Do You Get Taxed On Gambling Winnings Uk
Gambling and Taxation. Essentially betting is ‘tax-free’ in the UK – the professional gambler is outside the scope of tax. This is confirmed in HMRC’s Business Income Manual at BIM22015. The basic position is that betting and gambling, as such, do not constitute trading. This is not a new precedent either. Most countries don’t tax gambling winnings; however, there are exceptions. These include the US, where winners are taxed, even casual gamblers. The majority of gamblers lose, so any additional government revenue from taxing winnings would be insignificant. Prefer to listen to this story? The tax-free status of gambling in the UK has not always been in place, however, and until relatively recently punters did have to pay tax on their bets/winnings. Betting shops were legalised in the UK in the 1960s and from then until 2001 there was a 9% tax levied against bettors.
Have you ever dreamt about winning big money on scratchcards, but worried about how much you will lose to a scratchcard tax?
Well good news for you all, there is no tax to pay when you claim a UK scratch card win. If you are a UK resident, any prize – big or small – does not count as taxable winnings.
UK Lottery Tax Rules
Are National Lottery winnings tax free? You bet they are!
The UK lottery tax rules state you do not have to pay tax on National Lottery winnings, such as scratchcards, but also any other lottery games from National Lottery such as Lotto, Thunderball and Euromillions.
In fact, you do not have to pay tax on any UK gambling winnings.
However, there are a few exceptions that can apply over the years proceeding your big winners. You need to be aware of the following tax rules:
Scratchcard Gift Tax
When you receive gifts of large value, you are subject to paying gift tax. However, the beneficiary can gift £3,000 per donor per year absolutely tax free.
Scratchcard Income Tax
Whilst you are not paying any income tax on the lump sum winnings you receive, when you deposit the cash in a bank account, you are subject to income tax on any earnings you make through interest.
You are not going to lose any of your initial winnings, but a substantial amount of earnings is likely to be taken from you.
Scratchcard Inheritance Tax
Depending on which scratch card game type you play, it is possible that it takes the total value of your assets over £325,000. This is an important figure, because any assets exceeding this value are subject to a 40% income tax upon your death.
To try and reduce the amount of inheritance tax you pay on your assets, it is possible to gift cash or valuable assets to friends or family. If however, you give away assets in excess of £3,000 per year, you may have to pay inheritance tax if the beneficiary dies within 7 years.
Who Pays Scratchcard Tax?
One of the reasons that scratchcards and other gambling is allowed in the UK is due to the tax the government makes. Whilst we’ve determined that winners aren’t responsible for paying tax, except in the above circumstances, it is actually the National Lottery that pays taxes on all income from sales.
National Lottery pays 12% income tax on all revenue generated from scratch card and lottery sales. This is lower than the standard tax rate of 15% other gambling companies pay.
If you’ve ever won a jackpot through bingo, slots or the lottery, you might have wondered if your winnings are taxable...
If you find yourself lucky enough to win big, do you have to declare it and pay taxes? If that thought has ever crossed your mind, you’re in luck because BingoPort has you covered. We’ve put together a guide that will answer whether your winnings really are taxable, a brief history of gambling laws and a look at how this might impact you.
So, if you’ve bagged yourself a big jackpot, congratulations! If you’re just here for the information, don’t worry—we’re sure your time will come someday.
Are Bingo Winnings Taxable?
The short answer is no—your gambling winnings aren’t taxable, at least in the UK. Here you won’t have to pay taxes on any of your winnings or stakes. It doesn’t matter if you’ve won £100 or £1 million. This applies to all types of gambling—from bingo, to slots, to lotteries, and even horse racing. So if you win big, you can rest assured knowing that you can spend your money in whatever way you’d like.
Depending on the site you’re using, your winnings will either be paid to you in one lump sum, or as a certain amount each month. If you’ve won recently, or you frequent a particular site, casino or betting brand, you should check their Terms and Conditions—this will lay out everything you need to know should your lucky day come.
If you don’t live in the UK your winnings might be subject to a tax, so it’s important that you check in advance. For example:
- France has a 2% tax on poker cash pots.
- In Spain, you need to declare winnings as income for taxation.
- The Netherlands has a 29% tax if you win more than €454 in the lottery.
If you’re a UK citizen and you find yourself gambling abroad, you generally won’t need to worry about taxes. Most countries have treaties with the UK, so you won’t be subject to their tax requirements.
Gambling wasn’t always tax-free however—check out the section below for a summary of the history of gambling and taxes in the UK.
History of Gambling Laws
Betting shows were first legalised with the 1960 Betting and Gaming Act, in which a tax was levied either on stakes or winnings in high street betting shops. This was charged at a whopping 9% for punters. It was abolished by Gordon Brown in his March budget of 2001.
This tax on gamblers themselves was replaced with a 15% tax on bookmakers and their gross profits at point of supply instead. This ‘point of supply’ basis meant that if a bookmaker wasn’t based in the UK, they weren’t liable however. This was a pressing concern for Brown, who feared that the UK was losing revenue to offshore gambling sites.
In fact, more and more bookmakers moved their online operations offshore where they would only have to pay the local tax rate on profits—this was capped at 1% in Gibraltar!
This changed with an amendment to the 2005 Gambling Act in 2014. From this point, the tax was changed to 15% on all gross profits at point of consumption—including offshore companies. This meant that gambling operators in Gibraltar and the Isle of Man for example, were now obliged to pay tax in order to obtain a gambling licence. This amendment essentially made it illegal to operate in the UK without a UK gambling licence.
This had a huge impact in making UK-based bookies and betting shops more competitive—increasing the growth and success of the gambling industry in the UK.
So, Why Aren't They Taxable?
To put it simply, it’s just easier for everyone involved to leave winnings untaxed. For example, if people are paying taxes on their winnings just like businesses do, then it would potentially be possible to claim back losses on tax returns. As you can imagine, this would be a nightmare, especially considering the fact that most people lose when it comes to gambling. After all, we all know what the 10 stages of losing at bingo are like!
Who Exactly Pays The Tax?
The casinos and bookmakers are the ones now paying the tax—this is the way they contribute to the UK’s economy. There are a variety of different taxes and gambling duties:
- General betting duty
- Bingo duty
- Machine games duty
- Lottery duty
- Gaming duty
- Remote betting duty
Before you start thinking about how tough it must be for gambling businesses, or how great it might be for you, bear in mind that they do pass these costs on to you in some way. For example, some online gambling sites have high wagering requirements or lower odds.
What If You're A Professional Gambler?
When we say ‘professional gambler’, we mean someone who essentially uses gambling as their main source of income. But even if this is the case and you are a professional gambler, the answer is still no—your winnings are not taxable.
This is backed up by the HMRC’s Business Income Manual at BIM22015. Their position is that betting and gambling don’t constitute trading:
“The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade”.
Gambling winnings, therefore, remain tax-free, regardless of whether it’s your main source of income or a simple hobby. An example of this goes back as far as 1925, in which a man named Alexander Graham was taxed by Inland Revenue. Graham made a living out of betting on horses, so Inland Revenue claimed £300 from him under the 1918 Income Tax Act. This case went to court, where Graham’s lawyers argued that betting on horses couldn’t be considered a trade. The judge eventually ruled that you can’t tax “habit”.
That’s not to say that professional gamblers can’t ever be subject to tax. It can get a little bit complicated. For example, if a professional gambler is being paid an appearance fee for playing at a particular tournament, then this would be a type of income that would be liable for tax.
So, I Don't Have To Worry At All Then?
While your winnings aren’t taxable by any gambling laws, that doesn’t mean you don’t have to worry. After all, other taxes may still be applicable.
A problem that many lottery winners have is extra tax—particularly on the ‘bigger’ wins. Any income that you generate from your winnings could be subject to income tax—for example, income earned through investments would be subject to a capital gains tax at 18%! And that’s not all—your winnings might even be liable to an inheritance tax when you die.
An inheritance tax is levied on property or cash acquired by a gift or inheritance. The threshold for this tax is £325,000, so if your ‘estate’ is worth more than that, you’re looking at a 40% tax. While you can give your money away to people or charities, it’s still liable should you die within 7 years of the gift.
You can give away £3,000 each year tax-free to any one person, or £250 as a gift to someone as long as they’re not gifted any further. If you give more than this away and you die, it will be liable to this tax. If you live longer than the allotted 7 years, it will be exempt from the inheritance tax.
If you do end up winning big—whether it’s through bingo, the lottery or a casino—you should definitely look to a financial advisor for help on how to invest your money and how to protect it.
Do You Pay Tax On Casino Winnings Uk
Before going out to buy your lottery tickets for the week, find out if the lottery is worth playing.
Conclusion
Well, there you have it. If you live in the UK, our tax laws mean that you can gamble tax-free, without a single worry. Generally speaking, it isn’t very likely that this will ever change—taxing gambling winnings will never be viable for the UK. After all, if you tax the income or profit made from an activity, you have to make allowances for any losses made from the same activity.
Now you know that, you can keep playing bingo without a care in the world!
Do You Have To Pay Tax On Gambling Winnings Uk
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