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Premium Bonds
Tax-free prizes instead of interest — from NS&I.
Annual limit
£50,000
Maximum total holding per person
Government incentive
None
Tax on growth
N/A — prize-based, not growth
Tax on income
None — prizes are completely tax-free
Tax on withdrawal
None — withdraw anytime
Eligibility
UK residents of any age (under 16: parent or guardian holds)
Best for
- ✓Emergency fund alternative for higher-rate taxpayers
- ✓Those who have used their ISA allowance
- ✓Anyone who enjoys the lottery-style element
Key benefits
- ✓All prizes completely tax-free
- ✓Backed by HM Treasury — 100% secure (beyond FSCS £85k limit)
- ✓Instant access to your money
- ✓Up to £50,000 per person
- ✓Prizes range from £25 to £1 million
Restrictions & watch-outs
- ⚠️No guaranteed return — you might win nothing in a given month
- ⚠️Does not count towards your ISA allowance
- ⚠️Prize rate equivalent (4.4% est.) may be less than a high-interest savings account
- ⚠️No compounding — prizes must be separately reinvested