NS&I Premium Bonds

Just forward thinking to next year and the filing of my return. I received a £25-00 premium bond win from NS&I. Would this be listed on line 21 of the 1040 as other income (prize), or lumped together with my cash ISA and taxable income from NS&I? Not sure if it would be added to schedule B with other interest income (that has been received both taxed and untaxed). Would I also note this on the 1116 with all passive interest income?
I would appreciate any thoughts.

What about gambling winnings.

It's not gambling, as you don't loose your investment. So, if you invest £1,000, you'll get it back at anytime. The worse that can happen is that you make nothing.

A Premium Bond winner! Congrats, that's becoming rare these days.

It would seem logical (to me, therefore danger) to treat NS&I as a bank/building society account, list it on Sch. B, and treat the win as you would interest from an ISA (it is tax free, isn't it?) for 1116. Wouldn't the test be how is the account (and the location of income on 1040) declared on 8938?

As long as you declare it, and list it as appears correct to you......you're filing with all best intentions. If it's wrong, you file a 1040X, but there surely wouldn't be any penalty threatening problems. It wouldn't seem to be the type of account that would require an additional special form.   

It's not gambling, as you don't loose your investment. So, if you invest £1,000, you'll get it back at anytime. The worse that can happen is that you make nothing.

...but conversely you only get any return when you win a prize draw, you get no interest, just the chance that you'll win a prize. If you win big....say a million pounds, the implied interest rate would be ridiculous. Most people buy Premium Bonds for the chance to win the big prize, they are gambling that their winnings will be more than the return they could get on a savings bond or a mutual fund.

I would guess the pros are laughing their backsides off at us 'chattering classes' over this! They must have a mutually accepted way to declare this. Sorry pros, with all due respect, getting £25 on the correct line isn't worth your fees.

...but conversely you only get any return when you win a prize draw....

I agree with Barcrest, it's not gambling. There is no risk involved and the funds are guaranteed protected by HM Treasury.

Barcrest is probably laughing their backside off as well, since their little puzzle has now caused me to look at the Premium Bonds site.

So here's one for you, nun. According to the T&C's, "Bonds are UK Government securities" So, how and where do you declare foreign government securities and income from them?

http://www.nsandi.com/savings-premium-bonds

It is rather like arguing about angels on the head of a pin.

I'd put interest from the savings bonds on the interest line and Schedule B, just like interest from a UK bank savings bond.

I'd put winnings from a premium bond on line 21 other income. That just feels right to me, I have nothing to go on other than the use of the terms "interest" and "winnings" in each case. They might not be gambling winnings, but they are prizes. Further down the premium bonds T&Cs there's this statement "Bonds do not earn interest, but are included in draws for cash prizes", so I would include premium bond winnings on line 21, not with any interest.

By the way, you can fit an awful lot of angels on the head of a pin, IMHO

Whether it's other income on line 21, or interest on Sch. B, the AGI is the same, and the final taxable income on line 43 is the same. If it's gambling winnings, don't you have to do a special calculation (from info on a W4 which NS&I probably doesn't issue?) for line 21?

If it's £1 million, the pros fees would be worth it! As Barcrest suggested, maybe line 21 under other income would be the simplest solution for £25. Here's betting nothing further will ever come of it.

I think if you win over $600 a 1099 is required along with tax withholding and a W-2G. If you won a $1M in premium bonds you'd just have to explain why there's no 1099 or W-2G. As this is only $25 and no tax was withheld neither would be required. Just add $25 to whatever else is on line 21.

I suppose all the American winners of this year's Nobel Prizes are asking similar questions, that $1M in prize money also goes on line 21.

Thanks guys...

Line 21 was what I had thought all along. If someone makes the big time with a premium prize win, then know doubt there would be estimated tax payments just like there would be for winning a car on the 'Price is Right'!

I'll come to that bridge if it ever happens...

I think that's exactly how to think of it, it's a prize. If you come up big it would be a nice problem to have.