Are donations from tax-efficient savings confusing? Many people who hold ISAs or NS&I Premium Bonds pause because the rules on withdrawals, prize wins and inheritance can feel opaque, and a simple mistake can reduce the tax benefit of the gift or create avoidable paperwork.
Practical solution: this concise, expert-level analysis explains how charitable giving can work when the funds originate from a Cash ISA, Stocks and Shares ISA or Premium Bonds. It covers what is allowed, tax consequences, how prize wins behave, regular giving mechanics and inheritance/legacy options, with step-by-step actions and realistic examples tailored to UK rules (indicative, current at time of writing).
Quick essentials about charitable giving: using ISAs & Premium Bonds in 1 minute
- Can make gifts from ISAs and Premium Bonds, direct transfers to charities are not automatic; withdrawals or transfers are normally required.
- ISA income/gains remain tax-free even when donated, but Gift Aid still matters and may change tax reporting.
- Premium Bonds prizes are taxable notional winnings, they are paid tax-free but count differently for Gift Aid and estate planning.
- Regular giving from ISAs is straightforward, set up standing instructions after a withdrawal or use a linked current account.
- Inheritance and legacy rules differ, nominating a charity in a will or using survivorship/assignment affects IHT outcomes.
Can I donate directly from an ISA or Premium Bonds?
Direct donation from an ISA: not normally possible. ISAs are tax wrappers, not payment portals. To give to a charity, the typical steps are:
- Withdraw funds from the ISA to a nominated bank account or transfer cash to a current account, then send the donation via the charity's preferred method (bank transfer, card, cheque).
- Transfers between providers (e.g. transfer an ISA to another provider) do not constitute donations unless the provider supports direct payment to a charity as a special service, rare and must be confirmed in writing.
Direct donation from Premium Bonds: not automatic either. Premium Bonds prizes are paid to the registered holder's bank or NS&I account. Options are:
- Redirect a prize payment once received by instructing NS&I to pay prize proceeds into a bank account used to make the gift.
- Assign or transfer Premium Bonds in certain circumstances (see below under inheritance and assignment), some charities accept donated Premium Bonds but administrative steps and policies vary by charity.
Why this matters: attempting to treat the ISA or bond account itself as a payment channel can lead to rejected payments, delays, or loss of Gift Aid eligibility where that matters.
Common mistakes:
- Assuming a charity can be the ISA account nominee (it cannot).
- Sending instructions to an ISA provider asking them to pay a charity without confirming the provider's ability to do so.
- Not keeping a clear audit trail (receipt, date, amount) for Gift Aid or tax records.
Practical action: always withdraw to a named bank account and then authorise the charity payment; keep receipts and a screenshot of the transfer.
Tax implications when giving from ISAs and Premium Bonds
How donations themselves are treated
- Gifts made from an ISA: the withdrawal is simply the return of the investor's capital; no tax on withdrawal because ISA returns are tax-free. The act of donating does not create additional income tax or capital gains tax liability.
- Gifts of Premium Bonds prize money: NS&I prize payments are paid tax-free and recipients do not declare that money as taxable income. For donors, gifting prize proceeds is normally tax-neutral.
Where Gift Aid interacts
- Gift Aid increases the value of donations for charities by reclaiming basic-rate tax. Gift Aid is applied to the donation amount paid by the donor; it does not change the tax status of ISA withdrawals or Premium Bonds prizes. However:
- Donating directly from a non-ISA bank account and claiming Gift Aid is straightforward.
- If a donor withdraws from an ISA and then donates, Gift Aid applies as usual but the donor must confirm being a UK taxpayer who paid sufficient tax to cover the reclaimed amount.
Implications for higher-rate taxpayers
- Higher-rate taxpayers who donate can claim additional tax relief via self-assessment, where Gift Aid is used. Donating money originally from an ISA does not affect the ability to claim relief; the relief depends on the donor's tax position, not the source of funds.
Record-keeping and HMRC guidance
- Keep donation receipts and bank statements that show the withdrawal and subsequent transfer to the charity. HMRC guidance on Gift Aid and charitable donations is available at HM Government, Gift Aid.
How NS&I Premium Bonds prize wins affect donations
Structure of prize wins
- Premium Bonds do not pay interest; prize wins are taxed at source in the sense that the prizes are tax-free to the recipient. For donation purposes, consider:
- A prize credited to the NS&I account or nominated bank account can be donated immediately after receipt.
- NS&I will not apply Gift Aid on behalf of the donor.
Donating the bond holding versus donating prize money
- Donating actual Premium Bonds (the asset) is possible but uncommon. Some charities accept donated Premium Bonds as a direct transfer of the investment, subject to their acceptance policy. If the charity accepts the bonds:
- They become the registered holder and can claim future prizes.
- The donor must follow NS&I procedures to change ownership, typically a transfer form and ID verification.
- Donating the prize proceeds after a win is administratively simpler and more common.
Practical examples
- Example A: A £50 prize is credited to the donor's bank account. Donor transfers £50 to charity by bank transfer; charity receives £50 and can claim Gift Aid if donor qualifies.
- Example B: Donor transfers the Premium Bonds (all or some) to a charity that accepts them. The charity registers as the new holder and receives future prizes; no Gift Aid applies to the asset transfer itself.
What to check with NS&I and charities
- Confirm NS&I procedures and processing times at NS&I.
- Confirm whether the chosen charity accepts Premium Bonds and their required forms (some large charities accept them and have an admin route; smaller charities often prefer cash).
Using ISA withdrawals to make regular charity donations
How to set up regular giving from ISA funds
- Step 1: Schedule a withdrawal from the ISA to a nominated bank account (check provider's withdrawal times and rules).
- Step 2: Use a standing order from that bank account to the charity for the regular payment.
- Step 3: For each payment, keep the charity's receipt and confirm Gift Aid declaration if applicable.
Timing, liquidity and notice periods
- Cash ISAs: withdrawals are typically immediate or within a business day for online accounts, but some notice accounts and fixed-term ISAs may restrict access.
- Stocks and shares ISAs: withdrawals may take several business days to settle after selling investments; market timing and potential loss of value must be considered.
Automation and best practice
- For regular donations, it is often simpler to withdraw a buffer amount into a current account and set the standing order from that account. This avoids repeated ISA transactions and potential market timing costs for Stocks & Shares ISAs.
Costs and taxable events
- Cash ISAs: no tax consequences on withdrawal; minimal cost other than lost future tax-free growth.
- Stocks & Shares ISAs: selling investments could crystallise losses or remove exposure to future gains, consider the opportunity cost. There is no capital gains tax on amounts withdrawn from an ISA, but the sale locks in current prices.
Errors to avoid
- Selling investments at a loss immediately before an intended donation without considering timing and re-investment plans.
- Failing to confirm Gift Aid declarations for regular givers who are eligible.
Choosing cash ISA or stocks and shares ISA for donating: practical comparison
Below is a focused comparison tailored to charitable giving: liquidity, ease, tax, and planning.
| Feature |
Cash ISA |
Stocks & Shares ISA |
| Ease of donating |
High, quick withdrawal to bank account |
Medium, may need to sell investments and wait for settlement |
| Tax treatment when donated |
Withdrawals tax-free; Gift Aid unaffected |
Withdrawals tax-free; selling locks in market outcome |
| Impact on long-term growth |
Lower, less future growth forgone |
Higher, potential future growth lost when sold |
| Best for regular donations |
Yes, stable liquidity |
Possible but needs planning |
Key practical advice:
- For predictable regular donations, a Cash ISA or buffer current account is simplest.
- For one-off larger legacy-style gifts, Stocks & Shares ISA may be appropriate but consider timing and whether transferring investments (rather than selling) to a charity is possible.
Inheritance tax and legacy rules for ISAs and Premium Bonds
How ISAs are treated for inheritance
- ISAs do not pass outside the estate automatically; they remain part of the deceased's estate for IHT purposes unless left in a way that attracts an exemption.
- Exception: a surviving spouse or civil partner can receive an additional ISA allowance (additional permitted subscription) equivalent to the deceased's ISA value, but this is not an outright IHT exemption.
- To leave ISA funds to a charity and potentially reduce IHT:
- Leaving assets to a registered charity in a will can reduce the taxable estate because gifts to charity are exempt from IHT; where more than 10% of net estate is left to charity, certain lower IHT rates may apply (check current HMRC rules and thresholds).
How Premium Bonds are treated for inheritance
- Premium Bonds are assets and form part of the estate. They can be:
- Transferred to named beneficiaries under the will via probate.
- Donated in lifetime by transferring registration to the charity (if the charity accepts transfers), this is an immediate disposal of the asset.
Nomination and assignment
- NS&I allows holders to nominate someone to receive the investment proceeds on death (a nominee), but nomination does not change ownership during life. Nomination forms are available from NS&I and provide administrative ease on death.
- A formal transfer of Premium Bonds to a charity during a donor's lifetime is possible but requires NS&I forms and the charity's acceptance.
Practical estate planning points
- If the objective is to reduce IHT, leaving a residuary or specific legacy to charity in the will is the straightforward route; consult a solicitor for precise wording.
- For ISAs, converting to a legacy (a bequest) in the will means the value at death is outside the surviving spouse ISA allowances but can reduce the taxable estate if left directly to a charity.
- Always confirm with the charity whether they can accept Premium Bonds as a donated asset and what paperwork they require.
Info-process: how to donate from an ISA or Premium Bonds (visual aide)
Step 1 → Withdraw or receive prize → Transfer to bank account → Authorise donation → ✅ Charity receipt & Gift Aid
Strategic balance: what is gained and what to watch when using ISAs & Premium Bonds for charitable giving
When this is a strong option (benefits of high impact)
- Immediate liquidity and simplicity: Cash ISAs enable fast donations without tax events.
- Tax-efficient source: ISA withdrawals do not create income tax or CGT to complicate the donation.
- Premium Bonds flexibility: Prize wins can be donated with minimal admin or the bonds transferred to charities that accept them.
Flags to watch (red flags)
- Selling investments for charity without timing plan: can crystallise losses or miss gains in Stocks & Shares ISAs.
- Assuming Gift Aid applies automatically: Gift Aid must be declared and donors must be eligible.
- Administrative mismatch: some charities do not accept Premium Bonds or need time to process a transfer.
Practical examples and scenarios (short calculations)
- Scenario 1: Donor with £10,000 in a Cash ISA wants to give £100 monthly.
- Action: Withdraw or set aside £300 in current account and set standing order for £100; Gift Aid claim if eligible.
-
Benefit: No tax paperwork; predictable giving.
-
Scenario 2: Donor holds £25,000 in Stocks & Shares ISA and prefers a one-off £5,000 donation.
- Action: Consider selling a portion of holdings during a favourable window; factor in loss of future tax-free growth. Alternatively, transfer specific investments to a charity if accepted.
Errors to avoid:
- Issuing a cheque or card payment directly from an ISA account number without confirming provider processes.
Deductions, checks and useful links (expert resources)
Donating from ISAs & Premium Bonds, quick flow
1️⃣
Withdraw or receive prizeTake funds from Cash ISA or accept Premium Bonds prize.
2️⃣
Move to current accountUse a buffer account for standing orders.
3️⃣
Authorise donationSet standing order or one-off transfer; get receipt.
4️⃣
Claim Gift Aid if eligibleComplete Gift Aid declaration for higher tax benefit.
✅
Keep recordsSave receipts and statements for tax and estate planning.
Dilemmas others ask: quick questions about charitable giving: using ISAs & Premium Bonds
How can a charity receive Premium Bonds from a donor?
A charity can receive Premium Bonds if it accepts them; the donor must complete NS&I transfer forms and the charity must register as new holder. Check the charity's policy first and contact NS&I for the correct paperwork.
Why does Gift Aid matter when donating from an ISA?
Gift Aid increases the donation value to the charity by reclaiming basic-rate tax on the amount donated; the source (ISA withdrawal) does not prevent Gift Aid but the donor must be a UK taxpayer and sign a declaration.
What happens to ISA holdings after death if left to a charity?
ISA assets form part of the estate; leaving them to a registered charity in a will generally exempts that portion from IHT. Legal advice is recommended to ensure will wording achieves the desired IHT outcome.
Can Premium Bonds be gifted directly without selling?
Yes, Premium Bonds can be transferred if the charity accepts them and NS&I and the charity complete the required transfer/registration process.
Which ISA is better for charitable giving: cash or stocks & shares?
Cash ISAs offer simple liquidity for regular giving; Stocks & Shares ISAs may be used for larger legacy gifts but require selling assets or arranging transfer, plan for timing and market impact.
What records should be kept after donating from an ISA or Premium Bonds?
Keep withdrawal records, bank transfer confirmations, and the charity's receipt. These support Gift Aid claims and provide evidence for estate records.
What if a donor wants to make a legacy of Premium Bonds in their will?
Include specific instruction in the will and advise the charity in advance. Nomination forms with NS&I and clear will wording reduce delays in probate.
Final summary and roadmap: making charitable giving from ISAs & Premium Bonds work for the long term
Donating from ISAs or Premium Bonds is entirely feasible and often tax-efficient; the practical route is usually to withdraw or receive prize proceeds, transfer to a bank account, then donate (with Gift Aid where eligible). For longer-term or legacy-focused giving, transferring assets or specific will wording are valid options but require coordination with NS&I, the chosen charity and legal advisers.
Start your giving plan
- Withdraw or note how prizes are paid from NS&I and confirm bank details for donations.
- Contact the charity to confirm acceptance of Premium Bonds (if relevant) and Gift Aid procedures.
- Keep clear records: withdrawal date, bank transfer and charity receipt; consult a solicitor for legacy clauses and HMRC/Governance resources for tax queries.
