UK Premium Bonds After Aliyah: Tax, Reporting, and What Ends a Holding

> This is general information, not tax, legal, or financial advice. Cross-border (US/UK) and Israeli tax interact in complex ways; consult a qualified cross-border professional before acting.

If you made aliyah from Britain and an NS&I envelope still turns up at an address in Manchester, you own something no lifelong Israeli has ever had to think about. Premium Bonds survive aliyah better than most British olim expect, and when they do fail, they fail for a reason almost nobody expects. Not a tax rule. Not the Statutory Residence Test. Not HMRC. A bank account.

This page is written for someone who already holds Bonds and is working out what aliyah did to them. It keeps four answers separate, because they point in different directions: what the UK charges, what Israel charges, what the treaty decides, and what a US filing obligation does to all of it.

Can you still hold UK Premium Bonds once you live in Israel?

Yes. The regulations that govern Premium Bonds condition holding on age and legal capacity, and the conditions they do impose have nothing to do with where you live. The National Savings (No. 2) Regulations 2015, regulation 4(1), says that "a bond may be purchased and held by a person who has attained the age of sixteen years, being a person who is not under a legal disability otherwise than by reason of age" ⁴. The neighbouring paragraphs add that a bond may not be purchased or held by more than one person or by a body of persons, and may not normally be purchased or held by one person on behalf of another ⁴. No residence, nationality or domicile condition appears among them. NS&I confirms the practice: "We've always been a UK savings provider, backed by HM Treasury, but we do have some customers who live outside the UK" ².

What aliyah changes is the channel, not the entitlement. NS&I tells overseas readers that "if you're allowed to hold them, you'll need to apply first by post", and that only afterwards can you "register for our online and phone service" ². Its UK-facing product page answers the question "Who can buy Bonds?" with "Anyone 16 or over who has a UK bank account", and asks applicants for "your UK bank account details registered to your current address" and "your debit card from a UK bank or building society" ¹. The instant routes a British resident is offered on day one are not open to someone standing in Israel until a postal application has set the holding up.

Prizes are sterling-only. NS&I states flatly that "any prizes you win will be paid in Sterling" ², so a shekel-spending household absorbs a currency step that a British holder never sees.

What actually ends a Premium Bonds holding after aliyah?

Closing your UK current account does. NS&I's condition is blunt: "To save with us, you'll need a UK bank or building society account in your name. This is because we can only make payments to, and receive payments from, a UK account in pounds sterling" ². The customer agreement is the contractual version. Deposits "must be in pounds sterling and from a personal account held in your name at a UK regulated bank or building society", and NS&I does not accept "credit cards or money from non-UK financial institutions" ³. On the paying-out side you must supply "the sort code and account number for a personal UK bank account or building society account in your name", which NS&I calls your nominated account ³.

There is one partial softener worth knowing before you panic. For prizes specifically, NS&I says an overseas holder can "choose to receive prizes by BACS to a UK bank or building society account or an NS&I Direct Saver or Investment Account" ², so the prize itself has somewhere to land other than a high-street current account. That does not rescue the holding, because NS&I puts the requirement at the level of the account relationship rather than the individual payment: "Your NS&I Customer Agreement requires you to keep a UK bank or building society account open to be able to operate an account with us. If your bank closes your account ... then you'll no longer be able to hold an NS&I account" ². NS&I wrote that paragraph about EU-resident customers after Brexit, but it turns on the UK bank account rather than on which country you moved to.

So the ordinary, sensible aliyah housekeeping step of tidying away a UK current account you no longer use is what quietly breaks a holding the regulations were perfectly happy to let a non-resident keep. The fallback NS&I describes is worse than most people assume: where it cannot pay a UK account, "our only alternative is to send you a warrant (like a cheque), which could be costly to deposit into a non-UK bank account" ². The customer agreement contemplates a warrant "posted to your home address" ³, but no NS&I text we could find addresses Israeli addresses specifically, so treat overseas posting as the agreement's own conditional rather than as a confirmed Israeli service, and confirm it with NS&I before you rely on it.

Three structural facts close off the obvious workarounds. Bonds are non-transferable: "a bond shall not be transferable" ⁴, which NS&I renders as "you cannot sell or give your Premium Bond to someone else" ³. A bond "may not be purchased or held by more than one person or by a body of persons, whether incorporated or not" ⁴, and NS&I adds that "Premium Bonds can't be held jointly or in trust" ³. A holding therefore cannot be gifted to a spouse, assigned, or moved into any Israeli vehicle. The ways out are cashing in, death, and the account failure described above.

UK: does the UK still tax a Premium Bond prize once you live in Israel?

No, and nothing in the exemption is expressed as depending on where the holder lives. NS&I, which is backed by HM Treasury ² and issues the Bonds as UK Government securities under the National Loans Act 1968 ³, states that "all prizes are free of UK Income Tax and Capital Gains Tax" ³ and, on the product page, that "any prizes you win are free from UK Income Tax and Capital Gains Tax" ¹. Neither statement carries a residence qualification.

The capital-gains limb is statutory and equally unqualified: section 51(1) of the Taxation of Chargeable Gains Act 1992 declares that "winnings from betting, including pool betting, or lotteries or games with prizes are not chargeable gains" ⁵. There is in any case nothing to compute, because "each Premium Bond number is worth £1" and the capital comes back at par when you cash in ³.

The income-tax limb works differently, and it is worth getting right because the obvious citation is the wrong one. The National Savings exemptions HMRC actually lists are for something else: its savings manual records "a statutory exemption for interest on UK savings certificates (ITTOIA05/S692) and Ulster savings certificates (ITTIOA05/S693)" ⁷, neither of which is a Premium Bond. What HMRC does say about winnings sits in a different manual and starts from trading. Its business income manual opens with "the basic position is that betting and gambling, as such, do not constitute trading", quotes Rowlatt J in *Graham v Green* [1925] 9 TC 309 that "a bet is merely an irrational agreement that one person should pay another person on the happening of an event", and says of the taxpayer placing a spread bet that "they are not taxable on the profits, nor do they receive relief for their losses" ⁶. That last sentence sits in a paragraph about spread betting, so read it as an illustration of the trading principle rather than as a ruling on draw prizes. Put together, the position an Israeli-resident holder can rely on is NS&I's own unqualified statement of the outcome, resting on a general treatment of winnings rather than on a named Premium Bonds provision that a change of residence could switch off.

One point for the reader who has just worked through the UK departure rules. A prize is not a capital gain, not a pension lump sum, not a chargeable event gain and not an offshore income gain, so it does not appear on the temporary non-residence clawback list at all. If you return to the UK inside the anti-avoidance window, prizes received while you were abroad are not dragged back. For the mechanics that do bite, see the temporary non-residence clawback and split-year treatment, with UK tax obligations for olim as the general orientation.

UK: why does Inheritance Tax follow the Bonds to Israel anyway?

Because Premium Bonds are UK-situated assets, and aliyah does not move them. HMRC's manual states the rule for registered securities: "for the purposes of Inheritance Tax an inscribed and registered security (a shareholding in a Company, for example) is located at the place where the title of ownership must be registered", and "it makes no difference that the business of the company is totally administered outside the country in which the register is kept" ¹⁸. A Premium Bond's title is registered on the register that regulation 3(3) requires the Director of Savings to keep, a register created and maintained under UK law ⁴. Moving yourself to Israel does not move the register.

GOV.UK sets out what that means on death. It states that "if you're based abroad, Inheritance Tax is only paid on your UK assets", and that HMRC "will treat you as being based abroad if you have lived in the UK for less than 10 years in the last 20" ⁸. The same page lists the excluded assets that escape the charge: foreign currency accounts with a bank or the Post Office, overseas pensions, and holdings in authorised unit trusts and open-ended investment companies ⁸. Premium Bonds appear on none of that list, and the separate carve-outs the page flags for trusts, government gilts and visiting armed forces do not describe them either ⁸.

HMRC's estate practice points the same way. Its Inheritance Tax manual instructs that "the total value of all Premium Bonds owned by the deceased should be included in box 54 and at box 3 on form IHT406", and that this "should also include any unclaimed or uncashed prizes" ⁹. There was one historic escape route, and it never reached Israel. Until 6 April 2025, section 6(3) of the Inheritance Tax Act 1984 made certain government-sponsored savings excluded property, and the eligible securities expressly included "Premium Savings Bonds", but only where the beneficial owner was domiciled in the Channel Islands or the Isle of Man ¹¹. That provision is gone.

The 2025 long-term residence reform does not rescue you either, because it runs in the opposite direction. It decides when your non-UK assets are pulled into the UK charge ¹², and says nothing about an asset that is UK-situated to begin with. The test itself, its post-departure tail and the bands live on UK Inheritance Tax after aliyah. The single fact this page adds is that a Premium Bonds holding sits inside the UK charge whether or not that tail has run out. GOV.UK's own instruction where an estate is not clear-cut is to "contact the Inheritance Tax helpline if you're not sure whether your assets are excluded" ⁸.

Israel: does Israel tax a Premium Bond prize?

Not during a new oleh's ten-year exemption, and the reason is that the exemption is drafted so broadly it never has to classify the prize. The Israel Tax Authority's guide for new immigrants starts from the baseline that "as a rule, an Israeli resident is liable for tax on worldwide income (the personal taxation method)", then grants new immigrants and veteran returning residents "a 10-year exemption on all foreign-source income", which "also applies to passive income such as dividends, rent, royalties, and capital gains from the sale of assets abroad, as well as active income such as business income from assets held abroad, and income from business or employment activities performed outside Israel" ¹⁴.

A Premium Bond prize is foreign-source on the Tax Authority's own definition, which is that "income sourced outside Israel is income arising from activities conducted outside Israel" ¹⁴. The draw is run in the UK, on a security "issued under the National Loans Act 1968, and the National Savings (No 2) Regulations 2015" ³, recorded on a register kept under UK law ⁴. Because the exemption is written as *all* foreign-source income rather than as a list of categories, the awkward classification question does not arise while the window is open.

That classification question is genuinely open, and this page will not pretend otherwise. From year 11 the worldwide-income baseline resumes ¹⁴, and how the prize is taxed then depends on which category of the Israeli Income Tax Ordinance it falls into. No published Israel Tax Authority position was found on whether a Premium Bond prize is prize or lottery income or ordinary other income, and the argument runs both ways: the payout is settled by a random draw, which looks like prize income, yet the capital returns in full at par and the monthly prize fund is a stated percentage of the value of the Bonds eligible for that draw, the percentage being "one twelfth of the annual prize fund rate" ³, which looks more like a variable return on a savings product. Because the category is unsettled, no Israeli rate and no exempt threshold appears anywhere on this page; publishing either would mean publishing a number we could not stand behind. Take the category, the rate and the threshold from the Israel Tax Authority or a licensed Israeli tax professional, and read what changes at year 11.

One limit worth stating. All of the above is the new immigrant and veteran returning resident regime. An ordinary returning resident, meaning on the Tax Authority's definition "an individual who was a foreign resident for at least 6 years before returning", gets a five-year exemption written as an enumerated list, covering foreign-source income "that is not business income, such as dividends, rent, royalties, and capital gains from the sale of assets abroad acquired by the returning resident during the period of residence outside Israel after ceasing to be an Israeli resident, as well as pension income, interest, and royalties" ¹⁴. Whether a draw prize is covered by a list it is not named on is a far less comfortable question than the new oleh's, and one for a professional.

Israel: who has to report the holding, and who does not?

Your aliyah date decides it, not the tax year and not the size of the holding. The Tax Authority states that "a first-time Israeli resident and a veteran returning resident who arrived in Israel by 31.12.2025 are exempt from reporting income generated outside Israel and also exempt from reporting assets held outside Israel for a period of 10 years from the date of arrival in Israel", that "the exemption from reporting foreign income and foreign assets does not apply to anyone arriving in Israel starting from January 1, 2026", and that "such income will continue to be exempt from tax for 10 years as explained above" ¹⁴.

Read that twice, because it splits readers of this page down the middle. Two olim can hold identical Bonds, owe an identical nothing, and file completely different returns. An oleh who landed in 2026 reports the NS&I holding as a foreign asset and each prize as foreign income from year one. An oleh who landed in 2025 reports neither for a decade. The mechanics of the window itself, and how it is counted from your aliyah date, are on the 10-year foreign income tax exemption guide.

Treaty: what does the UK-Israel Convention actually decide?

It shuts the UK out of the ordinary case and leaves Israel free, which is the opposite of what most readers assume a treaty does. Under the 1962 UK-Israel Double Taxation Convention as amended by the 1970 and 2019 Protocols, a Premium Bond prize is not dividends (Article VI), not interest (Article VII), not royalties (Article VIII), not a gain from the alienation of property dealt with in Article VIIIA, not income from immovable property (Article IX), not government service remuneration (Article X), not a pension (Article XI, and Article XIII(1)) and not employment income (Article XIII(2) and (3)) ¹³. Nor is it any of the other specific categories the Convention deals with before its residual article: business profits (Article III), shipping and aircraft income (Article V), public entertainer and athlete income (Article XIV), teaching remuneration (Article XV) or a student's maintenance payment (Article XVI) ¹³. It therefore lands in the residual article. Article XVII(1) provides that "items of income beneficially owned by a resident of one of the territories, wherever arising, which are not dealt with in the foregoing Articles of this Convention, other than income paid out of trusts or the estates of deceased persons in the course of administration, shall be taxable only in that territory" ¹³. For a living Israeli-resident holder with no UK permanent establishment, that territory is Israel. Even on the strained reading that a prize is somehow a gain, Article VIIIA(5) sends gains on any other property to "the territory of which the alienator is a resident" ¹³, which lands in the same place.

Two limits sit inside that article and both matter here. Article XVII(2) sets the residual rule aside where the income is effectively connected with a permanent establishment the recipient has in the other territory ¹³, which is not the ordinary oleh's position but is worth knowing exists. More pointedly, the quoted carve-out for "income paid out of trusts or the estates of deceased persons in the course of administration" means the residual rule this section relies on does not, on its face, reach a prize that arrives through an estate under administration. Since Bonds keep entering draws for a year after death ³, that is not a hypothetical, and how those particular prizes are allocated between the two countries is a question for the estate's advisers rather than one this page answers.

Now the counterweight, which is the sentence that makes this section worth reading. Article I(3) states that the Convention "shall not affect the taxation, by a Contracting Party, of its residents except with respect to the benefits granted under paragraph (3) of Article III, paragraph (2) of Article IV and Articles X, XV, XVI, XVIII, XX and XXI" ¹³. Article XVII is not on that list. The treaty removes a UK claim that was never going to be exercised anyway, and leaves Israel's claim over its own resident entirely to Israeli domestic law, which is exactly where the ten-year exemption does all the real work.

One more thing the treaty does not do. Article IA lists the taxes it covers: in the UK, "the income tax", "the corporation tax" and "the capital gains tax"; in Israel, "the income tax (including capital gains tax ...)", "the company tax" and "the tax on gains from the sale of land under the Real Estate Taxation Law" ¹³. No inheritance or estate tax appears on either side. So the UK Inheritance Tax exposure described above gets no relief from this Convention, and Israel levies no estate tax that could be credited against it. For the article-by-article walkthrough of pensions, dividends and interest under the same Convention, see the UK-Israel tax treaty guide.

Who taxes a Premium Bond prize, and on what basis?

Four authorities have a view, and only two of them ever charge anything, but which two depends on your filing obligations and on how long you have been in Israel.

What does this look like for two olim holding the same Bonds?

Thirty-one days of landing date produce an identical tax bill of nothing and two completely different filing lives. Take one holding of 32,000 bond units. At one pound per Bond number ³ that is £32,000, and it leaves 18,000 units of headroom under the statutory ceiling, since 50,000 minus 32,000 is 18,000 (reg 5(1), checked August 2026) ⁴.

Daniel landed on 15 December 2025. His ten-year window runs from arrival, so it closes on 14 December 2035. Measured to 25 August 2026 he has used 8 complete months and has 112 to run, because 120 minus 8 is 112. Across all 112 of those months Israel charges nothing on any prize ¹⁴ and the UK charges nothing on any prize ¹³⁵¹³. Because he arrived by 31 December 2025, he also reports nothing: not the holding as a foreign asset, not the prizes as foreign income ¹⁴.

Rebecca landed on 15 January 2026 with an identical 32,000 units. Her window closes on 14 January 2036, and to 25 August 2026 she has used 7 months, leaving 113 to run, because 120 minus 7 is 113. Her Israeli tax across those 113 months is exactly Daniel's, which is nothing. Her paperwork is not. Arriving on or after 1 January 2026, she reports the NS&I holding as a foreign asset and each prize as foreign income from year one, and owes no Israeli tax on either ¹⁴. Thirty-one days of landing date, one month more of window left to run, and an entirely different obligation.

Now the estate arithmetic, where a single day decides what is taxable. Suppose Daniel dies on 3 March 2031. HMRC's manual says a Premium Bond prize "is not taken into account for inheritance tax purposes until the draw allocating it has taken place", counts it "from the day following the date of dispatch of the prize notification", and states that the monthly draw "normally starts on the first full day of each month", with notifications dispatched on the 1st day of the draw for prizes of £1,000 and over, the 2nd day for £500 and the 3rd day for £100 (HMRC's stated schedule, checked August 2026) ¹⁰. So if the March 2031 draw starts on 1 March: a £1,000 prize is dispatched 1 March and counts from 2 March, which is inside the estate; a £500 prize is dispatched 2 March and counts from 3 March, the date of death itself, so it is also in; a £100 prize is dispatched 3 March and counts from 4 March, one day too late, so it stays out. Box 54 would therefore carry £32,000 of Bonds plus £1,000 plus £500, which is £33,500, and not the £100 ⁹¹⁰. That last step rests on the draw actually starting on the 1st, which HMRC only calls the norm, and the same page tells its own officers that "in case of doubt the date of the draw for any particular month can be checked" and to "seek advice in any case of doubt" ¹⁰, so an executor should check the month rather than assume the pattern. The Bonds themselves keep entering draws "for 12 months following the date of death, unless they are cashed in before that" ³, so potentially through March 2032, with those later prizes falling to the estate and into the treaty carve-out described above.

And if any of them closes the UK current account, all of the above becomes academic. NS&I can no longer receive money from them or pay money to them, and on its own terms the holding cannot continue ²³.

If you also hold a US passport, what changes?

Everything, and in the direction nobody expects. If you have no US filing obligation, skip this section entirely; nothing in it applies to a British oleh with one passport.

The same prize is exempt in the UK for every holder ¹³⁵, exempt in Israel for ten years ¹⁴, and treated by the IRS as taxable income in every single year. The IRS states that "gambling winnings are fully taxable and you must report the income on your tax return", and that gambling income "includes but isn't limited to winnings from lotteries, raffles, sports betting, horse races, and casinos", the page's own scope being "casual gamblers who aren't in the trade or business of gambling" ¹⁵. Nothing in that list is drawn by country, and the winnings go on Form 1040 or 1040-SR via Schedule 1 "including winnings that aren't reported on a Form W-2G" ¹⁵.

The credit arithmetic is unforgiving precisely because the other two countries were generous. UK tax on the prize is nil and Israeli tax on the prize during the window is nil, so no foreign tax has been paid on it for a credit to relieve, and the US charge stands undiminished. Losses do not help either. They are deductible "only if you itemize your deductions on Schedule A (Form 1040)" and only up to the winnings you reported ¹⁵, and a Premium Bond holder has no wagering loss to itemise, because the stake comes back at par ³. A British neighbour and a British-American oleh holding the identical Bonds get opposite answers on the same envelope.

The one piece of relief is the PFIC question, and it deserves spelling out rather than waving away. The Form 8621 instructions begin from a threshold requirement: "a foreign corporation is a PFIC if it meets either the income or asset test", being 75% or more passive gross income, or at least 50% passive assets ¹⁶. A Premium Bond is a registered, non-transferable UK Government security, "issued under the National Loans Act 1968, and the National Savings (No 2) Regulations 2015" ³⁴. There is no foreign corporation in the picture, so neither test has anything to be applied to. Contrast that with a UK stocks-and-shares ISA, whose underlying funds are PFICs for the same reader: see the PFIC problem and keeping a UK ISA after aliyah. Two wrappers a British reader files under "tax-free", sitting at opposite ends of the US spectrum.

Reporting inverts against instinct as well. The IRS comparison table lists "foreign stock or securities not held in a financial account" as reportable on Form 8938 but not on the FBAR ¹⁷. An NS&I holding is registered on the Director of Savings' register ⁴ under a holder's number ¹, rather than sitting inside a custodial or deposit account, which on its face makes it an 8938 asset and not an FBAR account. Whether that relationship is itself a "financial account" for FBAR purposes is not something the IRS table settles, and the two characterisations give opposite answers, so treat it as a question for your preparer rather than a conclusion you can reach from this page. The same IRS page carries its own caution that the table "is current through the publication date" (page last reviewed 18 September 2025, checked 25 August 2026), and on that date gave the thresholds as aggregate financial accounts over $10,000 at any time in the calendar year for the FBAR, and, for an unmarried specified individual living outside the US, specified foreign financial assets over $200,000 on the last day of the tax year or over $300,000 at any time during it for Form 8938 ¹⁷. Because regulation 5(1) caps a holding at 50,000 bond units (checked August 2026) ⁴, the Bonds alone are a modest input to that aggregate; whether you cross it turns on everything else you own abroad.

Will the Israel Tax Authority learn about the holding anyway?

Yes, independently of what you report yourself. NS&I states that the Common Reporting Standard "asks all financial institutions, including NS&I, who operate in a CRS participating jurisdiction to gather certain customer information and report it to local tax authorities" ². That is the inbound arrow: a UK state institution reporting a UK holding into the system that reaches the authority where you now live. It can arrive while you are still comfortably inside the Israeli reporting exemption, which is the point worth internalising, because the exemption is from *reporting*, not from *being known about*. For how the two exchange regimes differ, and what your Israeli bank sends the other way, see FATCA vs CRS for olim.

A closing caution, in NS&I's words rather than ours: "you may not be able to hold some NS&I accounts in certain countries because of local restrictions, and some of our accounts might be liable for local tax. Always check the local laws and regulations in the country you are living in or moving to" ². The example NS&I gives is the United States, whose "strict gaming and lottery laws ... mean that it might not be possible or practical to hold Premium Bonds while in the US" ². NS&I says nothing at all about Israel, and no Israeli restriction on holding a foreign state savings product of this kind was verified for this page. That is a position to confirm, not one to assume in either direction. NS&I also asks that "if you move overseas, please let us know so we can update your details" ², and the customer agreement makes it an obligation: "you must tell us whenever you change your name, address, phone number, email address, or nominated account" ³.

> Work out where you are in the window before you touch the holding. Almost every answer above turns on two dates: your aliyah date, and which side of 1 January 2026 it fell on. Start with our 10-year foreign income tax exemption guide, which sets out how the window is counted and what falls inside it.

Frequently asked questions

Yes. The regulations set no residence test; a closed UK bank account is what ends a holding, because NS&I pays and receives only through one. NS&I states prizes are free of UK income tax and capital gains tax, and Israel's ten-year new-immigrant exemption covers foreign-source income. UK Inheritance Tax still reaches the Bonds; a US filer is taxed yearly.