AJ Bell Gilt MPS in spotlight as gilt yields jump on increased inflation risk

Rising gilt yields have bolstered the tax efficient returns profile of the AJ Bell Gilt MPS range, the group has reported today in their latest update.

Gilt yields have increased significantly since the start of the conflict in the Middle East at the end of February, as rising energy prices are set to push up inflation and shift interest rate expectations away from future cuts and toward future hikes.

This has in turn seen investment solutions leveraging gilts, such as the AJ Bell Gilt MPS range, become more attractive to higher and additional rate taxpayers seeking a secure return that is favourable compared with other cash-like investments and cash interest currently available on the market.

The Gilt MPS purchases gilts below par, meaning most of the return comes from the capital gain at the point of maturity, which is tax-free when using gilts. For example, compared with a one-year fixed rate cash savings account paying 4.46%, an equivalent £100,000 investment could result in an extra £1,200, or 120 basis points, for higher rate tax paying client portfolios after income tax on savings interest is deducted (see table below).

Example – higher rate taxpayer:

4.52% yield to maturity	1.25% coupon	One-year fixed term rate 4.46%
Face value	£100,000	£100,000
Buy for (market price)	£96,030	£100,000
Annualised capital gain	£3,126	£0
Income	£1,250	£4,460
Total return	£4,376	£4,460
Income taxed at 40%	-£300	-£1,584
After-tax return	£4,076	£2,876
After-tax yield	4.08%	2.88%

Source: AJ Bell Investments. Illustrative example: after-tax yield on one-year gilt for a 40% taxpayer factoring in their £500 tax-free personal savings allowance. Coupon example based upon annualised return from a UK Treasury 1.25% Gilt 22/07/2027 as at 27/03/2026 and held to maturity.

The Gilt MPS range was expanded earlier this month to include portfolio maturity options out until 2032.

Ryan Hughes, AJ Bell Investments managing director, says:

“Conflict in the Middle East has seen the inflation risk jump significantly in recent weeks as the prices of oil and energy have surged. This has shifted market expectations for interest rates, which are now expected to rise, and pushed up gilt yields. Advisers supporting their clients through this uncertainty will be looking for ways to earn a secure return in a highly tax efficient manner – and our Gilt MPS range is now even more attractive as a result.

“Our Gilt MPS range provides advisers with more favourable tax efficient returns than cash-like counterparts currently available in the market by locking in the return at the point of investment, meaning they can protect client wealth and make the most of a wide range of maturity options using the Gilt MPS ‘ladder’ approach. Clients can benefit from a secure and reliable return with a minimum investment value of £10,000, and very low charges at just 0.10% per annum.”

Gilt MPS explained

AJ Bell’s Gilt MPS range was launched to provide tax efficient solutions for advisers to invest in gilts across rolling maturity dates to suit their clients’ needs. Designed for advisers and their clients who are looking to invest in a tax efficient MPS, the portfolios feature short-dated gilts issued with a low coupon which trade on discounts to par.

These low coupon gilts benefit from a large element of their total return coming from capital growth at maturity, which is free from capital gains tax. Only the income element from the interest received will be subject to tax at the client’s marginal rate. Tax treatment depends on individual circumstances and rules may change.

Gilt MPS range:

Portfolio	Number of issues	First maturity date	Final maturity date	Yield to maturity	Higher rate ‘tax equivalent yield’
Gilt MPS Final Maturity 2027	2	Occurred January 2026	July 2027	4.14%	6.19%
Gilt MPS Final Maturity 2028	3	Occurred January 2026	January 2028	4.16%	6.44%
Gilt MPS Final Maturity 2029	4	October 2026	January 2029	4.19%	6.54%
Gilt MPS Final Maturity 2030	4	July 2027	October 2030	4.29%	6.82%
Gilt MPS Final Maturity 2031	4	January 2028	July 2031	4.30%	7.01%
Gilt MPS Final Maturity 2032	4	January 2029	July 2032	4.38%	7.05%

Source: AJ Bell Investments. Yields correct as at 27 March 2026. Tax equivalent yield is the yield a taxable investment would need to produce to match the after-tax yield of a comparable tax-exempt investment. In the context of the AJ Bell Gilt MPS, the figures illustrated represent the yield required from a cash deposit where returns are provided through income, taxable at an individual’s marginal rate of tax.

The portfolios are designed to be held until maturity to benefit from the ‘pull to par’ and offset fluctuations and interest rate changes.

As each gilt matures, advisers have the option of withdrawing the proceeds, rebalancing within the existing portfolio, or rebalancing into an adjacent portfolio along the maturity ladder.

Interest payments are made every six months, offering a secure income stream. The Gilt MPS is available in six different maturity preferences, allowing advisers to choose an investment time horizon and gilt maturity dates that suit their clients’ needs.

Carrying a low investment management charge of just 0.10% per annum, it also caters to the rising popularity of UK gilts among advisers seeking cash-like returns. Advised clients can invest in the Gilt MPS range with as little as £10,000, meaning more clients across a broad spectrum of wealth profiles can benefit from the tax planning and investment opportunities currently offered by gilts.