Martin Lewis gives surprising Premium Bonds | European Markets

Martin Lewis, the personal finance guru, has delivered some blunt steering for these utilising Premium Bonds as an different to a conventional financial savings account to keep away from an HMRC tax raid. In his latest financial insights video launched on X, Lewis tackled the subject of saving money and how people can sidestep paying tax on their hard-earned money.

Mr Lewis identified that an ISA must be the primary port of call for savers. He highlighted that for earners between £12,500 and £50,000, the personal financial savings allowance is capped at £1,000—which means tax turns into payable on financial savings over £20,000.

These with incomes starting from £50,000 to £125,000 will encounter taxation as soon as financial savings hit £10,000 resulting from a decrease allowance of £500.

Lewis then supplied what would possibly come as an surprising piece of advice relating to Premium Bonds as a strategy to protect financial savings in opposition to tax: “The other thing that you can look at that’s very easy to do is premium bonds. The prizes that you earn from premium bonds, premium bonds are where you put your money away, the money you put in is safe, but you then get paid interest depending on a prize draw.

“And the prizes that you just get from premium bonds are additionally tax free. Now I might all the time go for a money ISA first.”

“The speed on premium bonds for many people, you’ll earn much less in premium bonds than you’d in a high money ISA. But when you will be paying tax in your financial savings and you have a first rate whack you would put in premium bonds, then they may turn out to be a fairly fascinating option for you. Not my first option, however an fascinating option.”

Discussing the superior alternative of ISAs over Premium Bonds, Mr Lewis elaborated: “A money ISA is solely a financial savings account you do not pay tax on. You possibly can put £20,000 in per tax 12 months.

“Now the important thing about a cash ISA is you can put your money in, it’s then protected from tax, so money in there, you don’t pay tax on it and it doesn’t count towards the interest in the personal savings allowance, this is on top of that.”

“As long as it stays inside the cash ISA, you could put £20,000 in this year. Well, let’s say you can then put £20,000 in the next tax year, so that’s £40,000. And then in the next tax year, so that’s £60,000, so if you are lucky enough to be able to max it out each year, you could protect more and more and more of your savings inside the cash ISA without having to pay tax on it.

“So for individuals who’ve obtained a good whack of financial savings, it is very worthwhile to take a look at a money ISA as a result of, properly, as a 20% charge taxpayer, you will be 20% of your curiosity can be taken away in tax in the event you’re above the personal financial savings allowance.”