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Are Premium Bonds tax free?

Yes. NS&I says all Premium Bond prizes are free of UK income tax and capital gains tax, and gov.uk lists Premium Bond wins as income you do not pay tax on.

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Premium Bonds pay no interest, so prizes do not count toward your personal savings allowance.

The advisers for this subject: Sunny Bharj and Tony Springer

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How Premium Bonds work

No interest
NS&I sets a prize fund rate that pays for a monthly prize draw. The rate is variable and can change at any time.
Prizes
From £25 to £1 million, all tax-free.
How much you can hold
From £25 up to £50,000 in total. Bond numbers above £50,000 are not eligible for prizes, and NS&I can reclaim a prize paid on one in error.
Who can buy
Anyone 16 or over with a UK bank account. Bonds can also be bought for a child under 16 and are managed by a parent or guardian until the child turns 16.
When they enter the draw
Bonds must be held for a whole month first. Bonds bought in November enter the January draw.
Getting your money back
You can cash in all or part of your Bonds at any time.

Comparing Premium Bonds with taxable savings

Prizes are tax-free, but the amount you win varies month to month and can be nothing at all. The prize fund rate describes the prize fund as a whole. What one holder receives depends on which of their Bonds are drawn.

Interest on an ordinary savings account is taxed only above your allowances. A basic rate taxpayer can earn £1,000 of interest a year without tax, so the tax-free status of prizes matters more to a higher or additional rate taxpayer: How much interest can I earn tax free?

A cash ISA also pays interest free of tax. ISAs covers the £20,000 allowance, and the cash ISA changes from April 2027 limit cash ISA payments to £12,000 a year for anyone under 65.

Premium Bonds pay no interest. The return comes as prizes from a monthly draw, and every prize is free of tax.

Related questions

What is the Premium Bonds limit?

£50,000 per person. A child under 16 can hold up to £50,000 in total, however many parents or guardians manage Bonds for them.

Do Premium Bond prizes count as income?

They are not taxed. gov.uk lists Premium Bond wins among the income you do not pay tax on.

Who owns Premium Bonds bought for a child?

The child. Any prizes belong to the child too, and the nominated parent or guardian manages them until the child is 16.

Does inflation affect Premium Bonds?

Yes. NS&I points out that inflation can reduce the real value of money held in them over time.

Where this fits

How much to keep in Premium Bonds, a cash ISA or an ordinary account depends on your tax band and when you will need the money.

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The advisers for this subject

Sunny Bharj

Sunny Bharj

Independent Financial Adviser

Tony Springer

Tony Springer

Independent Financial Adviser

Advising through Equity & General Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority. Check the firm on the FCA register under number 474163.

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