Do You Have To Pay Tax On Gambling Winnings Uk
In the UK all gambling wins are tax free (lottery, sports betting, poker etc) and do not need to be declared. Tax is taken at source, the government doesn't gamble, they tax your stake and let you. So it is perhaps not surprising that the UK tax authorities have decided not to come after the winnings of those few people who do profit from spread betting. Much easier for them to tax the profits of the spread betting firms themselves, which tend to be very substantial. Although any winnings gained from gambling be it online, in a high street bookmaker or in a casino, are exempt from tax in the UK, you may be in a situation where some interest earned on those winnings whilst they are in a bank account, savings account, trust fund or bond will be taxable. Players are not required to pay taxes on winnings from online or land based casinos in the United Kingdom. UK gambling tax applies to casino operators, who are required to pay 2.5-40% of their gross gaming revenue. The United Kingdom has a wide variety of casinos, with around 24 in London, 13 in Scotland and 5 in Wales.
In short for the customer there is no tax to pay on either bets or any subsequent winnings in the UK. If you are not based in the UK you may be liable for tax in your own jurisdiction if you take any winnings back to that teritory, you are advised to check in advance.
It may seem strange to some people that the UK Government don’t want a slice of the pie from punters. Don't worry the government still get their two pound of flesh they just now take it direct from bookies in the form of point of consumption tax. Tax laws were changed in 2001, again in 2014 and then 2018 to reflect the changing nature of gambling moving progressively from the high street to online. These new laws removed the need for the bettor to directly pay a levy, this was instead shifted to the bookmaker in a move designed by the government to increase tax revenue from online operators based off shore.
Beware however, there are some instances in which tax may need to paid, such as in the case of index and financial betting. In this article we tell you everything you need to know about betting tax, we tell you if you need to declare winnings, what to do if you’re a professional gambler, the old rules, history and more.
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What was the old Gambling Tax Law?
Prior to the 1960 Betting and Gaming Act it was illegal to place cash bets away from licenced race courses and tracks. The 1892 Gaming Act created the Totalisator board, commonly known as the Tote, set up to accept wagers at race courses and greyhound tracks from punters. It was however illegal to take bets off site unless these were made by post or over the phone.
Many illegal bookmakers operated throughout these periods and the large betting black market that ensued showed the government there was a huge demand for off site bookmaking, and crucially this could be taxed. This led to the 1960 Act that principally regulated and licenced high street betting shops.
The first shops opened in 1961 but under the condition that a new levy was to be charged at 6.75% to bookmakers. Bookies passed this on to punters in the form of a 9% betting tax. The tax could either be paid at the time of placing a bet or on the winnings instead. A levy of 9% on winnings can be a lot of money so most people elected to pay the tax on the stake.
What is the current Gambling Tax Law?
By the time of the new millennium the betting landscape was changing with more and more gambling moving towards telephone betting and betting online. This allowed companies to move offshore to tax havens such as Gibraltar, Malta, The Caymans, etc., from where they could allow punters to bet tax free. The earliest and most famous of these migration was the bookmaker named after Victor Chandler, now known as BetVictor. Victor moved his operation to Gibraltar in 1998 and this was said to be the final straw for the then Chancellor Gordon Brown who legislated a change to the gambling tax law.
In 2001 the betting levy was abolished and replaced instead by a 15% tax on bookmakers gross profits in the UK at point of supply. This was a landmark day for punters in Great Britain who could now bet tax free win or lose. However, when you think about it, bookmakers are businesses and therefore you are still paying the tax today, only now it is indirectly passed on to customers in the form of poorer odds and bigger operator margins.
Unfortunately however this new legislation didn't solve the ultimate problem, as more and more betting companies moved their online operations offshore. The tax at the time was 'point of supply' meaning offshore gambling brands were charged tax based on where they were based, meaning they would pay the local tax rate on profits instead of full UK tax. In Gibraltar for example this was capped at 1% or a maximum of £400k.
This didn't just result in the online-only operators to moving abroad it also caused the bigger, older, high street names, such as Coral, to move their online operators abroad too. Effectively keeping the high street business in the UK, with profits liable to UK tax, but moving all of the online profits abroad. As the online industry steadily grew over the subsequent decade this problem became more and more visible to the treasury.
In 2014 an amendment to the 2005 Gambling Act the tax legislation was issues. This contained a new 15% point of consumption tax on all gross profits. This now meant off shore companies were obliged to pay tax on profits earned from UK based customers to the UK treasury. Failure to do so would mean the betting company would not be re-issued with, or could not obtain, a UK gambling licence. As it is a legal requirement to have a licence to offer gambling services in the UK this also means it is a leagal requirement for all operators to pay the tax.
New 21% Point Of Consumption Tax For Remote Gambling in 2019
The UK chancellor, Philip Hammond, announced in his budget in 2018 that the a higher rate 21% point of consumption tax will now be imposed for online gambling on 'games of chance', up from 15%. This means if you play casino games, slots, table games like blackjack, poker, virtual or any other fixed odds game of chance, there will now be a 6% higher tax on the profits made by a casino site operating in the UK.
This will come into effect on the 1st October 2019, at the same time the new £2 limit on FOBT's will come in for high street shops. The main effect customers will notice will be poorer odds and return to player amounts as online gambling companies will largely pass on these costs to the customer. The competitiveness and profitability of the industry however should at least mean some of these costs are borne by the gaming companies at least. We may notice, in combination with Brexit, that more companies may leave the UK market in light of this new higher tax. We will update this section as more information is announced.
Gambling Tax FAQ's
Do Professional Gamblers Pay Tax?
Professional gamblers, or those who live off the proceeds of fixed odds gambling, do not need to pay tax whatsoever on their winnings. Conversely however you of course cannot get a tax refund on your loses either.
If you are a resident in another country, other than the UK, you may be liable to pay tax on your winnings. This could be the case if you either declare tax in another country or you try to take the money back into another territory. Check your local betting tax laws if you are unsure of the gambling tax where you are based.
I'm a visitor to the UK do I have to pay gambling tax?
You do not need to pay a penny to the UK government but depending on the laws in your country you may be liable to declare any winnings.
Beware however should your winnings be in physical cash and you are travelling outside of the EU you are restricted to taking a maximum of €10,000 (or equivalent) in cash out of the country at any one time.
Do I pay tax on Spread Betting?
Spread betting, index betting and binary options are not regulated by the UK Gambling Commission but instead fall under the umbrella of the Financial Conduct Authority (FCA). Despite this you do not need to pay the 18% UK Capital Gains Tax or stamp duty on winnings from Spread Betting. You also do not need to pay tax when betting on fixed odds currency and market fluctuations with bookmakers.
If however you call spread betting your primary source of income, or your day job, you may be liable to pay the tax, effectively you become classed as a trader in this scenario. You would on the other hand be able to write any loses off against tax.
If you trade on the stock markets this is a different story. This form of trading is liable to full capital gains tax and stamp duty.
Do you need to declare winnings to the government?
The short answer is no, your winnings are not taxable so you do not need to declare them. Likewise you won't get any rebate against your loses either so no point in declaring them either.
If you have won a lot of money it helps to declare to the treasury on your tax return. There is a specific box where you can enter gambling winnings. You won't be taxed and this could help in any future investigations if you are audited.
It certainly helps to keep records and receipts of your winnings as proof of how you obtained the cash. Often high value purchases require a fraud check and if you have no proof of where your money came from it can land you in hot water. Even if you want to make a large purchase in cash (a car, a house, etc), then you will need to show where the money came from. Yet another reason to only bet with UK licenced reputable, tax paying, bookmakers.
Can I give or gift my gambling winnings away?
Yes, and No. If someone inherits your winnings they will be liable to inheritance tax If your estate is large enough. You can give your money away to people or charities but this may be liable to inheritance tax should you die within 7 years of the gift. You can give a £3000 tax free each year to any one person or you can give £250 away in a gift to anyone you like so long as one person is not gifted more than £250.
Should you give more than this away and you die within 7 years you will be liable for a percentage of the tax, this is known as the tapor rule. If you live longer than this this is now exempt from inheritance tax.
Do I need to pay gambling tax in other countries?
If you win in a country that taxes gambling profits then you will pay the tax at the point of supply, and so you don't need to declare it. If you want to bring winnings back into the UK (or any cash for that matter) you may be restricted on the amount of cash you can bring in, if travelling from outside the EU, to €10,00 Euros (or equivalent currency value).
It is currently not known how Brexit will effect the ability to bring in gambling winnings from other EU country's. For more about betting abroad see our dedicated page.
History of Gambling and Betting Taxes
Gambling and betting was not taxed effectively in the UK for most of history. Unlicensed gambling was causing such a legal and moral problem to the Victorians that the parliament of the time issued the Gaming Act of 1845. This made a wager unenforceable by law and therefore rendered all contracts between bettor and bookie invalid. This didn't stop gambling but it certainly made it into an underworld practice.
Do You Get Taxed On Gambling Winnings Uk
In the late 1800's gambling was finally allowed, but only from the government run Totalisator Board (Tote) at select tracks and courses. The tote could conveniently set odds and pump profits back into the Treasury.
Over time some one-off exceptions emerged such as the Football Pools. This was a betting phenomenon and for most people in the UK the only experience of gambling they had. Despite legal battles with the football league and sneering from the government the pools were classed as a low wager competition and was allowed.
By the late 1950's black market betting was rife and the government had neither the resources or the motivation to stop it. In an 'if you can't beat em' join em' approach the government licenced off site betting shops under the 1960 Acts and the betting levy at the same time that remained in place until 2001.
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.
Do You Have To Pay Tax On Gambling Winnings Uk Lottery
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.
Do You Have To Pay Tax On Gambling Winnings Uk Property
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.