Answers · UK 2025/26

Do I have to pay tax on Premium Bond prizes?

No -- Premium Bond prizes, from the smallest £25 win up to the £1 million jackpot, are entirely tax-free in the UK. Winnings don't count towards your Personal Savings Allowance, don't need to be declared on a Self Assessment return, and have no impact on your Income Tax or Capital Gains Tax position.

Last updated: 2 July 2026Last reviewed: 2 July 2026How we verify

Full answer

Premium Bonds, issued by National Savings & Investments (NS&I), are one of the most popular UK savings products, and their tax-free status on prizes is a major part of their appeal, particularly for higher and additional rate taxpayers who've otherwise used up their Personal Savings Allowance. **Every prize is tax-free, no matter the size** Unlike interest on a standard savings account, which counts towards your Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate, £0 for additional rate) and is taxable above that, every single Premium Bond prize -- from the minimum £25 up to the maximum £1 million jackpot -- is completely free of Income Tax and Capital Gains Tax, regardless of how much you win or how many prizes you receive in a year. **No need to declare prizes anywhere** Because prizes are entirely tax-free, you don't need to report them on a Self Assessment tax return, and they have no effect on your adjusted net income for other purposes (such as the Personal Allowance taper above £100,000, or the High Income Child Benefit Charge threshold) -- this makes Premium Bonds attractive for higher earners who want tax-efficient exposure to a prize-linked savings product without any of the reporting complexity of taxable interest. **How the prize draw works instead of paying interest** Rather than paying a guaranteed interest rate, NS&I pools the equivalent of interest earned across all Premium Bonds into a monthly prize fund, and each eligible £1 Bond number has an equal, independent chance of winning a prize in the monthly draw -- the "prize fund rate" (a headline annualised rate NS&I publishes) represents the average return across all bondholders, but any individual saver could win nothing at all, or could win significantly more than the average. **Maximum holding and the trade-off with guaranteed savings** The maximum you can hold in Premium Bonds is £50,000 per person -- and because the tax-free prize fund essentially replaces a guaranteed interest rate with a lottery-style prize structure, savers give up the certainty of a fixed return in exchange for the tax-free chance of winning larger prizes, meaning realistic expected returns for smaller holdings can be lower (and less predictable) than a competitive taxable savings account, even after accounting for the tax saving. **Who benefits most from the tax-free structure** The tax-free nature is most valuable for additional rate taxpayers (who have no Personal Savings Allowance at all) and higher rate taxpayers with modest savings allowances, since they'd otherwise lose a meaningful chunk of ordinary savings interest to Income Tax -- for basic rate taxpayers with total savings interest comfortably within their £1,000 allowance, the tax-free status of Premium Bonds is less of a distinguishing advantage compared with a competitive easy-access savings account. **Practical tip** Because Premium Bond returns depend on luck rather than a guaranteed rate, it's worth comparing the NS&I-published prize fund rate against the best available tax-free-equivalent return from a Cash ISA (also entirely tax-free) before deciding how much of your savings to hold in Bonds versus other tax-efficient products.