Easy-access savings account
Best£400After-tax return in the first year
- Interest at 4.00%
- £400
- Income tax on the interest
- -£0
All of this interest falls inside your savings allowance, so none of it is taxed.
Should I put my savings in Premium Bonds or a savings account?
Compares Premium Bonds, a savings account and a cash ISA after tax on your own income — the prize is tax free, interest is not once it passes your savings allowance, and that is what decides it.
On the figures so far
An ordinary savings account pays the most after tax on these figures.
The gap is £20 — wide enough to be real, and one figure was assumed. To be surer: your actual prizes rather than the average — which no one can know in advance.
Refine it in 9 questions below.
The decision
An ordinary savings account pays the most after tax on these figures.
£20 better than premium bonds, on the same figures.
- 0%Your tax on extra savings interest
- 3.80%Account rate needed to match the bonds
- 5.5Expected Premium Bond prizes a year
- under 1%Chance of no prize in a year
Why
- Your savings allowance covers all of this interest, so being tax free gives Premium Bonds no advantage over an ordinary account here.
- An ordinary account would need to pay about 3.80% to match the bonds' average for you.
Does this apply to you?
Each of these has to be true. Where your answers settle it we have said so; where they cannot, the test is yours to check.
You are 16 or over, to buy bonds for yourself. — we cannot tell from your answers
NS&I Premium Bonds terms and conditions
You would hold no more than £50,000 in Premium Bonds. — met, on your answers
NS&I Premium Bonds terms and conditions
You do not need a guaranteed return. — we cannot tell from your answers
Not a tax rule — the practical gate
What this does not model
- The Premium Bonds figure is the average return across every bond in the draw. Your own prizes could be nothing, or far more; the draw is random and no tool can tell you which.
- Every rate here is one you entered. NS&I changes the prize fund rate and odds several times a year, and banks change theirs more often.
- It compares one year. A fixed-rate account, or a rate that falls next month, changes the answer, and so does inflation, which none of these beat by much.
- It does not consider access. Premium Bonds and easy-access accounts can be cashed in within days; a fixed account usually cannot.
This is information, not tax or financial advice. It shows how the rules apply to the figures you entered — it does not know the rest of your circumstances. Worth checking with an accountant before you act.
Rates as at 6 April 2026 — the 2026/27 tax year.
What to keep
The figures above are only as good as what sits behind them. These are the records HMRC would ask for.
- Your NS&I holder's number and the bond numbers, which NS&I sends when you buy.
- Nothing for HMRC on the prizes: they are tax free and do not go on a tax return.
- Annual interest statements from any ordinary savings account. Banks report interest to HMRC, and if it passes your savings allowance the tax is usually collected through your tax code.
The dates that matter
| When | What | If you miss it |
|---|---|---|
| The end of the month after you buy | New bonds enter the draw once they have been held for a whole calendar month. | Nothing is lost, but bonds bought on 2 March first enter the May draw. In that gap they earn nothing. |
| 5 April | Use this tax year's ISA allowance if a cash ISA is the winner. | An unused ISA allowance does not carry forward. It is gone on 6 April. |
| 6 April 2027 | The cash ISA limit for under-65s falls from £20,000 to £12,000 a year. | The £20,000 total ISA limit stays, but only £12,000 of it can then be cash. This year is the last with the full amount for cash. |
How to actually do it
Check today's rates
Look up the Premium Bonds prize fund rate and odds on nsandi.com, and the best easy-access account and cash ISA rates on a comparison site. Put them in above. The answer depends on them.
Know your savings allowance
£1,000 of interest a year is tax free at basic rate, £500 at higher rate, nothing at additional rate. If your interest is already over it, being tax free starts to count.
Buy bonds from NS&I directly
Online, in the NS&I app or by phone. The minimum is £25. Choose to have prizes paid into your bank or reinvested in more bonds, up to the £50,000 limit.
Or open the account or ISA
If a cash ISA wins, you can transfer existing ISAs to it without using this year's allowance, but only through the new provider's transfer form. If you withdraw the money yourself, it loses its ISA status.
www.gov.uk/individual-savings-accounts/transferring-your-isa
Look again when rates move
Both NS&I and banks change their rates without warning. Cashing in bonds is free and usually takes a few working days, so switching later costs nothing but the month a new bond waits for its first draw.
Worked examples
Three situations, worked through. They use the same rules as the tool above, so you can check the arithmetic against a case near your own.
Basic-rate taxpayer, £30,000 salary, £10,000 to save
- Premium Bonds, average at 3.8%
- £380, tax free
- Savings account at 4%
- £400, all inside the £1,000 allowance
- Cash ISA at 3.8%
- £380
- Chance of no prize in a year
- Under 1%
The savings account wins. The interest is already tax free under the allowance, so the bonds have no tax advantage here, only a lower average.
Higher-rate taxpayer, £70,000 salary, £800 of interest already, £20,000 to save
- Premium Bonds, average at 3.8%
- £760, tax free
- Savings account at 4%
- £800 interest, £320 tax, £480 kept
- Cash ISA at 3.8%
- £760, tax free
- Account rate needed to match the bonds
- 6.33%
The allowance is already used, so 40% of any new interest goes in tax. The ISA and the bonds tie on average and both beat the account easily, so the ISA wins: it pays that figure for certain.
Additional-rate taxpayer, £150,000 salary, £50,000 to save, ISA allowance already used
- Premium Bonds, average at 3.8%
- £1,900, tax free
- Savings account at 4%
- £2,000 interest, £900 tax, £1,100 kept
- Cash ISA
- No allowance left
- Expected prizes a year
- About 27
With no savings allowance at all, 45% of interest goes in tax. At £50,000 there are enough prizes a year that results tend to land nearer the average, which is where Premium Bonds make the most sense.
The rules behind this
Every figure above comes from one of these. Where we have interpreted rather than calculated, the tool says so.
Premium Bond prizes are exempt from income tax.
The personal savings allowance is £1,000 for basic-rate taxpayers, £500 for higher-rate and nil for additional-rate, set by UK bands even in Scotland.
Interest and other returns on ISA investments are exempt from income tax, within a £20,000 annual subscription limit.
Savings income is taxed after earnings, so it takes the rate of whichever band earnings leave it in.
Money in Premium Bonds is backed by HM Treasury with no upper limit. Bank and building society deposits are protected by the FSCS up to its limit per person, per banking licence.
Questions people ask
Are Premium Bonds worth it?
It depends on whether you pay tax on savings interest. If all your interest fits inside your savings allowance, an ordinary account paying more than the prize fund rate is simply better. If your allowance is used, and especially at higher or additional rate, the tax-free prize can beat a noticeably higher account rate. Put your own figures in above.
What are the chances of winning with Premium Bonds each month?
NS&I publishes the odds per £1 bond per draw, recently around 22,000 to 1. With £1,000 you hold 1,000 entries, which works out at about a 4% chance of a prize in any one month. With £10,000 it is about 36% a month, and it is very unlikely you would go a whole year without a prize.
Why is my Premium Bonds return lower than the prize fund rate?
Because the rate is an average across every bond, and a small number of large prizes pull it up. Most prizes are the smallest ones, so most holders win less than the headline rate in a given year and a few win much more.
Do I pay tax on Premium Bond winnings?
No. Prizes are exempt from income tax and capital gains tax, and you do not report them to HMRC. That is the real advantage of the bonds over an ordinary account.
Are Premium Bonds better than a cash ISA?
Both are tax free, so compare the ISA's rate with the prize fund rate. The ISA pays that rate for certain; the bonds pay it only on average. Where the rates are close, the ISA is the more predictable choice, but it uses ISA allowance that the bonds do not.
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