Can grandparents buy Premium Bonds for grandchildren?Yes. Grandparents and great-grandparents can buy Premium Bonds for grandchildren under the age of 16. The bonds are held in the child's name but managed by a parent or guardian until the child turns 16. As a grandparent, you can buy bonds as a gift without being the child's legal guardian. Grandparents can buy Premium Bonds for grandchildren as a gift. Minimum purchase is £25, maximum holding per person is £50,000. All prizes are tax-free. How do grandparents buy Premium Bonds for grandchildren?
Key facts about Premium Bonds for children
Are Premium Bond prizes tax-free for children?Yes. Premium Bond prizes are tax-free for everyone, including children. There is no income tax or capital gains tax on prizes regardless of the child's or parent's tax position. This makes Premium Bonds particularly attractive for grandparents who want to give tax-efficient savings gifts. Is the prize rate worth it?The prize fund rate is 4.40% as of April 2026. In practice, most bondholders win less than this in any given year as the fund is weighted towards larger prizes. The expected return for a typical bondholder is closer to 4.0–4.2% AER. The best children's savings accounts currently pay up to 5.0–5.5% AER — though interest is taxable for the parent if it exceeds the £100 annual gift rule. Alternatives to Premium Bonds for grandchildren
Verdict A solid, flexible gift option Premium Bonds are a simple, tax-free gift that grandparents can make directly without being the child's guardian. They are not the highest-returning children's savings option, but NS&I government backing, prize tax-freedom, and the £50,000 limit make them a popular choice. Frequently asked questionsCan I buy Premium Bonds for a grandchild who already has some? Yes. Additional purchases are added to the child's existing holding. The combined total across all purchases must not exceed £50,000 per person. What happens to a grandchild's Premium Bonds if the grandparent dies? The bonds continue in the child's name and are unaffected. They remain valid and entered in prize draws. Can the child cash in Premium Bonds before age 16? Yes — the parent or guardian can cash in bonds on the child's behalf at any time. The child can manage and cash in their own bonds from age 16. Do Premium Bonds count towards the Junior ISA allowance? No. Premium Bonds and Junior ISAs are entirely separate products. Buying Premium Bonds does not affect the child's annual Junior ISA allowance (£9,000 in 2025/26). |
Premium Bonds for Grandchildren: UK Guide 2026
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