NS&I Income Bonds explained

An NS&I Income Bond is an easy access savings account that pays your interest monthly, straight into your bank account, rather than adding it to the balance. NS&I describes it as "an easy access savings account that pays your interest monthly, direct to your bank"¹. There is no set investment term: you can cash it in at any time with no notice and no penalty².

The account is for people who want the interest as income rather than growth, and who want to be able to reach the capital. Interest is calculated daily and paid on the 5th of each month, or the next working day if the 5th falls on a weekend or bank holiday¹. The rate is variable, so it can move up or down, and NS&I's own site carries today's figure.

Income Bonds sit alongside NS&I's other accounts, and the brand is the government's savings bank, backed by HM Treasury³. That backing is the main thing that separates it from an ordinary bank account, and it works differently from the Financial Services Compensation Scheme.

What an Income Bond is: monthly interest from savings you can reach at any time

Most savings accounts add interest to the balance, so the money compounds and you see it only when you look at a statement. An Income Bond does the opposite. NS&I calculates interest daily and pays it out to your bank account on the 5th of each month, or the next working day if the 5th is a weekend or bank holiday¹. The account terms describe the same arrangement: income is paid directly into your nominated UK bank or building society account, or into an NS&I Direct Saver or Investment Account².

That makes it a different product from the fixed-term Bonds that share the NS&I name. Guaranteed Income Bonds also pay interest monthly, but they run for a fixed term and you cannot take money out until the Bond reaches the end of its term⁵. Guaranteed Growth Bonds work the same way, with interest calculated daily and added to the Bond on each anniversary of your investment⁶. MoneyHelper notes that savings bonds usually pay interest annually, though some pay quarterly or monthly⁷.

The practical difference is what you are choosing between: a fixed rate for a fixed period with no access, or a variable rate with full access. Income Bonds are the second of those. The rate is variable and set by HM Treasury, and NS&I's site has the current figure².

How interest is calculated, paid and taxed

Interest on an Income Bond is calculated daily on the end-of-day balance. NS&I works out the daily rate by taking the current yearly rate and dividing by 365, and rounds the result to the nearest penny each month². Because the interest leaves the account each month rather than staying in it, the balance does not grow through compounding in the way it would in an account that adds interest to the capital.

The interest is taxable and is paid gross, with no tax deducted at source. NS&I's terms say taxpayers may need to declare the interest to HMRC, depending on their circumstances². That is a different position from Premium Bonds, where any prizes you win are free from UK Income Tax and Capital Gains Tax⁸.

Two things follow from paying interest gross. First, the interest counts towards your Personal Savings Allowance, the amount of savings interest most people can receive before paying tax on it. Second, if a bank or building society tells HMRC you have more than £10,000 in savings interest, HMRC will send you a notice to file a tax return⁹. How the tax is then collected depends on your circumstances: HMRC can adjust your tax code, or you may need to report the interest through Self Assessment.

If you are unsure how the allowance applies to your own situation, the pages on tax on savings interest and the personal savings allowance set out the rules, and tax on savings interest for Scottish taxpayers covers the different rates that apply in Scotland.

Who can hold Income Bonds: alone, jointly, in trust or for a child

You can open an Income Bond in your own name or jointly with one other person, and you can also invest in trust for someone else¹. Joint holding works the way it does on other NS&I accounts: NS&I's terms say that half of the balance in a joint Income Bonds account counts towards each account holder's personal holding limit².

That rule matters if either holder is close to the maximum. But if one of them already held a large Income Bond balance in their own name, the joint account could push them over.

Children cannot hold an Income Bond in their own name. NS&I says children under 16 can hold its Junior ISA, Premium Bonds and its Investment Account¹⁰. An adult can hold an Income Bond in trust for a child, but the account is in the adult's name as trustee.

If you are thinking about how a joint account works more generally, including what happens when one holder dies, the page on joint savings accounts covers the mechanics, and children's savings accounts sets out what is available for under-16s.

How much you can pay in and hold

The maximum holding in an Income Bond is £1 million per person². That is a higher ceiling than most savings accounts, and it is one reason the account attracts people with larger sums to place, including those holding money between property transactions.

The limit is per person, not per account, and half of a joint balance counts towards each holder's limit². So a couple holding £1 million jointly would each be using half of their own allowance.

There is a specific rule for inherited money. NS&I's terms say that if you inherit money held in an Income Bonds account, you can hold it in an Income Bonds account in your name even if it takes you over the personal holding limit, but you cannot pay more in while the balance is above the limit². That means an inheritance will not force you to move the money elsewhere, but it does freeze further deposits until the balance falls back below the ceiling.

For comparison, NS&I's fixed-term Guaranteed Income Bonds have a minimum of £500 and a maximum of £1 million per person in each Issue⁵, and Guaranteed Growth Bonds have the same £1 million per person per Issue ceiling with a £500 minimum for each Bond you buy⁶. Premium Bonds work differently again, with holdings from £25 to £50,000⁸.

How to open an Income Bond and pay money in

You can apply online or by phone using a UK debit card, or by post with a personal cheque, a banker's draft or a building society branch cheque. If you are applying on behalf of a trust, you can only apply by post².

Once the account is open, you can manage it through NS&I's online and phone service, which covers Premium Bonds, Green Savings Bonds (online only), Income Bonds, Direct Saver, Junior ISA (online only) and Direct ISA¹¹. Through that service you can:

• check your NS&I investments
• pay money in and take it out
• change your personal details
• choose to have any Premium Bonds prizes paid straight to your bank account¹¹

Money paid in by bank transfer usually arrives quickly. NS&I says that in most cases the money leaves your bank account straight away and can take up to two hours to reach your NS&I account¹². If you set up a standing order instead, remember that stopping or changing it means contacting your bank as well as NS&I¹³.

If you already hold another NS&I account, you may be able to move money across rather than paying from a bank. NS&I's switching service lets you choose an account and complete the relevant form, including the amount you want to switch and the NS&I account you are switching it from¹⁴. If the amount you switch would take the old account below its minimum, you must mark on the form that you want to close that account¹⁴.

Taking money out and closing the account

Income Bonds have no set investment term, so you can cash them in at any time with no notice and no penalty². That is the central feature of the account and the main reason someone would choose it over a fixed-term Bond.

How quickly the money arrives depends on how you give the instruction and how much you are taking out. NS&I's product page says withdrawals can take 3 to 5 days to reach your bank account¹. Its account terms give a more detailed picture: where an instruction is given online or by phone, the payment normally reaches your nominated account by the end of the first banking day after the day NS&I receives it².

Larger withdrawals follow longer timescales. If a withdrawal takes your combined daily withdrawal total above £50,000, NS&I says the payment will normally reach your account between two and four banking days after the instruction, where it is given by phone before 20:00 on a banking day¹⁴. A postal instruction received before 13:00 on a banking day is processed on the next banking day, with the payment normally arriving two banking days after that¹⁴.

You can also close the account. NS&I's terms say it may close your account at any time by giving you at least two months' written notice². The same two-month notice term appears in the key features document for NS&I's Guaranteed Growth Bonds¹⁵.

If you are weighing up whether an easy access account or a fixed-term one suits you better, the pages on easy access savings accounts and easy access versus fixed-rate savings set out the trade-offs.

When the rate changes or NS&I closes the account

The Income Bond rate is variable, which means it can move in either direction. NS&I's terms say that if the interest rate for your account goes down, it will contact you personally at least 14 days before the change takes effect². There is no equivalent personal notice for an increase, because an increase does not disadvantage you.

That 14-day notice period is a common feature across NS&I's variable-rate accounts. The same term appears in the Direct Saver key features document¹⁶, and the Direct Saver product page says NS&I will contact you personally in advance if the rate goes down¹⁷. The Direct Saver summary explains the reasoning behind variable rates: the rate can change up or down from time to time, for example when the Bank of England base rate changes or when rates in the general savings market change¹⁸.

Fixed-term NS&I Bonds work differently. For Guaranteed Income Bonds, Guaranteed Growth Bonds and Green Savings Bonds, NS&I says it can change the fixed rates on offer at any time, releases a new Issue each time it changes the rate on offer, and can withdraw any Issue from sale without notice⁵. Once you have bought a fixed-term Bond, the rate is fixed for the term, but the rate available to new customers can change or disappear.

NS&I can also close an account immediately in specified situations, including where false information has been given, where the account is used illegally, or where the agreement is breached².

Backed by HM Treasury: how your money is protected

NS&I is the UK government-owned savings bank, and it is backed by HM Treasury³. That backing is the protection, and it works differently from the Financial Services Compensation Scheme that covers ordinary banks and building societies.

Independent guidance is explicit about the distinction: NS&I is backed by the Treasury and is therefore not covered by the FSCS, and 100% of all NS&I savings are fully protected⁴. The same point appears in NS&I's own documents, which state that NS&I is backed by HM Treasury, the government's economic and finance ministry². NS&I describes itself as the nation's savings bank, backed by the UK government²⁰.

There is no cap on the protected amount in the way there is with an FSCS-covered account, which is why NS&I accounts are often used for large balances. NS&I's British Savings Bonds page puts it plainly: your money will be 100% secure, backed by HM Treasury²¹.

That said, the protection is only as good as the government's ability to meet its obligations, and it is a different kind of promise from an insurance-backed compensation scheme. If you want to understand how the FSCS works for the accounts that do use it, the page on how FSCS protection works for savings explains the limits, and what happens to money above the FSCS limit covers the position for balances that exceed the cap.

What happens to an Income Bond when the holder dies

When an Income Bond holder dies, the money in the account becomes part of their estate, and the account continues to earn interest while the estate is dealt with. NS&I's terms say that if the account holder, or the last surviving holder of a joint account, dies, NS&I cannot accept any more deposits into the account, the balance becomes part of the estate, and the account continues to earn interest¹⁶.

The executor or personal representative informs NS&I and deals with the balance. For Premium Bonds, the process is similar in outline: the executor informs NS&I, after which the account is frozen and no more Bonds can be bought²². NS&I has said that it found some estates making bereavement claims did not receive the full amount owed, and it is working to repay everyone affected²³.

There is a separate rule for inherited Income Bonds. NS&I's terms say that if you inherit money held in an Income Bonds account, you can hold it in an Income Bonds account in your name even if it takes you over the personal holding limit, but you cannot pay more in while the balance is above the limit².

If the deceased held an ISA, the surviving spouse or civil partner may be able to inherit an additional ISA allowance up to the value of the ISA at the date of death²⁴. That is a different rule from the Income Bond inheritance position and applies to ISAs rather than to Income Bonds.

Statements, records and what you receive

NS&I sends an electronic statement in April each year showing all your transactions and interest, and a closing statement when the account is closed¹. The account terms describe the same annual statement in April showing your monthly interest payments².

That April statement is the record you would use if you need to check what interest you received in a tax year, or if you need to give HMRC figures. Because the interest is paid gross and is taxable, keeping the statements is worth doing if your savings interest is anywhere near the level at which tax becomes due.

The same April statement pattern applies across NS&I's accounts. Guaranteed Income Bonds, Guaranteed Growth Bonds and Green Savings Bonds all send a statement in April each year showing the interest earned and the balance⁵. Direct Saver sends an electronic statement in April each year, or by post if you prefer¹⁷.

If you need to find your NS&I holder's number or account number to manage the account, the page on finding your NS&I holder's number explains where to look.

Problems, complaints and where to get help

If something goes wrong with an Income Bond, the first step is to complain to NS&I. Its complaints process covers holdings including individual Savings Certificates, Direct ISA accounts, Direct Saver accounts and Premium Bonds²⁵.

If the complaint is not resolved, NS&I's terms say you may be able to refer it to the Financial Ombudsman Service free of charge². The ombudsman publishes quarterly complaints data by firm and product. In the first quarter of 2026/27 it recorded 98 complaints about Premium Bonds (NS&I only), of which 47% were upheld²⁶. In the same quarter a year earlier, it recorded 55 such complaints²⁷. Those figures relate to Premium Bonds rather than Income Bonds, but they show the volume and uphold rate for NS&I complaints that reach the ombudsman.

On unauthorised payments, NS&I's terms say it will normally return the account to the position it would have been in had the unauthorised payment not happened, unless the customer failed to take reasonable care or did not report lost security details promptly².

If you are worried about a bond that is not from NS&I, the page on savings and fake bond scams explains how those work and how to get money back. For free, impartial help with money problems more generally, MoneyHelper is the government-backed service, and debt advice charities can help where savings sit alongside problem debt.