Premium Bonds: how the prize draw works, the limits and the tax treatment
Published · 3 min read · Figures checked . UK rules and rates change, so check the official sources below before you act.
Premium Bonds from NS&I pay prizes instead of interest. This guide explains who can hold them, the minimum and maximum amounts, how winners are picked, how prizes are paid and how they are taxed.
What Premium Bonds are
Premium Bonds are a savings product from National Savings and Investments (NS&I). NS&I says it is backed by HM Treasury. Unlike most savings products, Premium Bonds do not earn interest. Instead, each £1 Bond that is eligible goes into a monthly prize draw.
NS&I says you can cash in all or part of your Bonds at any time. Your original money is not what is drawn: the prizes come from a prize fund, and the Bonds you hold stay yours.
Key rules
- Each Bond costs £1, and the minimum purchase is £25.
- The most one person can hold is £50,000.
- Prizes range from £25 up to £1 million.
- All prizes are free from UK Income Tax and Capital Gains Tax, according to NS&I.
- New Bonds must be held for a whole month before they can enter the draw.
Who can hold them
Anyone aged 16 or over with a UK bank account can hold Premium Bonds, as set out on the NS&I product page. A parent or guardian can buy Bonds for a child under 16. Until the child's 16th birthday, the parent or guardian named on the application looks after the Bonds. At 16 the child manages their own. A child cannot hold more than £50,000 in total.
NS&I says someone buying Bonds for another person's child cannot look after those Bonds or have them repaid to themselves.
How winners are chosen
NS&I says winning numbers are picked by its random-number generator, which it calls ERNIE. NS&I also says every £1 Bond entered into the draw has the same odds of winning. That means holding more Bonds gives more chances, but no holding is guaranteed to win anything in a given month.
The prize fund rate and the odds are variable. NS&I changes them from time to time, and the figures shown on different NS&I pages were not consistent when this guide was checked. For that reason this guide does not quote them. The current figures are on the NS&I Premium Bonds page.
How prizes are paid
Prizes can be paid into a bank account, reinvested into more Bonds, or sent as a cheque. NS&I says payments to a bank account should arrive by the seventh working day of the month. Cheques can take until the end of the month, and NS&I says they expire after three months.
NS&I runs a prize checker that shows prizes from the current month and the previous six draws, as well as older prizes that have not been claimed. NS&I says it tells winners by text or email. Larger prizes need a claim form, according to NS&I.
Things to bear in mind
- Because there is no interest, the value of the Bonds does not grow unless you win prizes, and prizes are not guaranteed.
- Tax-free prizes may matter more to people who would otherwise pay tax on savings interest, but this depends on each person's circumstances.
- Premium Bonds are one of several NS&I products. Other products, such as ISAs and fixed rate bonds, have different rules.
Check before you act
Rules, the prize fund rate and the odds can change. Confirm the current details on the official NS&I pages linked below before buying, cashing in or relying on any figure in this guide.
Sources
For information only. See our disclaimer and editorial standards. Spotted an error? Tell us.
