Wealthy UK investors are racing to buy tax-free gilts, according to new figures, coming as yields soar.  

New figures from Interactive Investor showed there had been an almost tenfold jump in direct bond trading in the year-to-date when compared with the same period in 2022. Almost all of the activity was concentrated in gilts.

It comes as more investors seek to take advantage of the financial-planning benefits that come with owning gilts, in that they are free from capital gains tax on any profits made when selling or redeeming the bond. 

Short-maturity gilts are in particular demand, according to Interactive Investor.

Sam Bensted, from Interactive Investor, said: “Cuts to the tax-free capital gains allowance are making gilts an even more effective way of reducing tax bills.”

He said the most popular bonds suggested that “investors are holding the gilts to maturity, locking in yields of more than 5pc.”

The bond market has been warped by expectations that the Bank of England can only tame inflation by pushing the economy into contraction with ever-higher interest rates.

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