Premium Bonds vs Savings After-Tax Calculator (UK, 2026)

The Premium Bonds headline prize rate (4.40%) is the mean of a skewed prize distribution — most small-to-medium holders earn below the median. This tool computes both expected and median Premium Bonds return, then compares against easy-access and fixed-rate savings after Income Tax and Personal Savings Allowance. For higher-rate taxpayers with £20k+ holdings, Premium Bonds usually win — but this shows when they don’t.

⏱️ 3-5 minutes • 💪 Quick

Updated April 2026

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

  1. 1
    Enter your Premium Bonds holding amount.
  2. 2
    Specify your holding period in months.
  3. 3
    Select your UK tax band.
  4. 4
    Input PSA already used this tax year.
  5. 5
    Set comparison easy-access and fixed-rate APRs.
  6. 6
    We calculate expected and median Premium Bonds return.
  7. 7
    We apply your PSA and tax band to savings.
  8. 8
    We recommend the winner for your situation.

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.

Comparison rates and preferences

NS&I default. Keeps compounding.

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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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