Premium Bond Winner ?

redpete

MACKEM99 said:

I wonder if the new 22% tax on non isa savings (after allowance) will lead to more funds going into premium bonds?

Median return on £50k in PB is about 3.2%. Assume 4% savings account, net return after tax (for lower rate taxpayer) is about 3.5%.

Makes more sense for higher rate tax payers.

eskbanker

redpete said:

MACKEM99 said:

I wonder if the new 22% tax on non isa savings (after allowance) will lead to more funds going into premium bonds?

Median return on £50k in PB is about 3.2%. Assume 4% savings account, net return after tax (for lower rate taxpayer) is about 3.5%.

Makes more sense for higher rate tax payers.

Net return is the same 3.2% for a basic rate taxpayer, unless you're factoring in some use of personal savings allowance (which don't allow like-for-like comparison without knowing size of sum involved).

After the new rate kicks in in 2027, the 4% savings account would pay less net (excluding any allowances) than the 3.2% ISA....

Carl2510

eskbanker said:

Carl2510 said:

I have used both mine and my partners ISA allowance for the tax year, shall i have what i have left over put into premium bonds

The standard advice on here would apply, i.e. focus on maximising net return rather than minimising tax - even with large PB holdings for a long time, the average luck return is easily beaten by the headline rate of leading savings accounts, but the effect of taxation on those returns can only be evaluated in your own specific circumstances (higher rate taxpayer? PSA fully used? etc)....

not high tax rate payer, don't think i use any of my PSA to be honest, just my ISA allowance.

SandyN21

Have I worked this out right?  Max holding this year and over the year I've won £2,150 - does this mean my return is 4.3%?  I'm also a basic rate tax payer.

redpete

eskbanker said:

redpete said:

MACKEM99 said:

I wonder if the new 22% tax on non isa savings (after allowance) will lead to more funds going into premium bonds?

Median return on £50k in PB is about 3.2%. Assume 4% savings account, net return after tax (for lower rate taxpayer) is about 3.5%.

Makes more sense for higher rate tax payers.

Net return is the same 3.2% for a basic rate taxpayer, unless you're factoring in some use of personal savings allowance (which don't allow like-for-like comparison without knowing size of sum involved).

After the new rate kicks in in 2027, the 4% savings account would pay less net (excluding any allowances) than the 3.2% ISA....

I did make assumptions that the same amount was involved (£50k), that there was no other savings interest, and therefore that the £1k PSA was relevant. I admit that there are significant assumptions there.

BooJewels

SandyN21 said:

Have I worked this out right?  Max holding this year and over the year I've won £2,150 - does this mean my return is 4.3%?  I'm also a basic rate tax payer.

Yes, your return is 4.3%.  If you had used your PSA and other allowances and were due to pay tax on savings interest, then the PB wins would be equivalent to a return of 5.375% from a taxable account.

Arrietty

£200 win for me in December 
80% holding

Total wins for 2025 = £1275 so down on last year which was £1750. 
I only had one month without a win
3 months were £25 wins 
1 month was a £50 win
1 month was a £75 win
2 months were £125 wins
1 month was a £75 win
3 months were £200 wins
1 month was a £250 win


I keep thinking about withdrawing £10k to £15k to add to ISA  but this serves as my Emergency Fund, I would probably never reinvest what I withdraw and I do like tax free wins! 

Maybe I'll leave them another year and if the winnings aren't great make a change then! 

thegreenone

£100 for me and £700 for hubby on full holdings.

stripe123

I'm interested that most folks seem to think premium bonds are not efficent savings.  I have £50K invested, I've knocked up a spreadsheet to ensure I get value for money, I've worked out that if I were to invest this £50k in a savings account offering 4.55% I would get (using compound interest) £2,128.10.  I ivested the money in January so I've not yet had a whole year of prizes to check against, but with one month left I've so far received £2,550.  The premium bonds have out preformed the interest savings by £421.90 so far . . . . and it's not taxable

eskbanker

stripe123 said:

I'm interested that most folks seem to think premium bonds are not efficent savings.  I have £50K invested, I've knocked up a spreadsheet to ensure I get value for money, I've worked out that if I were to invest this £50k in a savings account offering 4.55% I would get (using compound interest) £2,128.10.  I ivested the money in January so I've not yet had a whole year of prizes to check against, but with one month left I've so far received £2,550.  The premium bonds have out preformed the interest savings by £421.90 so far . . . . and it's not taxable

The point is that premium bonds winnings are variable, with the average luck (median) return on £50K being about 3.1%, i.e. £1,550, so the fact that you've had a particularly good year in excess of that doesn't extrapolate into that being what others should anticipate (or what you should expect in future either).