Are lenders treating ISAs and Premium Bonds the same when verifying savings for a mortgage application? Many applicants discover that the answer depends on documentation, accessibility and lender policy rather than a single rule. This guide explains, in plain British English and with actionable detail, how mortgage lenders count ISAs versus Premium Bonds when assessing proof of savings and the tax and legal implications that affect underwriting decisions.
Key takeaways: what to know in 1 minute
- Lenders usually accept cash ISAs as proof of savings when supported by current statements showing ownership and accessible funds. Stocks & shares ISAs are treated differently and often need recent valuation.
- Premium Bonds can be accepted but often require liquidation or a lender-specific allowance; lenders may apply a discount because prizes are not guaranteed and bonds may take days to convert to cash.
- Both ISAs and Premium Bonds are generally tax-free for income purposes, but both remain part of the estate for inheritance tax and must be evidenced carefully on death. Check current HMRC and NS&I guidance (indicative at time of writing).
- Gifted deposits, joint accounts and transfer-in-progress funds need clear paperwork: a gift letter, identity of donor, evidence of source of funds and statements covering seasoning periods.
- Prepare exact paperwork: latest ISA statements, provider letter or screenshot with account name and number, NS&I bond statements or certificates, and a plan to liquidate assets if required by the lender.
How mortgage lenders count ISAs for proof of savings
Mortgage underwriters test three practical attributes of any asset offered as proof of funds: ownership, accessibility (how quickly it becomes cash), and seasoning (how long funds have been held). For ISAs these are assessed as follows:
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Ownership: provider statements and account details showing the applicant's name are primary evidence. Lenders accept provider-issued PDF statements or online screenshots if they clearly display name, account number and balance. A letter from the ISA provider confirming current balance is a stronger piece of evidence when available. Refer to HMRC ISA rules for eligibility: Gov.uk: ISAs.
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Accessibility: cash ISAs are immediately accessible (subject to product terms), so lenders typically count the entire balance as savings. Stocks & shares ISAs may require time to sell underlying holdings and settle proceeds; lenders commonly apply a haircut or require valuation and proof of saleability.
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Seasoning: many lenders require 3–6 months of statements to rule out recently borrowed deposits. If ISA funds were transferred in recently, lenders often want proof of original source and a trail for the transfer. MoneyHelper has guidance on proofs lenders commonly request: MoneyHelper.
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Valuation method: for cash ISAs, the face value is used. For stocks & shares ISAs, the latest valuation (often provider valuation within 30 days) or sale proceeds are used. Lenders vary on how they treat unrealised gains.
Practical effect: cash ISAs usually count 100% (if documented), stocks & shares ISAs may count only after conversion to cash or with an agreed discount.
Are Premium Bonds acceptable as proof of funds?
Premium Bonds (NS&I) are popular for risk-free savings and tax-free prizes, but underwriters evaluate them differently because: (1) payouts are prize-based, not interest; (2) you must cash bonds to realise a known cash amount; (3) prizes are not guaranteed.
How lenders typically treat Premium Bonds:
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Documentation accepted: lenders will generally accept NS&I statements or the downloadable PDF “holdings statement” showing name and total bond value. The NS&I site explains documentation and statement download options: NS&I.
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Liquidity: although cashing Premium Bonds is straightforward, NS&I redemption often takes up to 3 working days for online redemptions and might be slower by cheque. Lenders may require bonds to be cashed before completion or request proof that the applicant can liquidate within the required timeframe.
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Underwriter caution: some lenders apply a haircut (for example treat Premium Bonds as 70–90% of face value) or only accept them if liquidated into a bank account before completion. Others accept them in full if the applicant provides an NS&I statement and a clear plan to cash them.
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Prize uncertainty: lenders care that the funds used for deposit are guaranteed. Because Premium Bond prizes are random, lenders prefer the principal value (current bond holding) to be available, not potential future prizes. Ensure the lender’s policy on acceptable deposit sources is reviewed early.
Example scenario: an applicant has £30,000 in Premium Bonds and a lender requires full cleared funds on completion. The lender may ask the applicant to cash bonds four working days before completion and show the cleared balance in a UK current account.
Tax differences: ISAs' tax-free status versus bond prizes
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ISAs: interest, dividends and capital gains within an ISA wrapper are generally exempt from UK income tax and capital gains tax for the individual account holder. The ISA savings are still part of the estate for inheritance tax purposes.
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Premium Bonds: prizes are tax-free — prize money is not subject to income tax or capital gains tax for winners. The underlying cash value of the bonds is also not taxed as income simply for being held. However, bonds and prizes remain part of the estate for inheritance tax.
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Reporting: neither ISA income nor Premium Bond prizes usually require reporting to HMRC by the saver as taxable income. For up-to-date guidance see HMRC and NS&I pages: Gov.uk: ISAs and NS&I: tax on Premium Bonds.
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Practical underwriting note: lenders do not usually apply different affordability treatment because of the tax status; the key underwriting concern is availability and documented ownership rather than tax-exempt status.
How to prove ISA balances to mortgage underwriters
Lenders require clear evidence. The stronger the evidence, the less likely delays or haircuts. Use the following checklist and a short step-by-step process to prepare proof that will satisfy most UK mortgage underwriters.
Documents lenders typically accept
- Latest provider-issued PDF statement showing: applicant name, account number, current balance and date.
- Recent printed or screenshot of online account with the same details; ensure screenshots show date and time and the browser address bar or provider logo for authenticity.
- Provider letter on headed paper confirming balance (requested from provider). Example providers: NS&I, high-street banks and ISA managers.
- For stocks & shares ISAs: valuation statements and confirmation of saleability (settlement times). Most lenders want a recent valuation within 30 days.
Step-by-step: prepare and present evidence
- Request PDF statements from any ISA and NS&I accounts covering the last 3 months.
- If funds were transferred recently, obtain the transfer confirmation and statements from the source account to show the original source of funds.
- If funds are a gift, obtain a signed gift letter from the donor (see the sample wording below) and evidence of the donor’s source of funds.
- If using Premium Bonds, download the NS&I holdings statement and be ready to cash bonds before completion if the lender requests it.
- Send all documents to the mortgage broker or lender early and ask for explicit confirmation of whether the assets will be accepted as-is or require liquidation.
Sample gift letter wording (use on donor letterhead where possible)
- "I, [donor name], confirm I am giving £[amount] to [applicant name] as a gift for use as the deposit for the property purchase at [address]. This gift is not a loan and will not be repaid. I confirm the funds are from my own savings held in [bank/building society/NS&I] and the source documents are attached."
Lenders often require the donor's account evidence to show the origin of the funds and may call the donor.
Legal issues: ownership, gifted deposits and joint accounts
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Ownership and documentation: lenders need to be certain the applicant owns the funds being used. For joint accounts, lenders need the applicant named on the account and typically a statement showing the applicant’s share or a signed declaration of intended split.
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Gifted deposits: common for first-time buyers. Lenders usually accept them but require a gift letter, proof of donor identity, proof of donor funds and sometimes a statement that the donor will not have any legal interest in the property. Some lenders also limit the proportion of the deposit that can be gifted.
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Joint accounts: if a joint account supplies the deposit, lenders often require both account holders to sign a declaration and proof of the proportion owned by the applicant.
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Anti-money laundering (AML): all deposit sources are subject to AML checks. Lenders may request additional historic statements if large inbound transfers are present. Being proactive with provider statements reduces friction.
Inheritance, tax reporting and NS&I Premium Bond rules
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On death of a bond or ISA holder: both assets form part of the deceased's estate. ISAs have an Additional Permitted Subscription (APS) allowance that lets a surviving spouse inherit the ISA tax wrapper under qualifying rules; NS&I provides an estate claim process to cash or transfer Premium Bonds held by the deceased.
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NS&I estate process: executors should contact NS&I to register the estate and obtain the necessary forms to transfer or cash bonds. NS&I maintains guidance for executors and administrators on its website: NS&I: when someone dies.
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Inheritance tax (IHT): the face value of ISAs and Premium Bonds may be subject to IHT as part of the estate; the tax-free nature of ISA income or Premium Bond prizes does not exempt the capital from estate taxation where applicable.
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Reporting to HMRC: individuals normally do not report ISA returns or Premium Bond prizes to HMRC as taxable income. Executors should follow HMRC guidance for estate administration.
Practical table: how lenders commonly treat ISAs vs Premium Bonds
| Criteria |
Cash ISA |
Stocks & shares ISA |
Premium Bonds (NS&I) |
| Typical documentation |
Provider statement, online screenshot, provider letter |
Valuation statement, provider confirmation, settlement times |
NS&I holdings statement, PDF certificate |
| Liquidity for completion |
Immediate (usually) |
Requires sale and settlement (days) |
Redeemable (usually days); lenders may ask for cashing before completion |
| Seasoning |
Often 3 months |
Often 3 months; valuations accepted |
Seasoning may be required; lenders differ |
| Tax on returns |
Tax-free within ISA |
Tax-free within ISA |
Prizes tax-free; capital not taxed as income |
| Common lender stance |
Usually accepted as full proof |
Accepted after sale or with valuation |
Accepted but often require cashing or apply a haircut |
How lenders verify ISAs vs Premium Bonds
✓ Step 1
Gather statements (3 months) and provider letters.
➡ Step 2
Confirm accessibility: cash ISA or redemption time for bonds.
⚡ Step 3
If gifted, add a donor letter and source proof.
✅ Step 4
Ask lender: accept as-is or require cashing before completion.
When to use ISAs and when Premium Bonds are problematic
Benefits / when to apply ✅
- Use cash ISAs where the lender requires immediately available, documented funds.
- Use Premium Bonds when the lender accepts bond statements and the applicant can cash them before completion.
- Use stocks & shares ISAs if the lender accepts recent valuation and the underlying investments are easily sold.
Risks and errors to avoid ⚠️
- Do not assume lenders will accept screenshots without provider branding and account details.
- Do not rely on potential Premium Bond prizes as a source of deposit; lenders need the principal value.
- If funds were recently transferred in, be ready with source documentation — lenders may suspect borrowed deposit if seasoning is inadequate.
How to prove ISA balances to mortgage underwriters: step-by-step how-to
Step 1: collect official statements
Request PDF statements from ISA providers and NS&I for the last three months. PDFs issued by the provider carry more weight than screenshots.
Step 2: obtain a provider confirmation letter
Contact the ISA provider or NS&I and ask for an account confirmation letter showing the current balance and account number.
Step 3: document any gifts or transfers
If the deposit includes a gifted element, secure a signed gift letter and the donor’s statements showing the funds’ origin.
Step 4: prepare to liquidate if required
For Premium Bonds or stocks & shares ISAs, plan the sale/redemption timeline and confirm how long funds will take to clear into a current account.
Step 5: present documents early to the lender
Supply the broker or lender with a single organised PDF pack and ask for written confirmation whether the assets will be accepted as provided.
Frequently asked questions
Can lenders see my ISA balance directly?
No. Lenders cannot access ISA accounts. Applicants must supply provider statements or letters showing the balance and account ownership.
Will Premium Bonds always be accepted as proof of savings?
Not always. Some lenders accept NS&I holdings statements; others require the bonds to be cashed before completion. Confirm with the lender early.
How long do ISA statements need to show funds for?
Commonly lenders ask for 3 months of statements, though some accept 1 month. If funds were transferred recently, provide earlier source statements.
Do gifted deposits affect mortgage approval?
Gifted deposits are usually accepted if supported by a gift letter and proof of donor funds. Lenders may cap the proportion of the deposit that can be gifted.
Are Premium Bond prizes taxable?
No. Premium Bond prizes are tax-free for UK taxpayers. However, the face value of bonds remains part of the estate for inheritance tax.
What is the fastest way to convert Premium Bonds to cash?
Online redemption via NS&I typically completes in up to three working days. Some lenders want funds cleared into a UK current account prior to completion.
Your next step:
- Request PDF statements and provider confirmation letters for any ISA and NS&I accounts today.
- If using gifted funds, obtain a signed gift letter and evidence of the donor’s source of funds.
- Contact the chosen lender or broker with documents and ask explicitly whether Premium Bonds will be accepted without liquidation.