Are the savings held in ISAs or Premium Bonds part of what must be split on divorce? Which is easier to value and transfer without creating extra tax or losing long-term benefit? For those facing separation, these decisions affect liquidity, tax wrappers and future returns — and they often determine whether settlements are simple swaps or complex trade-offs.
This guide focuses exclusively on Divorce & Separation: ISAs vs Premium Bonds for Splitting Assets. It explains ownership rules, tax and prize implications, how to value each holding, practical timings for withdrawing or cashing in, and the exact paperwork and steps to use in negotiations or court. All examples are indicative and current at time of writing (29 January 2026).
Key takeaways: what to know in one minute
- ISAs are individually owned wrappers; the tax wrapper does not automatically transfer on divorce — transfers must follow ISA rules or use compensation.
- Premium Bonds are held in the bondholder's name and can usually be cashed by the holder; future prize entitlement complicates valuation.
- Tax treatment is different: ISAs preserve tax-free status if moved correctly; Premium Bonds are tax-free prizes but no ISA wrapper to lose.
- Liquidity and timing matter: cashing Premium Bonds is often quicker than closing an ISA to rebuy elsewhere if allowance limits are a concern.
- Practical steps and paperwork: gather titles, statements and correspondence; use Form E or financial statement evidence and follow NS&I and ISA provider procedures.
How divorce affects ISAs and Premium Bonds ownership
Who legally owns an ISA or Premium Bonds is a primary practical question on separation. The law treats both as part of the matrimonial pool where relevant, but the mechanics differ.
What counts as matrimonial property?
- Money in an individual ISA or the legal title of Premium Bonds is usually considered a financial asset. Under usual financial remedies, both are part of the asset pool available for division unless agreement or orders state otherwise. Courts apply established principles (needs, compensation, fairness) rather than product type when making awards. See official guidance on splitting money and property: GOV.UK guidance on dividing money and property.
Ownership and named holders
- ISAs: the named account holder legally owns the ISA. ISAs cannot be jointly held. On divorce, the holder remains the legal owner unless funds are transferred or the account closed and proceeds are split.
- Premium Bonds: bonds are registered to the named individual. NS&I records the bondholder and prizes are payable only to that person or their nominated payee on death.
Practical consequence for settlements
- Because both products are in one person's name, splitting the asset pool normally requires either compensation (one partner keeps the product, the other receives cash or other assets) or realisation and division (cash in the product and divide the proceeds). Courts and negotiators expect full disclosure of each product and supporting statements.
Tax and prize implications in settlements: ISAs vs Premium Bonds
Tax and prize rules change the net value a party receives if a transfer, sale or compensation is chosen.
ISAs: tax wrapper and transfer consequences
- Tax-free growth and income: ISA returns (interest, dividends, capital gains) are free from UK income tax and capital gains tax while held within the ISA.
- Losing the wrapper: if an ISA is closed and the cash transferred to the ex-partner who then reinvests outside an ISA, the future tax-free benefit is lost on that portion. Reinvesting into an ISA is possible only subject to the receiving person's annual ISA allowance (currently indicative for 2026). For guidance on ISA rules see GOV.UK on ISAs.
- Transfers between spouses: there is no automatic ability to transfer an ISA between non-married parties without cashing in; on divorce the ISA holder can withdraw cash and then the ex can use that cash to subscribe to their own ISA subject to allowance.
Premium Bonds: prize tax and future entitlement
- Tax-free prizes: NS&I prizes are tax-free and do not count as income for tax purposes. There is no wrapper that can be lost.
- Valuing future prizes: future prize returns are uncertain. Courts will usually value Premium Bonds at cash surrender value (face value) and may not attribute speculative future prizes unless agreed or evidenced. Refer to NS&I for surrender terms: NS&I.
Which is more tax-efficient after settlement?
- If preservation of tax-free growth is a priority, keeping the ISA wrapper is valuable — especially for high-return or long-term holdings. Premium Bonds keep tax-free prizes but offer no shelter for other types of returns.
Valuing ISAs and Premium Bonds for asset division
Valuation is often the area of dispute. This section gives practical methods and worked examples.
Valuation principles applied by solicitors and courts
- Date of valuation: parties must agree the valuation date (commonly date of separation, filing or hearing). The Family Procedure Rules allow courts to set valuation dates.
- Evidence: provide up-to-date provider statements, transaction histories and product terms. Statements should cover the valuation date.
How to value an ISA
- Cash ISAs: value equals cash balance on the valuation date (including accrued interest if statement lags).
- Stocks and shares ISAs (S&S ISAs): value equals market value of underlying holdings on the valuation date (use provider valuation or independent valuation if large holdings). Include uninvested cash.
- Example: S&S ISA holding £120,000 market value at valuation date. That figure is included in asset pool. If one party keeps the ISA, the other receives compensation equal to their percentage of the £120,000 or compensatory assets.
How to value Premium Bonds
- Premium Bonds are valued at surrender value (face value) on the valuation date. Future prize expectation is speculative; courts generally rely on cash value unless parties provide a robust agreed method to capitalise expected prizes.
- Example: Premium Bonds holding face value £30,000 on valuation date. The asset pool includes £30,000.
Adjusting for future prizes or growth (examples)
- If parties want to include expected future prize stream, a common method is to estimate an annualised expected return (NS&I publishes long-term prize rates) and capitalise over an agreed term using a discount rate. This is negotiable and requires expert evidence for court.
Liquidity and timing: withdrawing ISAs or cashing Premium Bonds
Liquidity affects the ability to equalise quickly and may affect tax wrappers or allowances.
How long to cash Premium Bonds
- Cashing Premium Bonds: normally immediate; NS&I can redeem bonds and pay within a few working days if online or by post. There is no penalty aside from losing future entries and prizes. See NS&I guidance: How to cash Premium Bonds.
How long to withdraw or transfer an ISA
- Withdrawals: immediate for cash ISAs (processing times vary by provider). Stocks & shares ISAs require selling holdings which can take several days and may crystallise gains/losses — but gains inside an ISA are not taxable.
- Reopening ISA allowances: if ISA cash is withdrawn by the holder and paid as settlement to the ex, the ex can only re-subscribe up to their ISA allowance. This matters where the goal is to maintain tax-efficient status.
Timing considerations in negotiated settlements
- If keeping the ISA wrapper is important to either party, consider arranging for the person who will retain the ISA to keep it in exchange for other assets. If both want tax-efficient continuation, use compensation or swap assets to preserve wrappers.
Which suits short- or medium-term settlements: ISAs or Premium Bonds?
This compares product traits against settlement horizons and common divorce objectives.
| Factor |
ISAs |
Premium Bonds |
| Short-term access |
Moderate — cash ISAs quick, S&S ISAs require selling |
High — usually immediate cash-in |
| Preserve tax efficiency |
Excellent if wrapper retained or funds re-subscribed within allowance |
Prizes are tax-free but no shelter for other returns |
| Valuation clarity |
High — statements show exact balance/value |
High — face value clear; prize expectation uncertain |
| Best where settlement is |
Medium/long-term where tax-saving matters |
Short-term or when income is needed flexibly |
Practical rule-of-thumb
- For short-term equalisation where cash is needed quickly, Premium Bonds are often easier to convert to cash without affecting tax allowances.
- For preserving long-term tax efficiency, ISAs usually have greater value if the wrapper remains with the receiving party.
Practical steps and paperwork: splitting ISAs and Premium Bonds
This section lays out a step-by-step process suitable for negotiation, solicitor letters, or court evidence.
Step 1: collate documentation (evidence pack)
- Gather provider statements covering the valuation date and the most recent 12 months.
- For ISAs include: account opening terms, recent valuations (for S&S ISAs), and transaction histories.
- For Premium Bonds include: NS&I statements, bond numbers and online account access proof.
- Use standard authoritative guidance for disclosure: MoneyHelper and Citizens Advice documentation.
Step 2: agree valuation date and method
- Propose a valuation date in writing (e.g. date of separation).
- For Premium Bonds state face value; for S&S ISAs provide market value on that date.
- If one party contends that expected future prizes should be capitalised, obtain a joint expert report.
Step 3: choose mechanism to split
- Compensation/swap: one keeps the ISA or Premium Bonds, the other receives equivalent value in other assets or cash. This preserves wrappers.
- Realisation and split: cash in the product and split proceeds; consider ISA allowance implications.
Step 4: execute provider procedures
- For ISAs: the holder must instruct their provider if withdrawing or closing. Some providers permit transfers between providers but not transfers between account holders without cashing-in. Contact the ISA provider and follow their forms.
- For Premium Bonds: cash-in via NS&I online, post or phone. After cashing in, provide proof of payment and use funds for settlement or transfer.
- Record the agreed treatment in a consent order or financial remedy order so the agreement is legally binding. Solicitors typically include specific wording about who retains which product and how valuations were calculated. Guidance on forms and procedure: GOV.UK: money and property on divorce.
Example template wording (practical)
- "The parties agree that the Premium Bonds held by [name] with NS&I, account ref [xxxx], with face value £X on [valuation date], shall be retained by [name]. In compensation, [other name] shall receive £Y from the sale of the marital property by way of offset."
When court intervention is needed
- If parties cannot agree, the court will decide. Expert valuation evidence may be required if the value of future returns is disputed. Legal advice should be sought.
Quick split workflow: ISAs vs Premium Bonds
📄Step 1 → Gather statements and valuation date
🔍Step 2 → Agree valuation and provide evidence
⚖️Step 3 → Decide keep, swap or cash-in
🏦Step 4 → Follow provider procedures (NS&I / ISA provider)
🖋️Step 5 → Record in consent order or settlement
✓ Faster: Premium Bonds cash-in ✓ Preserve wrapper: keep ISA ✓ Always evidence statements
Advantages, risks and common mistakes
Benefits / when to apply ✅
- Keep the tax wrapper: retain an ISA if long-term tax-free growth matters.
- Quick cash: cash Premium Bonds for short-term liquidity needs.
- Valuation clarity: both products show clear face or market values for most dates.
Risks and errors to avoid ⚠️
- Losing ISA allowance inadvertently: paying an ex-spouse cash and expecting them to recontribute into an ISA may be limited by their annual allowance.
- Ignoring prize uncertainty: treating Premium Bonds as income-producing like an interest-bearing account can mislead valuation.
- Failing to formalise: verbal agreements about who keeps what often lead to disputes — always formalise via consent order.
Frequently asked questions
Can my spouse keep my ISA after divorce?
The named ISA holder remains the legal owner. A spouse cannot keep an ISA unless the holder agrees to transfer cash or the court awards it as part of the settlement.
Are Premium Bond prizes split on divorce?
Prizes already won and paid are assets. Future prizes are uncertain; courts usually value bonds at face/surrender value on the valuation date.
Will I lose tax benefits if the ISA is used in settlement?
If the ISA is closed and funds moved outside an ISA, the tax wrapper on those funds is lost. Re-subscription depends on the recipient's ISA allowance.
List current balance/value, account number, provider name, and include recent statements. Provide valuation date and explain whether wrapper will be preserved.
How quickly can Premium Bonds be cashed in for settlement?
NS&I redemption is typically processed within a few working days, faster if done online and with verified identification.
Do courts treat ISAs and Premium Bonds differently?
Courts treat both as financial assets. Differences arise in valuation (market vs face value) and tax-wrapper consequences, which affect negotiation strategy.
Can spouses transfer Premium Bonds between them without cashing in?
NS&I registers bonds to named individuals; transferring ownership without cashing is not standard practice and typically requires cashing and re-purchasing in the other name.
Should expected future Premium Bond prizes be included in the asset pool?
Only if both parties agree or expert evidence supports capitalising expected prizes. Courts prefer concrete valuation methods and may reject speculative claims.
Are there sample letters to providers to evidence ownership?
Most providers accept written statements and copies of ID. A solicitor's letter or consent order is the strongest evidence.
Your next step:
- Request up-to-date provider statements for every ISA and Premium Bond account and set a clear valuation date.
- Decide whether preservation of the ISA wrapper or quick liquidity matters more and propose an exchange or cash-in mechanism.
- Record the agreement in a consent order or financial remedy order and follow provider procedures with written confirmation.