A new Chancellor could put gilts back in fashion

24 July 2026

Alan Kinnaird, Senior Investment Manager at Walker Crips Investment Management in York, on what newly appointed Prime Minister Andy Burnham's appointment of John Healey as Chancellor of the Exchequer means for the UK government bond market and why higher-rate taxpayers are suddenly asking about gilts…

Healey's appointment on Monday 20th July 2026 caught the bond market off guard. Going into the announcement, the Home Secretary Shabana Mahmood was the expected favourite. Very few people in the market had looked closely at Healey at all.

The reaction was cautious rather than hostile. Yields backed up on the prime minister's early comments about finding flexibility within the fiscal rules, then eased once he made clear he would stick to them. That tells you exactly where the market's attention is.

Healey's time at the Treasury in Tony Blair’s Labour government counts in his favour, and he has a reputation as a safe pair of hands. However, he is the sixth Chancellor in just over six years, and bond markets are unsentimental. Healey will be judged on his first fiscal event, not on his CV.

For our clients, what comes next matters most. With public finances stretched, and a new Chancellor who resigned from Sir Keir Starmer cabinet over defence spending when he was the Secretary of State for Defence, the working assumption in the market is that taxes rise rather than fall.

In this scenario, gilts are the obvious beneficiary. Capital gains on UK government bonds are exempt from capital gains tax for individuals, so a short-dated, low-coupon gilt trading below its face value (£100) delivers the bulk of its return as a tax-free gain, with only the modest coupon taxed as income. A 1-year bank deposit paying 5% gross is worth 2.75% net to a UK additional-rate (top tax rate) taxpayer at 45% applying to income over £125,140 today. If additional-rate income tax were to rise to 50% (and I should stress that is speculation, not policy) that falls to 2.5%. An equivalent short-dated gilt would keep the large majority of its return intact. Every penny added to the top rate widens that gap.

We have seen enquiries build steadily in recent weeks and I would expect that to continue for as long as tax speculation runs ahead of the Budget; expected in the Autumn of 2026, but no date has been fixed yet.

Alan Kinnaird Chartered FCSI
Senior Investment Manager

Alan Kinnaird manages portfolios for private individuals, charities and trusts. He is primarily based in our York office. To contact Alan for a free initial review of your investments, please call him on 020 3100 8130 or email [email protected].