How This Tool Works
📋 Purpose
The headline Premium Bonds prize rate of 4.40% looks competitive — but it\'s the MEAN of a skewed prize distribution, and the MEDIAN holder earns less. Meanwhile savings interest is taxed at 20-45%. This tool computes both expected and median Premium Bonds returns, then compares against easy-access and fixed savings after Income Tax and Personal Savings Allowance.
⚙️ How It Works
- 1Enter your Premium Bonds holding amount.
- 2Specify your holding period in months.
- 3Select your UK tax band.
- 4Input PSA already used this tax year.
- 5Set comparison easy-access and fixed-rate APRs.
- 6We calculate expected and median Premium Bonds return.
- 7We apply your PSA and tax band to savings.
- 8We recommend the winner for your situation.
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Premium Bonds vs savings — UK, 2026
Premium Bonds pay 4.4% tax-free — but is that really better than a 4.8% fixed bond after tax?
Compare NS&I Premium Bonds expected return against easy-access and fixed-rate savings on a properly after-tax basis. For higher-rate taxpayers and £20k+ holdings the calculation often flips in Premium Bonds’ favour — but not always. This tool shows you which.
Your holding
Minimum £25, maximum £50,000.
Interest already earned on other accounts this tax year.
Used to show real purchasing power. ONS CPIH ~2.5% (Apr 2025).
Comparison rates and preferences
NS&I default. Keeps compounding.
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Sponsored Partner AlertDon't leave your salary to chance. Optimize your investments and reach financial freedom with Moola Pro.
We may earn a commission on purchases at no extra cost to you. While we only partner with trusted platforms through reputable affiliate networks, all services and accounts are managed directly by the provider, who will handle any customer care or account needs.
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Complete Guide: Premium Bonds vs UK Savings After Tax (2026)
Understand when NS&I Premium Bonds beat regular savings — and when they don’t.
📅 Last updated: April 2026
Quick Tips
Jump-start your understanding with these essential tips
With PSA exhausted, every £1 of savings interest is taxed 40%+. Premium Bonds’ tax-free 4.40% beats a taxable 5% easily.
The £1,000 PSA means you can earn £1,000 tax-free in a regular savings account — often better than Premium Bonds expected median.
Under £1,000 you have a very high chance of winning zero in any 12-month period. The headline 4.40% is the AVERAGE — not what most small holders actually get.
Cash ISAs give £20k/year tax-free capacity — mathematically better than Premium Bonds for most people until ISA is full.
Monthly excitement and lottery optionality encourage consistent saving. If Premium Bonds keep you saving more than a dull savings account would, the "worse" expected return is easily outweighed by the higher total balance.
Step-by-Step Guide
Follow these steps to get the most from this tool
£25 minimum, £50,000 maximum.
Shorter periods have much higher variance.
Basic (20%), higher (40%), additional (45%).
Sum of savings interest earned elsewhere this tax year.
Check MoneyFacts or MoneySavingExpert for current best-buys.
See expected/median Premium Bonds vs after-tax easy-access and fixed.
Advanced Topics
Deep dives for advanced users
Premium Bonds return is the expected value of a highly skewed prize distribution. About 75-80% of holders with under £5,000 earn BELOW the 4.40% headline in any given year. The median is consistently 20-40% below the mean. For fair comparison, use the median figure unless you're comfortable with variance.
Savings interest is taxed in the year it's credited. If you buy a 2-year fixed bond that pays annually, the interest is taxable when paid (not when it accrues). Some fixed-rate accounts offer monthly interest — shifts the tax timing. Premium Bonds are tax-free regardless of prize month.
Basic-rate taxpayers: £1,000 of savings interest is tax-free via the Personal Savings Allowance. Beyond £1,000, you pay 20%. So at £20k holding + 4.5% rate = £900 interest, you're ENTIRELY within PSA and savings beat Premium Bonds decisively. At £50k + 4.5% = £2,250 interest, only £1,000 is tax-free — making Premium Bonds more competitive.
NS&I also offers Green Savings Bonds, Guaranteed Growth Bonds, and Direct Saver — all backed by HM Treasury but taxable. These usually pay less than the market best-buys. If you want HMT-backing specifically, Premium Bonds are typically the best NS&I product for higher-rate taxpayers.
Compare with ISA vs GIA for investing, Annuity vs Drawdown for retirement.
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