Are the tax and eligibility rules different for ISAs and Premium Bonds after leaving the UK? Does an expat keep the UK tax advantage or face reporting and local tax bills? The following guide answers the key practical questions UK residents, departing the UK, or living overseas need to decide whether to keep, close or move ISAs and Premium Bonds.
Key takeaways: what to know in one minute
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Existing ISAs remain tax-free in the UK while held, but new subscriptions usually stop on becoming non-resident. That means interest, dividends and gains inside an ISA stay free of UK tax while the account is held.
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Premium Bond holdings can generally be retained by non-residents, but prizes may be taxable in the country of residence. UK prize payments from NS&I are free of UK income tax but not necessarily abroad.
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Remittance basis does not restore ISA subscriptions; it affects how foreign income is taxed but ISAs remain shelter for UK-source returns. Expats using the remittance basis should check interactions with foreign tax rules.
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Inheritance and IHT treatment differ: ISAs have spousal permitted subscriptions on death and both ISAs and Premium Bonds form part of the estate for inheritance tax. Estate planning matters for expatriates with UK domicile or UK assets.
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Practical action: confirm provider rules, check local reporting (e.g. US FATCA/FBAR, Spain, Portugal), and document decisions before moving. Keep records and seek local tax advice for the country of residence.
How non-resident status affects ISA eligibility
What HMRC means by non-resident
Residency for tax purposes is determined under the Statutory Residence Test. A person who is non-resident for UK tax purposes is normally outside the UK for the tax year and not treated as UK resident. The practical effect for ISAs is that HMRC treats the ability to subscribe as linked to UK tax residency rather than nationality or UK address alone. For official guidance see HMRC: Individual savings accounts (ISAs).
Keeping ISA accounts after moving abroad
Providers normally allow existing ISAs to remain open when the holder becomes non-resident. The tax protection on returns already inside the ISA continues for the duration the ISA is held. However, the key restriction is on new subscriptions: once non-resident for tax purposes, the individual normally cannot pay new money into an ISA until UK residency resumes.
Opening new ISAs while non-resident
Generally, non-residents are not eligible to open a new ISA or to pay into an existing ISA while non-resident. Exceptions are limited (for example returning UK Crown servants or their spouses). The ISA manager will require confirmation of residency status and may close or block subscriptions when notified of non-residence.
Returning to the UK and subscription allowances
On regaining UK tax residence, the individual can use the annual ISA allowance for that tax year like any resident. Any subscriptions missed while non-resident are not carried forward: the annual allowance does not accrue during absence.
Comparing tax-free returns: ISA versus Premium Bonds
UK tax treatment (while held)
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ISAs: All returns within an ISA (interest, dividends, capital gains) are exempt from UK tax. No UK tax reporting is required on ISA returns for UK residents.
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Premium Bonds: prizes paid by National Savings & Investments (NS&I) are tax-free in the UK. Premium Bonds do not pay interest; instead prizes (random monthly draws) are paid tax-free in the UK.
Tax treatment in the country of residence — practical country examples (indicative at time of writing)
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United States: US persons must report worldwide income. Premium Bond prizes are treated as taxable income in the US, and ISAs usually do not receive favourable US tax treatment. US persons should consult cross-border tax advisers and consider FATCA/FBAR reporting. See UK FATCA guidance.
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Spain: premiums from Premium Bonds are typically taxable as savings income in Spain; ISAs are often ignored for UK tax advantage and will be taxable on generated returns under Spanish rules.
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Portugal: Portugal’s non-habitual resident regimes and recent changes mean local tax treatment varies; prizes may be taxable depending on residency and treaty positions.
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Canada, Australia, France: in general, foreign residents will face local tax rules on income or prizes; the UK tax-free label does not guarantee exemption abroad.
Practical implication: choose between ISA and Premium Bonds not just on UK tax treatment but on how the country of residence taxes interest, dividends, capital gains and lottery-like prizes.
Illustrative numeric comparison (simple, indicative)
Assumptions: £10,000 held for one year; ISA pays 3% interest; Premium Bonds expected (NS&I indicative rate proxy) long-run equivalence 1.2% prize rate (probabilistic). Local tax rate assumed 25%.
- ISA: UK tax = £0; local taxable? If local tax applies to ISA returns, tax = 25% of £300 = £75; net = £225.
- Premium Bonds: UK tax = £0; local tax on any prize = 25% of prize. Expected prize approx £120 (1.2%): tax = £30; net = £90.
Conclusion: if the country taxes ISA returns and taxes Premium Bond prizes differently, that will change the comparative net outcome. These figures are indicative; run local calculations or consult advisers.
| Feature |
ISA (existing) |
ISA (new subscription) |
Premium Bonds (existing) |
Premium Bonds (new purchase) |
| UK tax shelter |
Yes — remains sheltered while held |
No — normally ineligible for non-residents |
Yes — prizes tax-free in UK |
Possible, depending on provider rules and bank accounts |
| Local tax risk |
Depends on local rules — likely taxable in many countries |
N/A |
Likely taxable abroad as prize/lottery income |
Same as existing |
| Access and liquidity |
Withdrawable subject to provider rules |
Requires residency confirmation |
Instant cashing in possible; prize receipts routed by NS&I |
Purchases may need UK bank account |
Remittance basis and ISAs: what UK expats need
Remittance basis fundamentals (brief)
The remittance basis allows UK residents who are non-domiciled to be taxed on foreign income and gains only when brought (remitted) to the UK. It is relevant mainly to those claiming non-domicile status who remain UK tax residents.
How ISAs interact with the remittance basis
ISAs hold UK-source investments. Returns inside an ISA are sheltered from UK tax regardless of remittance basis claims. The key interaction: the remittance basis does not permit a non-domiciled individual to contribute to an ISA if they are non-resident. The remittance basis covers how foreign income is taxed, not residency tests that determine ISA subscriptions.
Practical note: for those using the remittance basis while resident, keep clear records of any funds transferred to the UK and whether those funds are used to fund ISA subscriptions — HMRC scrutiny can arise if sources are mixed.
HMRC and NS&I rules on keeping and cashing Premium Bonds
Can non-residents keep Premium Bonds?
NS&I allows existing Premium Bonds to be held by people who become non-resident. Prize wins remain tax-free in the UK. However, operational matters matter: prize payments are in sterling and NS&I will generally pay to a UK bank account or to the registered address. See official guidance at NS&I: Premium Bonds.
How prizes are paid and claimed abroad
- NS&I pays prizes in sterling; for non-UK bank accounts conversion and bank charges may apply.
- If the bondholder has no UK bank account, NS&I has procedures to pay winners overseas but may require proof of identity and a valid address.
- HMRC does not tax Premium Bond prizes. Local tax treatment in the country of residence may require declaration.
Reporting and practical steps when cashing
- Keep copies of NS&I statements showing prize payments and dates.
- Check the bank’s FX and receiving charges for international transfers.
- Inform local tax authorities as required; use the NS&I documentation as evidence of prize source and tax-free status in the UK.
Inheritance and estate issues for ISAs versus Bonds
ISAs — death and spouse/civil partner rules
On death, ISA tax advantages cease for the deceased. A surviving spouse or civil partner can normally make an additional permitted subscription (APS) equal to the value of the deceased’s ISA at date of death, provided the APS is made within specified times and rules are followed. Despite this, the value of the ISA forms part of the deceased’s estate for inheritance tax (IHT) purposes.
For authoritative detail see HMRC: Inheritance tax.
Premium Bonds — estate treatment and prize draws after death
Premium Bonds are held in the deceased’s name and form part of the estate. NS&I will stop premium draws on death for the deceased’s bonds and has claims procedures. Any prizes paid after death may be payable to the estate. Executors must contact NS&I and supply paperwork (grant of probate or letters of administration). Both ISAs and Premium Bonds count when valuing the estate for IHT.
Cross-border complications
Domicile, double taxation treaties, and local succession laws can change how IHT and estate taxes apply. For expatriates with UK domicile or UK-based assets, the UK IHT regime can still apply; local inheritance taxes may also apply. Professional estate planning advice is recommended.
Practical steps for expats: closing or retaining ISAs
Checklist to decide whether to keep or close an ISA
- Confirm residency status under the Statutory Residence Test.
- Check whether the ISA provider permits accounts to remain open for non-residents and confirm rules about subscriptions and withdrawals.
- Assess local tax treatment of ISA returns in the country of residence.
- Compare expected net returns of ISA vs Premium Bonds given local tax rates and exchange risk.
- Consider estate planning (APS, IHT) and whether UK domicile status exposes assets to UK IHT.
Step-by-step: how to close, transfer or retain an ISA
- Contact the ISA provider with proof of new address and residency status; request written confirmation of account status and implications for subscriptions.
- If closing, request withdrawal instructions and confirm timing for transfers to local bank accounts in the appropriate currency.
- If transferring to another UK ISA provider on return to the UK, use official transfer processes rather than withdrawing and re-subscribing.
- Keep documents: provider letters, bank statements, confirmation of prize payments (for Premium Bonds) and tax residency evidence.
- Inform HMRC where required (e.g. if there are UK tax return filing obligations) and consult local tax authority guidance on declaring foreign investment returns.
Visual process: decision flow for expats → keep, close or transfer
Comparative summary: ISAs vs Premium Bonds
ISAs (existing)
- ✓UK tax shelter retained
- ⚠New subscriptions blocked if non-resident
- ✗Local tax may apply
Premium Bonds (existing)
- ✓Prizes tax-free in the UK
- ⚠Prizes likely taxable abroad
- ✓Can usually be retained as non-resident
Advantages, risks and common mistakes
- ✅ Benefits / when to consider each
- ISAs: best when the country of residence recognises tax-free status or when returning to the UK is likely.
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Premium Bonds: useful for low-risk capital preservation and tax-free UK prizes, and when an investor prefers the NS&I product mechanics.
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⚠️ Risks and common errors to avoid
- Assuming UK tax-free status implies local tax exemption.
- Not notifying the ISA provider of residency changes and inadvertently contravening subscription rules.
- Failing to document prize receipts, bank transfers or estate instructions for executors.
Frequently asked questions
Can a non-resident open a new ISA?
No. Non-residents normally cannot open new ISAs or subscribe to ISAs while non-resident. Exceptions are limited to returning Crown servants and similar cases.
Can Premium Bonds be held by someone living abroad?
Yes. Existing Premium Bonds may be retained when living abroad, but local tax may apply to prizes and operational issues (payments, address) should be checked with NS&I.
Are ISA returns taxable in the country of residence?
Possibly. Many countries tax worldwide income and gains. The UK tax exemption for ISAs does not automatically mean exemption abroad — check local rules.
How are Premium Bond prizes taxed overseas?
Tax treatment varies by country: many treat prizes as taxable income. Keep NS&I evidence and consult local tax authorities or advisers.
What happens to ISAs on death for an expat?
ISAs form part of the estate for IHT. A surviving spouse or civil partner may be eligible for an additional permitted subscription (APS); estate processes depend on domicile and IHT exposure.
Do winners of Premium Bonds pay UK tax on prize money?
No. Prize money from NS&I is tax-free in the UK, but local taxation rules in the country of residence may still apply.
Yes. Notify HMRC of residency changes and keep records of tax residence tests. Local tax authorities may need notification too.
Do US citizens get the same ISA benefits?
No. US persons are taxable on worldwide income and ISAs do not receive favourable US tax treatment. Cross-border reporting (FATCA/FBAR) and US tax payments may apply.
Your next steps:
- Contact the ISA provider and NS&I for written confirmation of account status and payment processes; request their overseas procedures.
- Obtain local tax guidance (or an initial consultation) for the country of residence, focusing on treatment of ISA returns and Premium Bond prizes.
- Keep a clear paper trail: provider letters, NS&I prize statements, bank receipts and residency evidence for tax years affected.