It’s crazy that a government could sponsor tax avoidance but the British do precisely that. Nearly a trillion pounds is shielded from taxation. This policy has incentivised those with disposable incomes to exploit what has become a bonanza. A unique millionaire class of 12,782, has been created. They’re beneficiaries of state sponsored tax avoidance. This is paid for in alternative taxation, which further distorts the economy. Hundreds of thousands of people have substantial tax-free capital in a sub-millionaire class.

Premium Bonds have a capital value of £133.1bn,¹ with 21m voters (investors). 532 people have won £1m tax-free.² The October 2025 prize money was, “…worth over £399 million”³ American lottery winners are taxed at 24% but let’s assume a 20% British tax rate. This implies £79.8m of taxation per month, which the Chancellor loses. Or, about a billion pa.

The tax loss for Premium Bonds is trivial compared to Individual Savings Accounts (ISA).

“The key attraction to an ISA is that there is no tax to be paid or, in the case of a ‘stocks and shares’ ISA, no capital gains tax either. (my emphasis)

There is an enormous amount of money invested in ISA accounts, “Around £726bn is held in ISA accounts across the UK, with the majority in stocks and shares….Across the UK, 22.3 million adults hold an ISA…”⁴

In 2024-5 the FTSE gained 14%, which is the benchmark for the ISA investor.⁵ In 2024-5 there was £100bn in capital gains – tax free. Capital Gains Tax (CGT), when payable,is 20% and the £20bn is, therefore, tax free.  ISA investors have been gifted £20bn in CGT avoidance.

Dividend income is the engine room of capital growth. The FTSE’s yield is 3.15%, which equals £25.4bn annually. This provides immediate compounding through reinvestment.⁶ ISA voters (investors) increased their investment by 17.1% during October 2024-25. This far outstrips any taxed savings investment.

Unsurprisingly there are ISA millionaires. “…..the ISA millionaire count jumped from 4,070 in 2023 to 4,850 in 2024. And looking at the top 25 ISA accounts revealed an average value of £8.9m.”⁷(my emphasis)

This fiscal suicide extends to all lotteries.⁹ The biggest is the National Lottery. The National Lottery is a business where the profits, after expenses, are distributed to ‘good causes’.¹⁰ Yet “The National Lottery is operated under Licence from the Gambling Commission.”¹¹ Taxation on gambling is 15%.¹² The lottery paid out £4bn in 2024 in prize money, which is £600m in lost taxation. About 20m people (voters) gamble on the National Lottery each year. This is probably an under-estimate because of the number of syndicates involved. 7,400 millionaires have been created by the National Lottery, with a further seven added each week.¹³

A bold Chancellor desperately wanting revenue, without touching the Big Three – Income Tax, National Insurance or VAT – might consider the status of  ISAs, the National Lottery and Premium Bonds.

On the other hand, political calculation might trump trivialities like fiscal sanity.

The Scorecard

ISAs: 22.3 million voters⁸……………….£726bn………..Tax lost (about) £42bn

National Lottery: 20 million voters…..£7bn…………..Tax lost (about) £600m

Premium Bonds: 21 million voters……£133.1bn…….Tax lost (about) £1bn

Notes

1 Detailed Stats – Investing in Premium Bonds see this for details on how the prize fund is distributed How we share out Premium Bonds prizes

2 premium bond millionaires in total numbers – Search

3 £1 million jackpot win for two Premium Bonds holders from North East Scotland and Greater Manchester | NS&I Corporate Site see also EuroMillions Tax: How Winnings Are Taxed by Country

4 ISAs unpacked: who holds them and how much do they have? | AJ Bell

5 Tracker Funds are very popular with ISA investors as it takes the pain out of decision-making and therefore 14% is realistic.

6 ftse dividend yield table – Search The more proletarian Premium Bonds do not permit compounding and so the £50,000 cannot be exceeded.

7 There are now 4,850 ISA millionaires! Here are the stocks and shares they’ve been buying | The Motley Fool UK

8 Voters = investing public

9 Do You Pay Tax On Prize Money? | A Comprehensive Guide

10 National Lottery Distribution Fund Annual report and accounts for the year ended 31 March 2025

11 loc.cit p2

12 General Betting Duty, Pool Betting Duty and Remote Gaming Duty – GOV.UK 13 The Millionaire Map | Winners and Good Causes | The National Lottery