Premium Bonds remain a popular savings option providing an alternative to a conventional savings account, with Bond holders entered into a monthly prize draw rather than getting guaranteed regular interest.
Each Bond has an equal chance of winning, which is currently 24,000 to 1, and a person could win a prize from £25 up to large prizes including £100,000 and a £1million jackpot.
A person’s Bonds are considered part of their estate for inheritance tax (IHT) purposes so they could be hit by the 40 percent tax.
However, this is more complicated for Premium Bonds prizes as the monthly winners do not receive all the different prizes at the same time, so when they become subject to inheritance tax varies.
A Premium Bonds prize
This means the prize should be taken into account from the day after the prize notification is dispatched or, for prizes under £100, when the warrant is issued.
The draw currently begins on the first full day of each month and these are the date of dispatch for the notifications:
Prizes of £1,000 or more – first day of draw
Prizes of £500 – second day of draw
Prizes of £100 – third day of draw
Smaller prizes – the date the warrant is issued.
until the draw when it is allocated takes place.
This means the prize should be taken into account from the day after the prize notification is dispatched or, for prizes under £100, when the warrant is issued.
The draw currently begins on the first full day of each month and these are the date of dispatch for the notifications:
- Prizes of £1,000 or more – first day of draw
- Prizes of £500 – second day of draw
- Prizes of £100 – third day of draw
- Smaller prizes – the date the warrant is issued.
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A person can check if they have any unclaimed Premium Bonds prizes using the prize checker tool on the NS&I website.
Inheritance tax is a 40 percent tax that applies to any amount inherited above the value of £325,000 from a single person, or above £650,000 from a couple.
There is an additional residence nil rate band for when a person inherits a home that was the main residence of the person who died.
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In this case, there is an additional nil rate of up to £175,000 for single people and £350,000 for couples.
One way a person can reduce the IHT liability of their estate is by reducing its size through giving away gifts.
A person can give away up to £3,000 each year divided among any number of people, and can separately give any number of gifts up to £250 to different people.
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