Two lucky premium bond holders have each won £1m in October’s National Savings & Investments (NS&I) prize draw.
The jackpot winners are from North East Scotland and Greater Manchester, while 76 other winners were picked for the next-best prize of £100,000.
Rumours are swirling that the Chancellor will make changes to inheritance tax in the upcoming Autumn Budget. But what are the current rules around leaving bonds and winnings to loved ones after you’ve passed?
October’s premium bond winners
The first winning bond (498FZ511907) was bought by a lucky winner living in North East Scotland and is part of a total holding of £10,150. The winning bond was bought in April 2022.
The second winner, from Greater Manchester, bought their bond (524KB804512) in January 2023. They have a total holding of £34,350.
- Find out more: premium bonds explained
How many winners were drawn in October?
There were 6,049,850 premium bond prizes paid out in the October 2025 draw. Of these, 5,983,156 were worth £100 or less.
In total, this month’s prizes were worth £399,290,100.
What happens to premium bonds when you die?
Premium bonds can’t be transferred to beneficiaries after the holder has died. Instead, they have to be cashed by the executor of the will, who is then responsible for distributing the funds.
The executor’s first job is to inform NS&I, after which the account will be frozen, and no more bonds can be bought.
They will need to fill in a bereavement claim form, either online or by post, and provide documents such as a certified death certificate. If the total NS&I savings are more than £5,000, NS&I will usually ask for additional documents such as a Grant of Probate or Letters of Administration.
Premium bonds may still be entered into prize draws for up to 12 months after the holder has died and are still eligible to win.
- Find out more: what is probate
Do you pay inheritance tax on premium bonds?
Premium bonds are exempt from income tax and capital gains tax, but they do form part of your estate when you die and are therefore liable for inheritance tax (IHT).
The good news is that cash prizes won after the premium bond holder has died are entirely tax-free. However, if the numbers come up while the person is still alive, then those winnings are included in your estate and could face an IHT charge.
IHT is charged at a rate of 40% on anything in your estate over the tax-free allowance of £325,000. This is called the nil-rate band. There is also a £175,000 ‘residence nil-rate band’ which applies to the inheritance of residential properties only.
For example, if you leave behind an estate worth £500,000, the tax bill will be £70,000 (40% on £175,000 – the difference between £500,000 and £325,000).
If the rumours are true, Chancellor Rachel Reeves is gearing up to announce changes to IHT in the next Autumn Budget on 26 November. She’s already tinkered with the levy once, and it’s reported that another shake-up could be on its way.
Rate rises haven’t been ruled out, and a cap on how much people can gift during their lifetime to reduce their IHT burden could also be on the cards.
- Find out more: what is inheritance tax?
5 ways gifting can cut your IHT bill
The Chancellor may be planning an overhaul of IHT rules, but for now, gifting remains a simple and popular way to avoid leaving a bill for your friends and loved ones after death. Here are five ways giving gifts can cut your tax burden:
1. Make the most of gift allowances
You can give up to £3,000 away tax-free during each tax year. This is called the annual exemption.
You can also carry any unused annual exemption forward to the next tax year – but you can only do this for one tax year. So, if you didn’t use this allowance last year, you could give away a total of £6,000 this year – but you won’t be able to carry forward last year’s unused annual exemption to the next tax year.
As a couple, that means you’ll usually be able to give away £6,000 per year as standard, and potentially £12,000 if you didn’t make any substantial gifts the year before.
There is also an allowance for smaller gifts worth up to £250 per person. There is no limit to the number of gifts you make of this value, as long as you have not used another allowance on the same person.
2. The seven-year rule
Most gifts you make to other people during your lifetime are classified as ‘potentially exempt transfers’, or PETs for short. If you survive for seven years after making the gift, no IHT is due. However, if you die within this time, the gift will be considered part of your estate for IHT purposes.
Generally, PETs are applied to your £325,000 tax-free allowance before the rest of your estate. So, unless you’ve given gifts worth more than this allowance, the recipients are very unlikely to pay IHT.
However, if much of the tax-free allowance has been used up against PETs and taxable lifetime gifts, this can leave little or no allowance to be used against the rest of the estate.
3. Taper relief
If you die within seven years of giving the gift and the total value is more than the nil-rate band, the amount owed to HMRC may still be reduced thanks to something called ‘taper relief’.
The IHT rate charged depends on when you made the gift. For example, gifts given in the three years before your death will face the full 40%. But that drops to 32% if you die within four to five years, 16% if within five to six years, and just 8% if six to seven years before your passing.
4. Avoid IHT on wedding gifts
You can give cash, without paying IHT, up to £5,000 for your child’s wedding, up to £2,500 for a grandchild or great-grandchild, and up to £1,000 for anyone else.
5. No IHT on donations
There is no charge on money given to UK charities, political parties, the National Trust, registered housing associations, national museums and universities. If you leave more than 10% of your net estate to one of these groups in your will, the IHT rate for the rest of your estate will fall from 40% to 36%.
- Find out more: tax-free gifts
Other ways to reduce IHT
You may also be able to reduce inheritance tax by putting your life insurance policy under trust, drawing up a deed of variation that allows your heirs to alter your will after death, or using an equity release scheme to make use of money tied up in property.
There’s a lot to consider for each of these options, so it might be worth consulting a specialist before you go ahead.