Zakat on Premium Bonds: Are They Zakatable? (UK Guide)
Are Premium Bonds subject to Zakat? Yes, the capital is zakatable. But are the prizes halal? A guide for UK Muslims holding NS&I Premium Bonds.
Premium Bonds are one of the UK's most popular savings products, held by over 22 million people. If you're a Muslim holding Premium Bonds, here's what you need to know about Zakat.
Quick Answer
Yes, the capital value of Premium Bonds is zakatable. If you hold £10,000 in Premium Bonds, that £10,000 counts toward your zakatable wealth. The bonds are essentially cash held with NS&I.
How Premium Bonds Work
Premium Bonds are issued by National Savings & Investments (NS&I). Instead of earning interest, each £1 bond enters a monthly prize draw. Prizes range from £25 to £1 million.
Key facts:
- Your capital is 100% secure (government-backed)
- No interest is paid — returns come as prizes
- You can withdraw your money at any time (few working days)
- Maximum holding: £50,000 per person
Zakat Treatment
For Zakat purposes, Premium Bonds are treated as accessible cash savings:
- The capital amount is zakatable — include the full value in your Zakat calculation
- Premium Bond holdings are liquid — you can withdraw at any time
- They function as stored wealth, which is exactly what Zakat applies to
Are the Prizes Halal?
This is a more contested question than the Zakat calculation itself.
View 1: Prizes are halal
Some scholars argue Premium Bond prizes are permissible because:
- Your capital is always returned in full (no risk of loss)
- The prizes come from a pool funded by what would otherwise be interest — but you're not receiving interest on your money
- It's closer to a gift/prize than gambling
View 2: Prizes are haram (majority view)
Most UK scholars and Islamic finance bodies consider Premium Bond prizes impermissible because:
- The prize fund is generated from interest on the total bond pool
- The prize element resembles a lottery (chance-based return)
- Islam prohibits both riba (interest) and maysir (gambling/games of chance)
If you hold Premium Bonds and follow the stricter view:
- Pay Zakat on the capital amount (2.5%)
- Give away any prizes as Sadaqah (without expecting reward — it's disposing of impermissible income)
- Consider moving the money to an Islamic savings account
Example
Hassan holds £20,000 in Premium Bonds.
He includes the full £20,000 in his zakatable assets alongside his other savings, gold, and investments.
If his total exceeds the Nisab, he pays 2.5% Zakat on the total.
Include Premium Bonds in your Zakat calculation →
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