NS&I Premium Bonds are a type of savings account that you can deposit money into (and withdraw at any time), with the interest rate determined by a monthly prize draw.
Are premium bonds investments or savings?
Premium Bonds are what they sound like. Premium Bonds are a type of investment that National Savings and Investments (NSI) offers (NS&I). You are entered into a monthly prize draw where you can win between £25 and £1 million tax free, unlike other investments where you get interest or a regular dividend income.
Overview
Premium Bonds allow you to invest anywhere between £100 and £40,000. Each month, a draw is held, with Premium Bond holders winning roughly £100 million. A £1 million jackpot is the highest prize.
You are not required to report it on your tax return. Premium Bonds can be purchased by anybody over the age of 16, and you can also purchase them on behalf of your kid or grandchild.
How to use this service
To apply, download the PDF application form from the National Savings and Investment website and mail it back to them.
The following link will lead you to a page with an application form and links to more information about how the bonds work. A copy of Adobe Reader is required to access the form.
Do NS&I savings include premium bonds?
The government created a new tax-free Personal Savings Allowance on April 6, 2016. If you’re a basic rate taxpayer, you can now earn up to £1,000 (or £500 for higher rate taxpayers) in interest on your savings each tax year without paying any tax. A Personal Savings Allowance is not available to additional rate taxpayers.
John, a higher-rate taxpayer, has £25,000 in an ordinary savings account earning 2% interest at the start of this tax year. He doesn’t have any other taxable assets. In this tax year, he’ll earn £500 in interest on this account, which consumes his whole Personal Savings Allowance. He’ll have to pay tax on the additional interest if he puts any more money into that account this tax year. Instead, he could invest up to £20,000 in a cash ISA without paying any tax this tax year.
Jenny, a basic rate taxpayer, has £60,000 in an ordinary savings account earning 2% interest at the start of current tax year. She doesn’t have any other taxable assets. This account will yield her £1,200 in interest this tax year, which is £200 more than her Personal Savings Allowance. If she maintains all of the money in the account, she’ll have to pay tax on the £200 in interest. Instead, she could transfer £10,000 from her regular savings account to a cash ISA at the start of this tax year, and she won’t have to pay tax on any of the interest she earns. This tax year, the interest she earns on her regular savings account will be reduced to £1,000, the same amount as her Personal Savings Allowance. The interest she earns on her £10,000 cash ISA will be tax-free.
When determining where to invest your money, consider the interest rate you’ll receive and the tax rate you’ll pay before deciding whether an ISA or a regular savings account is the best option for you.
Other tax-free savings
In addition to an ISA, we offer several tax-free savings accounts. In our monthly prize draw, you can win cash prizes ranging from £25 to £1 million if you own Premium Bonds. You won’t have to pay any tax on your prize if you’re the lucky winner.
You won’t have to pay tax on any returns you earn if you already own some of our Savings Certificates. Furthermore, your earnings will not be deducted from your Personal Savings Allowance.
Are premium bonds considered assets?
National Savings & Investments (NS&I) holds Premium Bonds, and the Probate limit for assets held by NS&I is presently $5,000. This means that if the dead had Premium Bonds worth more than £5,000, or if they had Premium Bonds and another NS&I account worth more than £5,000, Probate will be required.
If a person owned Premium Bonds at the time of their death, the value of such bonds will be included in their Estate. For Inheritance Tax purposes, the value of Premium Bonds must be included in the Estate’s valuation. The Premium Bonds must be administered in accordance with the stipulations of the Will (if one exists) or the Rules of Intestacy (if none exist).
Individuals can own a maximum of £50,000 worth of Premium Bonds. Premium Bonds can be a large Estate asset, although it is more common for people to own a smaller amount.
Do old Premium Bonds ever come out on top?
Is it still possible to use my old Premium Bonds? Yes. Your Bonds are still valid and will be included into our monthly prize draws as long as you haven’t cashed them in.
If I’m retired, do I have to pay taxes on my savings?
Your funds are subject to tax. When you retire or reach State Pension age, the method you save is taxed remains the same. Savings interest is currently paid tax-free by banks and building societies, but depending on your circumstances, you may still have to pay tax on some of your savings income.
Is it possible for a parent to cash in a child’s premium bonds?
Buying NS&I Premium Bonds for a youngster is a fantastic idea because it’s a gift that keeps on giving (possibly).
Premium Bonds can be purchased on behalf of a kid by anybody over the age of 16, thus aunts, uncles, and even family acquaintances can participate.
Furthermore, NS&I’s decision in 2019 to reduce the minimum investment amount from £100 to £25 makes them a considerably more practical, or inexpensive, gift.
Instead, how about purchasing bonds for yourself? The following are the simplest methods for purchasing Premium Bonds.
How to buy Premium Bonds for your child
Parents and legal guardians can apply online, over the phone, or by mail to purchase Premium Bonds as a gift for their children.
Whether you’re buying for the first time or adding to your collection of Premium Bonds, you’ll need to be registered with NS&I.
As previously stated, you must invest at least £25 in Premium Bonds, with each £1 producing one unique bond number.
Every number has an equal chance of winning a prize, so buying more increases your chances of winning.
Until your child turns 16, you will receive confirmation of transactions, money for bonds cashed in, and rewards won.
Do you want to know whether you’ve won anything? The most recent results can be seen in this article.
Buying Premium Bonds for someone else’s child
If you want to spoil your grandchild, niece, nephew, or even a family friend’s child, you can apply online or by mail for an electronic or paper gift card to give to the child.
Your investment will be acknowledged, but only the chosen parent or guardian will be able to manage and cash in the bonds.
Before purchasing Premium Bonds for someone else’s child, there are a few things to consider.
Of course, you’ll want to make sure the parent or guardian is okay with you sending over their information and that they’re happy to look after the bonds.
These facts include the child’s and parent’s or guardian’s dates of birth and addresses, as well as the child’s Premium Bonds holder’s number (if they have one).
Everyone on the application will have their identity and address checked by NS&I, therefore there’s a risk that documentation will be required.
To avoid any unpleasant shocks, inform the parent or guardian that NS&I may contact them to request documentation to establish their identity.
Premium Bonds are detailed in detail, including how to purchase them, how to cash them in, when winners are revealed, and more.
How long does the process take?
If you’re buying the bonds as a present for someone special, you’ll need to prepare ahead and apply ahead of time.
NS&I hopes to open new accounts in seven to ten working days, but because everyone’s name and address on the application form must be validated, it will most likely take longer.
What happens if the child wins?
If the child outperforms the odds and wins a prize, the parent or guardian will have to decide what to do with it.
There’s no need to be concerned about tax implications. While a child cannot earn more than £100 in interest per year from savings, this does not apply to Premium Bonds winnings because they are rewards.
Finally, make sure the child’s information is up to date: there are millions of pounds in unclaimed awards held by bondholders under the age of 16.
Are savings tax-free in the United Kingdom?
Interest on savings of up to £1,000 is tax-free. Because of the personal savings allowance (PSA), which allows most people to earn up to £1,000 in interest without paying tax on it, just about 5% of people in the UK pay tax on their savings earnings.
What is the procedure for redeeming old premium bonds?
Not a member yet? You don’t need to create an online profile to withdraw money from your or your child’s Premium Bonds. All you have to do is complete a little online form. Make sure you have access to your account information.
Please note that in order to withdraw or close the account, you must be the person responsible for the child’s Premium Bonds.
You can withdraw money from Premium Bonds while ensuring that particular Bonds remain in the draw by filling out a form online.
A cashing in form can also be downloaded, printed, and completed. Then send us your completed form along with the Bond certificates that need to be cashed in (if you have them).