Premium bond winners in February 2024 - is it time to consider an Isa?
Two lucky premium bond holders have each won £1m in February's National Savings & Investments (NS&I) prize draw.
The jackpot winners are from Dorset and Wandsworth, while 91 other winners were picked for the next-best prize of £100,000.
While record-high rates over the past two years mean tax on savings interest is an increasing concern for people even with modest pots, premium bond holders won't owe a penny to HMRC on any prize money won.
But it's not the only way savers can beat the taxman. So as well as revealing this month's winning premium bond numbers, Which? explains the other ways to maximise your tax-free savings.
February premium bond winners
The first winning bond (137BG686951) was bought by a lucky winner living in Dorset and is part of a total holding of £28,051. The winning bond was bought in March 2008.
The second winner, from Wandsworth, bought their bond (456RD476057) in May 2021. They have a total holding of £10,400.
- Find out more: should I get premium bonds?
How many winners were drawn in February?
There were 5,844,664 premium bond prizes paid out in the February 2024 draw. Of these, 5,765,193 were worth £100 or less.
In total, this month's prizes were worth £475,609,325.
| Value of prize | Number of prizes |
|---|---|
| £1,000,000 | 2 |
| £100,000 | 91 |
| £50,000 | 182 |
| £25,000 | 365 |
| £10,000 | 912 |
| £5,000 | 1,823 |
| £1,000 | 19,024 |
Source: NS&I
- Find out more: premium bonds – are they worth it?
When do you pay tax on savings income?
The personal savings allowance (PSA) allows you to earn £1,000 of interest tax-free if you are a basic-rate taxpayer or £500 if you are a higher-rate taxpayer. Additional-rate tax-payers do not benefit from a PSA.
But record-high savings rates over the past couple of years mean even people with modest nest eggs are being pushed over the threshold for paying tax on interest.
A Which? survey in November 2023 found 20% of people doing self-assessment for 2022-23 were filing because they owe tax on savings interest or investment income.
So it's important you keep on top of making your savings tax-efficient.
- Find out more: Tax on savings interest and investment income explained
Should you consider an ISA?
While you can hold up to £50,000 tax-free in premium bonds and won't owe HMRC anything on prize money, you won't earn interest on your investment and there is a high chance of winning nothing.
Putting money in an Isa means you can save up to £20,000 a year tax-free. Savers can deposit the full allowance into a cash, stocks and shares or innovative finance Isa, or any mix of the three types.
While you're currently only allowed to pay into one cash Isa account in each tax year, new rules that come into force in April will enable savers to easily move between different providers in search of better deals.
Despite the tax perks, research from Shawbrook Bank found that 27% of savers lack a clear understanding of the benefits and rules around Isas. These people are also potentially missing out on huge returns from higher interest rates.
The average interest on a one-year fixed Isa in January 2024 was 4.72% AER and 3.25% for an instant access Isa. Although rates are dropping fast across the market, the lead-up to the end of the financial year is traditionally the time when providers boost interest on Isa products - either to attract new customers looking to max out their allowance before it resets on 6 April or encourage early savers ahead of the new tax year.
If your savings goal is to buy a home, then there is also the option of opening a lifetime Isa. While young savers under 18 can deposit up to £9,000 tax-free in a Junior Isa.
- Find out more: best cash Isas 2023
Make the most of pension tax relief
When you save into a pension, the government gives you a bonus as a way of rewarding you for saving for your future. This comes in the form of tax relief.
When you earn tax relief on your pension, some of the money you would have paid in tax on your earnings goes into your pension pot rather than to the government.
Tax relief is paid on your pension contributions at the highest rate of income tax you pay.
- Find out more: tax relief on pension contributions explained
