IHT406 - Premium Bond prizes reinvested after death

rnem170

Another question for the experts here (you have all been very helpful thus far)

My Mum died on April 1st and on 4th, she won £225 in Premium Bonds.  These are automatically reinvested rather than being send to a nominated account.
Should this be included in the box "B - Value of any unclaimed or uncashed prizes".  Unfortunately the guidance notes are not clear, but there are no "unclaimed" prizes according to the NS&I Prize checker app.  Clearly if all the forms are not completed by the beginning of May, that box might be incorrect again. 

My assumption is the amount for IHT purely the exact holding on date of death, which goes in the first box.

kipsterno1

Sorry for your loss.

I think that NS&I actually do the draw on the 1st of each month but they do not publish them until the first working day. I will stand corrected if that is wrong but if it is the case then the £225 would form part of the holding on the date of death.

When I had to deal with my late fathers estate I found the NS&I bereavement team very helpful. I know others on this site have had differing experiences. You should really contact them soonest and they will provide a full breakdown of the holdings on that date as well as sorting what happens going forward. We left the bonds in for the following 12 months and any winnings in that time were paid by warrant along with the bonds value after this period.  

poppystar

For IHT it should be the value at date of death that you use on the forms. Later prizes would be income to the estate after death.

Have you told NS&I of the death yet? My experience was that they cancelled the reinvested bonds once they were aware of the death and paid that amount in cash along with the value of the bonds and any later prizes won on the bonds held at date of death. I left the existing bonds and this cash in for the twelve months allowed for the chance of getting more prizes on the original bonds - I did🙂

Keep_pedalling

No needs to declare on the IHT forms or for estate income as PB prizes are exempt from any form of tax.

Sarahspangles

Keep_pedalling said:

No needs to declare on the IHT forms or for estate income as PB prizes are exempt from any form of tax.

So if my MIL’s PB’s win £1m there would be no CGT for her beneficiaries to pay?

kipsterno1

Sarahspangles said:

Keep_pedalling said:

No needs to declare on the IHT forms or for estate income as PB prizes are exempt from any form of tax.

So if my MIL’s PB’s win £1m there would be no CGT for her beneficiaries to pay?

As I understand it there would be no CGT on prizes won.

uknick

Definitely no CGT on PB prizes.  Cash, which the win is considered to be, is never subject to CGT.

For IHT, this is what HMRC say;

"IHTM10082 - Premium Bonds (box 54): when to include prizes

A premium bond prize is not taken into account for inheritance tax purposes until the draw allocating it has taken place. A prize should be taken into account from the day following the date of dispatch of the prize notification or, in the case of prizes under £100, of the warrant.

The present monthly draw normally starts on the first full day of each month and the date of dispatch of the notification is as follows

Prizes of £1,000 and over	1st day of draw
Prizes of £500	2nd day of draw
Prizes of £100	3rd day of draw
Smaller prizes	Determined by the date of warrant

In case of doubt the date of the draw for any particular month can be checked.

You should seek advice in any case of doubt or any case where the taxpayers question our interpretation"

In 2023 the April draw was made on 3 April, so after time of death.

But, it'd be an interesting debate with regard to draw and death taking place on the same day.  For a million pound win and other large prizes, one for the lawyers to debate.  For the sort of prize most of us get, probably not worth bothering about.