Gambling and taxation of earnings in the United Kingdom

Betting tax in the UK – It’s difficult to replicate the sensation of winning at a casino game or after putting a sports bet. The body experiences a mixture of relief and adrenaline, and the thrill is difficult to restrain.

After the dust settles, gamblers who were fortunate enough to win or succeed with their wagers may question how they may ensure their profits do not land them in legal problems.

Not everyone is aware of the gambling tax issue in the United Kingdom. Some people believe that they must pay taxes on whatever winnings they make, regardless of whether they play at a traditional casino, online, or elsewhere. Others may not even think twice about disclosing their gambling winnings.

Anyone who has just won a large quantity of money while gambling may be asking how they can properly declare their earnings to the authorities.

Betting tax in the UK - all the information you need regarding the taxation of winnings from gambling in UK

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Is Gambling Taxable in the United Kingdom?

In the United Kingdom, gambling is not taxed. While gamblers in certain countries, like the United States, France, and Macau, must pay gambling taxes ranging from 1% to 25%, bettors in the United Kingdom can keep their whole earnings. In truth, both online and offline gamblers in the United Kingdom are exempt from paying taxes. You may recall dealing with betting duties in the past if you’ve been gambling for a long, but Gordon Brown, the Chancellor of the Exchequer at the time, eliminated the tax in 2001. As a result of the unexpected rise and perceived threat of offshore betting earlier this century, the government was virtually forced to implement various amendments. However, this was only one of several significant advancements. In addition, the government passed the Gambling Act of 2005, established the UK Gambling Commission, and began regulating internet casinos.

Did you realize that the UK government profits handsomely from gambling? In the 2017-18 fiscal year, Her Majesty’s Revenue and Customs collected £2.9 billion in gaming-related duty. Despite the fact that this statistic encompasses lotteries, betting, and both live and remote gaming, it is still staggering. The 15% tax charge that gambling businesses must pay accounts for a considerable chunk of that revenue. While you are not required to pay taxes regardless of whether you win or lose, the government does tax the revenues of betting shops, poker rooms, casinos, and other similar establishments. Even while players do not directly pay these fees, they are included into the odds in a variety of ways. Nonetheless, it’s good to be able to focus on playing your favorite games rather than dealing with onerous tax paperwork.

History of Gambling Laws

Betting tax in the UK -Betting shows were originally legalized with the Betting and Gaming Act of 1960, which imposed a tax on stakes or wins in high street betting shops. For punters, this was taxed at a staggering 9%. Gordon Brown eliminated it in his March 2001 budget.

This tax on gamblers was replaced by a 15% tax on bookmakers and their gross profits at the time of sale. However, because of the ‘point of supply’ principle, a bookmaker who was not situated in the UK was not liable. This was a major concern for Brown, who was concerned that the UK was losing money to overseas gambling sites.

Indeed, a rising number of bookies have moved their internet operations overseas, where they just have to pay the local tax rate on profits—which in Gibraltar is capped at 1%!

When the Gambling Act of 2005 was revised in 2014, this changed. From then on, the tax on all gross profits at the point of consumption, including those obtained by offshore corporations, was decreased to 15%. Gambling operators, for example, in Gibraltar and the Isle of Man, were now compelled to pay tax in order to receive a gambling license. This amendment effectively rendered doing business in the United Kingdom without a UK gaming licence unlawful.

This had a significant impact on making UK-based bookies and betting shops more competitive, hence promoting the expansion and prosperity of the UK gambling business.

The Elimination of Gambling Duties

In 2001, the UK government made a seismic shift in its approach to gambling winnings. A law was established requiring UK players to pay no taxes on their gains. The rule also applies to anyone visiting or staying in the UK on a valid visa.

One of the reasons such a law was enacted was because it was popular among the general population. The majority of people in the United Kingdom have a gambling problem. They will wager on horse races, football games, and other sporting events, as well as casino games and jackpot slots.

Winning at slots is a thrilling experience. When you see those three or five numbers or symbols appear one by one, all the same, you know you’ve had the luckiest day of your life. This emotion is enhanced by the knowledge that 100% of the money remains with you and is not distributed to the government.

Casino and gambling site taxes

Betting tax in the UK – Anyone operating a casino, bookmaker, or online gambling or betting service that serves players from the United Kingdom must pay taxes. The current tax rate for all gambling income for businesses is 15%. Such a regulation assures that the UK government continues to earn a considerable income from all of the money wagered by its residents, while without taxing the common individual when they win.

People unfamiliar with UK legislation may believe that such a policy reduces earnings, but this could not be farther from the truth, since the UK boasted over £2.9 billion in gambling duties in 2018. In successive years, the figures have remained consistent or increased.

Is Professional Gamblers' Winnings Taxed?

Betting tax in the UK – No, HM Revenue & Customs does not distinguish between amateur and professional players. Even if this may change in the future, gambling is not now a recognized trade.

If you’re a professional poker player, you’ve probably already spoken with an accountant. Nonetheless, there are a few issues to consider. If you play outside of the United Kingdom, you may be subject to local taxes. For example, if you win money in Las Vegas, you may be subject to a federal withholding tax, however as a non-resident, you can often seek for a refund. Also, if you become a poker celebrity and are compensated for public appearances or representing an online cardroom, you may be subject to taxes on your earnings but not on your winnings.

Placing Your Bets Offshore

Betting tax in the UK – If you’ve ever gambled online, you’ve probably observed that the business is always changing. That is true whether we are discussing game quality, technology features such as mobile betting, or regulatory and tax difficulties. Many of the sites that operate in the United Kingdom, as you may be aware, are based offshore. Some of these offshore operations began in the United Kingdom, but rapidly learned that they could lower their tax burden by relocating their servers and incorporating in a tax-free jurisdiction.

To address these developments, the UK Gambling Commission now requires all sites that accept British clients to be fully licensed, regardless of whether they are physically located in the UK or elsewhere. Furthermore, these sites are subject to the same 15% tax as their British counterparts. Of course, as a player, you will not be subject to these taxes. Nonetheless, a level playing field minimizes the likelihood of the government implementing changes that harm bettors.

Keeping Track of Your Performance

Although revenue from Betting tax in the UK is not needed to be declared on your tax return, successful poker players and other professional bettors usually keep personal records of their wins and losses. While keeping a performance journal may appear to be a waste of time because your wins are tax-free, there are a handful of advantages to doing so.

When gambling, it’s usually a good idea to keep track of how much you spend and win. Don’t you want to know how much money you gained after you deducted your losses and other expenses like travel, meals, and lodging? Driving to the store in an Aston Martin could raise multiple red flags if gambling is your primary source of income. Having gambling records will provide adequate evidence that you are not concealing income from taxable sources.

For tax purposes, is professional gambling considered trading?

Is an online professional gambler still simply following a strategy or trading?  Trading is not considered to be taking place if the “pro-punter” is not engaging in an organized activity to profit from the gaming public.

Betting tax in the UK - all the information you need regarding the taxation of winnings from gambling in UK

The betting exchanges have developed a number of adept pro-punters who approach their business scientifically and with thorough investigation.  The profit is not “irrational,” but it is “tax-free.”  There is no distinction between recreational and non-recreational players for tax purposes.  How does the professional gambler handle tax issues?

The safest course of action must be to notify HMRC of the situation.  This can be accomplished by simply writing to the pro-punter’s local tax office and saying that he or she has revenue from gambling and recording the specifics on a tax return each year.  It is also critical to gain clearance from HMRC through “Code of Practice 10.” 

Who is responsible for paying the tax?

Casinos and bookies are now paying the tax, which is how they contribute to the UK economy. There are several distinct types of taxes and gaming duties:

  • General wagering responsibility • Bingo wagering duty • Machine games wagering duty • Lottery wagering duty • Gaming wagering duty

Before you start thinking about how difficult it must be for gambling companies, or how great it may be for you, remember that they do pass these costs on to you in some way. Some online gambling sites, for example, offer high wagering requirements or lower odds.

Gamble Responsibly in the United Kingdom

When you gamble or place bets on sports games in the UK, be sure you do it responsibly. If you are not visiting a physical casino or bookmaker, the first step is to confirm the identity and validity of the website or app you are using.

There are numerous websites and apps that allow consumers to play casino games and wager on sporting events. It is critical that you use a site that is licenced to operate in the United Kingdom. If you have any problems while using the site, such as not being paid out for winning a bet or having difficulty withdrawing your funds, you cannot seek assistance from the authorities if you are using an unauthorized site.

The rules in the United Kingdom are particularly friendly to gamblers, as the government is well aware of the enthusiasm that many of its residents have for betting. The most major advantage of UK gambling legislation is that you will never have to pay any tax on your winnings.

Conclusion

Betting tax in the UK – While your profits are not taxed under any gaming regulations, you should still be concerned. Other taxes, after all, may still be applicable.

Extra tax, particularly on ‘larger’ prizes, is an issue for many lottery winners. Any income you earn from your winnings may be subject to income taxation; for example, income generated through investments may be subject to an 18% capital gains tax! Not only that, but your earnings may be subject to an inheritance tax after you die.

Inheritance tax is imposed on property or cash received through a gift or inheritance. The threshold for this tax is £325,000, so if your ‘estate’ is worth higher, you’ll face a 40% tax. While you can give your money to people or charity, it is still your responsibility if you die within 7 years of the donation.

You can give away £3,000 tax-free to any one individual each year, or £250 as a present to someone as long as they are not gifted again. If you donate more than this amount away and die, it will be subject to this tax. If you live for more than the required 7 years, your estate will be exempt from inheritance tax.

If you do wind up winning large, whether through bingo, the lottery, or a casino, you should definitely seek the advice of a financial professional on how to invest and secure your money.

If you live in the United Kingdom, our tax laws allow you to gamble tax-free. In general, it is unlikely that this will ever change—taxing gambling gains will never be a feasible option for the UK. After all, if you tax the revenue or profit generated by an activity, you must account for any losses generated by the same activity.

Frequently Asked Questions Regarding Gambling Taxation in the United Kingdom

Betting tax in the UK – all the question answered

Do Professional Gamblers Have to Pay Taxes?

Professional gamblers, or those who live off the revenues of fixed odds gambling, are exempt from paying any tax on their winnings. You, on the other hand, cannot claim a tax refund on your losses.

If you are a resident of a country other than the United Kingdom, you may be required to pay tax on your winnings.  This could be the situation if you either declare tax in another country or attempt to withdraw funds from another area. If you are unsure about the gaming tax in your area, check with your local government.

I’m a visitor to the United Kingdom. Is Gambling Tax Required?

You do not have to pay anything to the UK government, but depending on your country’s rules, you may be required to declare any winnings.

However, if your winnings are in cash and you are travelling outside of the EU, you are only allowed to take a maximum of €10,000 (or equivalent) in cash out of the nation at one time.

Do I Have To Pay Tax On Spread Betting?

The Financial Conduct Authority (FCA) regulates spread betting, index betting, and binary options, which are not regulated by the UK Gambling Commission. Despite this, you do not have to pay the 18% UK Capital Gains Tax or stamp duty on Spread Betting earnings. You also do not have to pay tax when betting with bookmakers on fixed odds currency and market fluctuations.

If you call spread betting your principal source of income or your day job, you may be subject to taxation; in this case, you are essentially classified as a trader. You could, on the other hand, deduct any losses from your taxes.

This is not the case if you trade on the stock exchanges. This type of trading is subject to full capital gains tax as well as stamp duty.

Is It Necessary To Declare Winnings To The Government?

The quick answer is that you do not have to declare your winnings because they are not taxable. Similarly, you will not be reimbursed for your losses, thus there is no use in revealing them. 

If you have won a large sum of money, you should notify the Treasury on your tax return.  You can enter gambling profits in a separate field.  You will not be taxed, which may aid future investigations if you are audited.

It is definitely beneficial to retain documents and receipts of your winnings as proof of how you received the money. High-value purchases frequently necessitate a fraud check, and failing to provide documentation of where your money came from might get you in serious water.  Even if you wish to make a major cash purchase (a car, a house, etc.), you must show where the money originated from.  Another reason to wager only with UK-licensed, respectable, tax-paying bookmakers.

Can I Give or Gift My Winnings From Gambling?

Both yes and no. If your earnings are inherited, they will be subject to inheritance tax. If your estate is sufficiently large. You can give your money to people or charity, but if you die within 7 years of the donation, it may be subject to inheritance tax. You can offer a tax-free present of £3000 to any one person each year, or you can give a gift of £250 to everyone you like, as long as no one person receives more than £250.

If you gift more than this and die within 7 years, you will be liable for a percentage of the tax according to the tapor rule. If you live longer than this, you are no longer subject to inheritance tax.

Is There a Gambling Tax in Other Countries?

If you win in a country that taxes gambling profits, you will pay the tax at the point of supply and will not be required to declare it. If you want to bring winnings back into the UK (or any cash for that matter), you may be limited to €10,00 Euros (or similar currency value) if travelling from outside the EU.

It is presently unknown how Brexit will affect the ability to transfer gambling profits from other EU countries into the Kingdom.  See our dedicated page for additional information on betting overseas.

Karina Peterson
More than 15 years in the gambling industry, working for the big players in the affiliation market. I won't name them, you know them. Also I enjoy seeing a new project taking life and expanding like this one.
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 Betting tax in the UK | Gambling and taxation of earnings in UK
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Betting tax in the UK | Gambling and taxation of earnings in UK
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Betting tax in the UK - all the information you need regarding the taxation of winnings from gambling in UK
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