Worried that the choice between an ISA and Premium Bonds could delay a property purchase or trigger unexpected tax or legal checks? Clear decisions about where to keep pre-settlement funds make the difference between a smooth completion and last-minute stress.
Practical, plain-English guidance follows on how ISAs and Premium Bonds behave during conveyancing, what proof of funds conveyancers and lenders expect, and which option suits common timeframes (days to weeks) and amounts. All explanations are indicative and current at time of writing (February 2026).
Key takeaways: what to know in 60 seconds
- ISAs keep interest tax-free and are straightforward to evidence for conveyancers, but access rules depend on type (cash vs stocks & shares) and provider processes.
- Premium Bonds pay tax-free prizes, not interest; they are backed by HM Treasury via NS&I, but payout timing for encashment can be longer and variable.
- Capital gains are rarely relevant for typical conveyancing amounts, but stocks & shares ISAs shelter gains that would otherwise be reportable.
- Conveyancers and mortgage lenders prioritise quick, verifiable proof of source and liquidity; choose the instrument that meets their timing and documentation requirements.
- For inheritance tax (IHT) planning, holding in ISAs or Premium Bonds has different practical effects on estate liquidity; neither removes the value from the estate but both affect ease of transfer.
How ISAs shelter pre-settlement funds from tax
ISAs (Individual Savings Accounts) are tax wrappers that shelter interest, dividends and capital gains from UK income tax and capital gains tax. For pre-settlement funds, the relevant points are:
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Cash ISAs: interest is paid tax-free. Providers usually allow withdrawals subject to account rules (instant, same-day, or several working days). The cash remains within the ISA wrapper until withdrawn; interest already earned is tax-free and need not be reported to HMRC.
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Stocks & shares ISAs: capital gains and dividends inside the ISA are tax-free. Selling investments and moving proceeds out of the ISA to the client’s bank account may require several business days for trade settlement and transfer, depending on the provider.
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Help to Buy and Lifetime ISAs: have additional rules and potential penalties; they are generally unsuitable for immediate conveyancing unless specific conditions are met. Avoid using them for settlement funds unless a conveyancer and lender confirm acceptability.
Practical notes for conveyancing:
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Conveyancers typically ask for a bank statement showing cleared funds in a client’s account or evidence that money can be transferred on completion day. Transferring directly from an ISA requires either a withdrawal to a nominated current account or a transfer to the conveyancer’s client account. Confirm withdrawal times with the ISA provider well before completion.
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A records pack (ISA statements, transaction confirmations) from the provider is usually accepted as proof of source when combined with recent bank statements. Where funds are within a joint ISA, a joint statement is required.
Relevant links:
- HMRC overview of ISAs: gov.uk: ISAs
NS&I Premium Bonds: tax treatment and payout rules
Premium Bonds (issued by National Savings & Investments, NS&I) do not pay interest. Instead, bondholders participate in a monthly prize draw where prizes are tax-free. Key features relevant to conveyancing:
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Tax treatment: prizes are tax-free and do not need reporting to HMRC. There is no interest income to declare. The capital value (the face value of bonds) is still part of the holder’s assets.
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Encashment process: NS&I allows online or postal encashments. Online encashments can be relatively quick (payments can be processed within 1–3 working days if the holder has a verified online account and the recipient bank details are pre-authorised), but postal requests and identity verification can add several days. Large redemptions may trigger additional checks.
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Payout certainty: the capital is guaranteed by HM Treasury (via NS&I), so redemption returns the nominal capital. However, payout timing is the operational constraint for settlement funds.
Practical points:
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For conveyancing, ensure that NS&I encashment can deliver funds to the required account before completion. If time is short, confirm the fastest route with NS&I and provide conveyancers with the encashment reference and timing estimate.
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Evidence of Premium Bond holdings (NS&I statements) helps satisfy source-of-funds checks, but an encashment confirmation is normally required to show funds will be available on completion.
Authoritative link:
- NS&I Premium Bonds: nsandi.com: Premium Bonds
Capital gains, income tax and conveyancing proceeds
Most typical conveyancing sums (deposit + mortgage drawdown + balance) will not create capital gains tax events when funds are moved from savings vehicles to a conveyancer. The taxation implications depend on the product:
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Cash ISAs and Premium Bonds: neither generate taxable interest or gains for the holder during withdrawal; withdrawals are tax-free and require no reporting to HMRC.
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Stocks & shares ISAs: selling assets inside an ISA does not create a chargeable gain for the account holder. If assets are sold outside an ISA (for example, a taxable investment account), any capital gains above the annual exempt amount may be reportable.
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Moving from taxable investment accounts: if part of pre-settlement funds sits in non-ISA holdings, selling investments to release cash could trigger capital gains tax. Conveyancers and lenders may prefer funds already in cash or in tax-free wrappers to avoid late surprises.
Example scenario (indicative):
- A client has £50,000 in a stocks & shares ISA and £20,000 in a taxable brokerage account. Using the ISA for completion avoids triggering capital gains; using the brokerage account may produce taxable gains depending on acquisition cost and allowances.
Practical legal issues: proof of source and HMRC
Conveyancers, mortgage lenders and regulated firms must satisfy anti-money laundering (AML) rules and lender-specific proof-of-funds policies. The focus is documentary proof and traceability, not the account wrapper itself. Common requirements and practical advice:
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Standard documents requested: recent bank statements showing cleared funds; ISA or NS&I statements showing holdings; encashment or withdrawal confirmations; clear paper trail for large deposits or transfers within the preceding 6–12 months.
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Timing: conveyancers often require proof of funds several days before completion to prepare transfer instructions. If funds are currently inside an ISA or Premium Bonds, provide a provider statement plus a plan for how and when funds will be released.
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HMRC enquiries: moving large sums by sale of assets can provoke HMRC enquiries only where tax returns or large unexplained transfers arise. Providing clear records showing source (savings accumulation, sale proceeds, gift letters where applicable) reduces risk of HMRC contact.
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Gifted deposits: if funds were gifted, a signed and dated gift letter with ID for the donor is typically required. The tax position of the donor (potential IHT implications) is a separate matter.
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Lender checks: mortgage lenders have specific lists of acceptable proof. Some lenders accept NS&I encashment confirmations; others prefer funds to be shown in the borrower’s bank account. Always check lender requirements early.
Useful regulatory and lender guidance:
Access, liquidity and eligibility during property settlement period
Choice of vehicle for pre-settlement savings is driven by how quickly cash must be available.
Timing considerations:
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Same day or next-day requirement (0–2 days until completion): funds should be in an instant access current account or a provider offering guaranteed same-day payments. Most ISA withdrawals are processed same-day only if the provider supports immediate transfers to the linked current account. NS&I online encashments may not be fast enough for same-day completion unless pre-authorised and processed earlier.
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Short notice (3–10 working days): cash ISAs and verified NS&I online encashments are usually acceptable; stocks & shares ISA liquidations may take several days for trade settlement plus additional days for provider transfer.
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Weeks (2–6 weeks): both ISAs and Premium Bonds are viable. NS&I encashments requested by post require allowance for postal and processing times.
Eligibility issues:
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Joint accounts: conveyancers need consent from all account holders. Joint ISAs do not exist; joint savings accounts are used instead. Premium Bonds can be held jointly; encashment requires signatures or online authorisation.
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Large sums: extremely large encashments can attract additional identity checks or require proof of source beyond standard statements; begin the process early for amounts significantly above typical monthly activity.
Quick checklist when time is tight:
- Contact the ISA provider or NS&I at least 7–10 working days before completion for large sums.
- Obtain written confirmation of expected clearing time and keep a screenshot or email confirmation for the conveyancer.
- Check lender policy on acceptable proof of funds.
Table: practical comparison for conveyancing use (Pre-Settlement Savings for Conveyancing: ISAs vs Premium Bonds)
| Feature |
Cash ISA |
Stocks & shares ISA |
Premium Bonds (NS&I) |
| Tax treatment |
Interest tax-free |
Gains and dividends tax-free |
Prizes tax-free; capital returned |
| Typical withdrawal speed |
Instant to 3 working days (provider dependent) |
3–10+ working days (trade settlement) |
1–5 working days online; longer by post |
| Proof of funds ease |
High (statements accepted) |
High for statements, but sale confirmation may be required |
High for statements; encashment confirmation often required |
| Capital guarantee |
FSCS protection for eligible deposits up to £85,000 per institution (cash ISAs) |
Investments not FSCS-protected; market risk exists within ISA |
Backed by HM Treasury (NS&I) — capital guaranteed |
| Best when |
Immediate liquidity needed; tax-free interest |
Avoid CGT on investments; medium-term holds |
Tax-free prizes and guaranteed capital; good if time allows for encashment |
| Conveyancer friendliness |
High |
Moderate (depends on sale timing) |
Moderate to high if encashment timing confirmed |
How to move funds from an ISA or Premium Bonds for completion: step-by-step
Step 1: check provider withdrawal times and process
Confirm exact times for withdrawals or encashments with the ISA provider or NS&I. Ask for a written estimate (email or web confirmation) that can be shared with the conveyancer.
Provide the conveyancer with provider statements, account numbers and the expected payment date. Confirm lender acceptability so mortgage offers are not delayed.
Step 3: initiate withdrawal early
Start withdrawal or sale early enough to account for trade settlement and bank transfer times. For NS&I, use the verified online account for the quickest processing when possible.
Step 4: capture proof of transfer
Retain encashment references, screenshots and confirmation emails, and provide copies to the conveyancer. Ensure cleared funds are visible in the destination account ahead of completion where required.
Advantages, risks and common mistakes
Benefits / when to apply ✅
- Cash ISA: best when speed and tax-free interest matter and immediate access is required.
- Stocks & shares ISA: best when avoiding capital gains tax on appreciated assets that are part of the funding plan.
- Premium Bonds: best when capital security backed by HM Treasury is desired and there is sufficient time to encash.
Risks and errors to avoid ⚠️
- Assuming instant access: not all ISAs or NS&I encashments are immediate; verify provider-specific timings.
- Not checking lender requirements: some lenders insist funds must be in a bank account several days before completion.
- Failing to document gifts or large deposits: missing gift letters or source evidence delays AML checks.
- Using complex ISA types without advice: Help to Buy or Lifetime ISA rules can cause penalties if misused for conveyancing.
[Visual flow] quick process for converting pre-settlement savings
Step 1 🔎 Check provider timings → Step 2 📤 Request encashment/withdrawal → Step 3 🧾 Share confirmation with conveyancer → ✅ Completion funds visible
Comparative timeline: withdrawing funds for completion
Cash ISA
Typical: instant–3 working days. ✅ Best for last-minute transfers.
Stocks & shares ISA
Typical: 3–10+ working days (sales + bank transfer). ⚠ Allow settlement time.
Premium Bonds (NS&I)
Typical: 1–5 working days online; longer by post. ✅ Capital guaranteed but timing variable.
Practical examples and timelines (indicative)
Example A — completion in 2 working days (urgent):
- Recommended: ensure funds already in a current account or a cash ISA that supports instant transfers. Start a withdrawal immediately and confirm that the provider supports same-day Faster Payments to the destination account.
Example B — completion in 10 working days (short notice):
- Recommended: cash ISA or NS&I online encashment. For a stocks & shares ISA, begin liquidation immediately and confirm expected trade settlement.
Example C — completion in 4 weeks (comfortable):
- Recommended: any of the three options. Use time to gather documentation and satisfy lender AML checks.
FAQ: frequently asked questions
Can conveyancers accept Premium Bonds as proof of funds?
Yes. Conveyancers will typically accept NS&I statements as proof, but they normally require an encashment confirmation showing funds will be available on completion.
How long does it take to withdraw from a cash ISA for conveyancing?
Times vary: some providers offer instant withdrawals, others take up to 3 working days. Always check the provider and get confirmation in writing.
Will selling investments in a stocks & shares ISA trigger capital gains tax?
No. Sales inside an ISA do not create capital gains tax liabilities for the holder; selling outside an ISA may create chargeable gains.
Do Premium Bonds affect mortgage affordability checks?
Lenders consider Premium Bonds as savings; they may accept them but will require evidence of encashment or that funds will be available in a bank account when needed.
What documents satisfy proof of source for large deposits?
Bank statements, ISA or NS&I statements, sale confirmations, and gift letters (where applicable) are commonly required. Conveyancers may request further evidence depending on the amount and history.
Are proceeds from ISAs or Premium Bonds included in the estate for IHT?
Yes. Both are part of the deceased’s estate and may be liable to inheritance tax where applicable; ease of access to funds affects estate administration.
Your next step:
- Contact the ISA provider or NS&I and get written confirmation of withdrawal or encashment timings for the exact amount required.
- Send the provider confirmation and recent statements to the conveyancer and the mortgage lender at least 3–5 working days before completion, or earlier for large amounts.
- If in doubt, move critical funds early into a nominated current account that meets lender and conveyancer rules to remove timing risk.
Notes and legal caution: This content is indicative and current at time of writing (February 2026). Individual provider processes and lender policies vary; readers should confirm timings with providers and seek regulated legal or tax advice where necessary.
Alan White
With over 15 years of experience helping individuals navigate savings and investment options, this author provides clear, practical guidance on ISAs, Premium Bonds, and alternative savings products. Every article on ISA vs Premium Bonds draws on real-world experience, offering actionable advice, risk awareness, and strategies to help readers make informed decisions, plan for savings goals, and understand tax and legal implications. The goal is to empower readers to confidently manage their money and maximise their financial growth.