NS&I account tracing issue – what do you need to know?

Background

National Savings and Investments (also known as NS&I) is a state-owned savings bank which offers premium bonds and other types of savings products. Some types of NS&I products – such as premium bond prizes and ISAs – are tax-free for income tax and capital gains tax purposes. However, NS&I also offer other products, such as standard savings accounts, where the interest received is taxable, subject to the usual allowances and nil rate bands. 

When an individual dies, those responsible for dealing with the estate administration, usually an executor or personal representative, must gather together information about the assets that the deceased owned when they died. This includes all NS&I products, even those which were tax-free during the individual’s lifetime. See our guidance page on Tracing assets after a death. The Tell Us Once service, which allows you to report a death to most government departments, does not cover NS&I. 

The value of an estate at the date of death determines whether any inheritance tax is paid by the estate. It’s important to note that although certain types of savings products are exempt for income tax and capital gains tax purposes, they may still be subject to inheritance tax. 

What has happened?

NS&I has recently stated that they failed to identify and trace some NS&I accounts when a customer died. This means that money was not repaid to the estate when it should have been. The majority (approximately three quarters) of the cases relate to the period from 2008 to 2025. It is estimated that up to 37,500 estates with a total value of up to £476 million have been impacted, however work by a dedicated team within NS&I is ongoing, so the true scale of the problem is not yet fully known. 

A delivery plan will be published in May which will set out more information on the number of cases affected, how they will go about reuniting the funds (including any interest due) with the beneficiaries, and the compensation that will be paid. 

In the meantime, NS&I has stressed that funds are safe and the issue relates to tracing only and not the security of the funds. They have also stated that the problem which caused this issue has been resolved, so current and future bereavement cases won’t be affected.  

What are the tax consequences?

We don’t yet know what the tax consequences will be and are awaiting further information from the government, however, we have set out below what the usual tax position would be.

Because these funds were not identified originally, the value of some deceased estates may have been understated for inheritance tax purposes. For many estates, there may be no tax consequences, provided the total value of the estate including the NS&I accounts is still less than the level at which an estate has to pay inheritance tax – see our guidance on Inheritance tax. 

However, for some deceased estates, any additional funds which were not previously known about when the estate was being administered could now result in additional inheritance tax becoming due. 

There could also be income tax implications arising from interest paid on any NS&I products which are not exempt from income tax. 

Although technically the tax would be due on the estate, any underpaid tax could in theory be recovered from the beneficiaries of the estate if the estate has already been wound up and funds distributed. The government said during parliamentary debate that they ‘want to avoid bereaved families facing disproportionate disruption and administrative costs as a result of the error’¹, and will set out how they intend to address any tax implications in May of this year, when NS&I publish its delivery plan. 

Will compensation be paid?

The government has said that compensation will be paid where appropriate - details of what this might entail are expected to be confirmed in May.  In similar situations in the past (including the Infected Blood Compensation Scheme and Post Office Horizon compensation), payments were awarded tax free. We will seek to provide an update once further details are known. 

What do I need to do? 

NS&I has published guidance on its website. The bank has advised that any customers who have made bereavement claims, either recently or in the past, will be contacted if they have been affected. No immediate action is therefore required by customers at the moment. 

The government has specifically said that individuals should not need to incur costs in seeking assistance from claims management companies or solicitors, as the responsibility to correct the situation lies with NS&I. 

Taxpayers should be cautious of any claims management companies who state they can resolve the issue on their behalf. It is unlikely that these companies will be able to resolve the matter any quicker and they will charge a fee for their service. 

If you do ultimately decide to use one of these companies, you should check they are registered, as all claims management businesses are regulated, and must be authorised by the Financial Conduct Authority to legally provide services. 

We will keep this matter under review and publish updates when further information is made available. 

¹ National Savings & Investments - Hansard - UK Parliament – statement by Torsten Bell, Parliamentary Secretary to the Treasury, 26 March 2026.