What should you do if you have already used your ISA allowance, do not want to lock up more money in a pension, but want to manage the tax on additional savings? For a higher-rate taxpayer, the Personal Savings Allowance is £500 per year in 2026/27, so interest above the relevant allowances can become taxable.
1. NS&I Premium Bonds: A Tax-Free Prize Draw Backed by HM Treasury
Premium Bonds, issued by National Savings and Investments (NS&I), are not a standard savings account.
- You can hold up to £50,000 per person.
- Instead of fixed interest, eligible bond numbers enter monthly prize draws, with prizes from £25 up to £1,000,000.
- The main advantage: Premium Bonds prizes are tax-free and do not use your Personal Savings Allowance.
- NS&I is backed by HM Treasury. Premium Bonds can be cashed in, subject to NS&I's normal withdrawal process.
2. The "Bed & ISA" Technique: Moving Investments into an ISA Wrapper
If you hold investments in a general investment account, a Bed & ISA transaction is one way of moving eligible investments into a Stocks & Shares ISA using available ISA allowance.
- Investments are sold in the taxable account.
- Cash proceeds are subscribed to the ISA, within the available ISA allowance.
- Investments are then repurchased inside the ISA.
- Future income and gains inside the ISA are generally sheltered from UK Income Tax and Capital Gains Tax under ISA rules.
Selling investments can itself create a taxable gain or loss, and dealing charges or market movements may apply.
Summary
Building wealth in the United Kingdom is not just about how much you earn — it is also about how much you keep. ISAs, pensions and Premium Bonds can each play a different role in a tax-efficient financial plan.