Do you pay tax on gambling winnings in the UK?
This is a question any gambler might ask themselves at one point or another.
Is it necessary to pay tax on gambling winnings or even on bets themselves in the UK? What are the rules and legislation about online betting and tax? And is it illegal not to declare winnings from online casinos that aren’t even based in the UK?
Tax evasion – after all – is a serious thing. So, before you hit that jackpot win – maybe you already have – or get a life-changing payout from your latest spin at the reels, you might want to know where you stand when it comes to gambling and taxes!
The United Kingdom is a fantastic place to call home. That is, whether you enjoy playing just with a few pounds here and there or enjoy thrilling tournaments putting some substantial bankroll onto the table. Because in contrast to other nations, the UK is a very liberal place. And this freedom extends to online betting and gambling in general. Not only is it completely legal and regulated in the UK, but you will be allowed to keep all your winnings, too.
Although it might be almost too good to be true, winnings from online gambling in Scotland, Wales, Northern Ireland, and England are completely tax-free. Yes, that really means there is 0% tax if you hit the jackpot, or just raked up some serious gains from a streak of good luck.
But HM Revenue still gets its share from the online gambling operators. Continue to find out all the aspects of taxation in regard to gambling as we answer your question: Do I have to pay tax on gambling winnings in the UK?
Are individuals being taxed for gambling in the UK?
Players in countries, such as the United States, France or Macau, must pay gambling taxes ranging from 1% to 25%. Yet bettors in the United Kingdom have the option of keeping all their winnings. In fact, both online and offline bettors in the United Kingdom do not have to worry about the declaration of taxes in regard to gambling at all.
Though if you do have a long history in gambling, you may recall that this was not always the case. However, Gordon Brown, the Chancellor of the Exchequer made gambling a lot more hustle-free by abolishing that tax in 2001.
As a result of the sudden rise of offshore betting around the turn of the century, the British government was basically forced to enact several reforms to online betting regulations and its associated tax legislation.
Resulting of this, the government issued the Gambling Act 2005, founded the UK Gambling Commission, and effectively started regulating online casinos.
And this is where you can find the crux, why you as a gambler do not have to pay a dime on taxes when governments knowingly like to take any opportunity to impose taxes on potential income.
To put a lot of bureaucracy into simple terms: It’s just easier for everyone involved to leave an individual’s winnings untaxed. Because consider this: If you would be paying taxes on your winnings just like businesses do on their profits, then it would potentially be possible to claim back losses through tax returns. Imagine the chaos that would be unleashed.
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.
Taxes are Being Paid – Just Not By The Gamblers
If you ask yourself if you do have to pay tax on gambling winnings in the UK, the answer is no. However, that does not mean that the government does not take its stake from the very lucrative online betting market. Her Majesty’s Revenue and Customs collected £2.9 billion in gambling-related duty in the fiscal year 2017-18 alone. Since then, the market has only become bigger, and the numbers are still increasing each year.
A large portion of this revenue derives directly from the 15% tax that gambling operators are obliged to pay. Individual online bettors are therefore not directly taxed, yet online casinos, betting shops, and other gambling-related establishments have to declare their profits. And while you may not notice this tax directly, it has already been calculated into the odds of operators in a variety of ways.
And while the taxable profits of gaming operators do, after all, come from their clientele, bettors will not have to worry about contacting or being contacted by the taxman directly.
What About Placing Bets Offshore?
From betting at physical shops, poker rooms, and at the races, gambling has evolved to increasingly take place in a virtual environment. Games are being developed and offered by a range of innovative companies from all around the world. They are then offered by gaming operators that may have their headquarters in altogether different corners of the globe.
Due to licensing and regulation, many online gambling operators have chosen to place their headquarters in countries outside the UK. So-called gambling hubs have therefore sprung up in rather unexpected places.
Gibraltar, Malta, and The Isle Of Man or Curacao for instance have become offshore gambling hotspots. Especially Gibraltar and Malta, due to their small size, have entire building complexes dedicated to housing gambling and gambling-related firms.
Many of these offshore operations were originally based in Britain. However, they quickly realized that a move could substantially lower the tax burden by locating their servers and operations in a tax-free jurisdiction. Yet, in order to offer its services to players gaming from and being resident within the UK, operators still had to justify earnings, even with their registered addresses being outside of the country.
Therefore, the Gambling Commission now requires all online gambling sites that allow British customers to use their services to be fully licensed, whether they have their offices physically based in Britain or not. Since the implementation of these regulations, online betting hasn’t just become more accessible to UK players. The milieu has also become a whole lot safer and transparent to bettors all over the globe. And while the taxes that go to HM Revenue and fees that need to be paid for holding a reputable license are reflected in somewhat reduced odds, players can now be sure to enter a safe gaming environment. Due to licensing requirements, operators must adhere to standards of quality, and transparency. They are being monitored to offer their customers an unbiased problem-solving approach.
I’m A Professional Gambler – Do I have to Pay Tax On Gambling Winnings In The UK?
You are literally in luck because HM and Customers do not recognize professional gambling as a source of income per se. In the eye of the taxman, casual and professional gambling are the same.
As a professional poker player, for instance, you may already be aware of this. However, there are a few things to take into account. While you are on the safe side, playing an online poker tournament from the comfort of your home in the UK, going overseas may be a whole different game.
Because, if you play outside of Britain, you may have to consider the taxation system of the specific country the bets are being placed and paid out. In Las Vegas, for instance, you could be subject to a federal withholding tax. Although this may be imposed, you can often apply for a refund as a non-resident. Yet, initially, this may see you having to let go of part of your winnings, and file some paperwork, which is never fun.
A Word Of Advice
Although in principle you do not have to declare your gambling income in the UK, it is advisable to always keep records of your wins and losses. You may think that keeping a log is tedious and void of any purpose because your winnings are tax-free.
Yet, it’s always a good idea to keep track of spending especially if your sole income is derived from gambling. As a serious gambler, one hand you might want to know, how much your actual long-term profit is.
On the other hand, if gambling is your sole source of income, driving around in a Ferrari could raise several red flags. Having your records to show will be ample proof that you aren’t hiding income from any taxable sources.
So, Do You Pay Tax On Gambling Winnings In The UK at all?
When it comes to taxes related to gambling laws you are indeed covered and, if you wished, could forget about them. But that does not entirely mean you don’t have to consider taxes, in relation to your gambling activities. Because, after all, other taxes may still be applicable.
An issue that many lottery winners face is extra tax. This applies particularly on larger wins.
Just think of the income you may generate from investments that you were able to buy with your winnings. Any income earned from those investments would mean you’d be due capital gains tax at 18%.
Another tax that can come into play, is the inheritance tax. So, should you inherit property or cash the threshold for this tax is £325,000. Any inheritance that surpasses this number may actually be taxable with a whopping 40%.
There Are Certain Allowances
You can give away up to £3,000 each year tax-free to a person of your choice. Or you can give or up to £250 as a gift to someone.
However, taxes such as investment tax or inheritance tax are applied to any income, be it from gambling or not. So, after all, you could consider this as an initial untaxed income until you decide to use the funds for further purposes.
What Are The Best Online Casinos To Make Tax-Free Profits?
Now that you are clear on the facts about gambling and taxation, you might wonder: What the best online casinos to gain some juicy, untaxed winnings?
And while the odds of the majority of popular games are similar, there are ways to boost your potential to take home a larger chunk of the cake.
Jackpot Casinos, for instance, offer a variety of massive price pools that can drop at any time and amount. Daily Drops and Wins is a popular casino promotion. Here in which players can win random cash rewards and participate in massive tournaments. These kinds of sites usually also offer progressive jackpots. They increase over a period of time until it hits and a random player gets rewarded with a gigantic win.
Jackpot games are immensely thrilling. Basically you are playing for the prospect of gains that can potentially rival that of a huge lottery win.
And if you are looking for the Best Jackpot Casinos, that don’t just offer you astronomical winning potentials but also an overall first-class gaming experience with more bells and whistles, such as bonuses, promotions and special rewards, we have two sites you should definitely not miss to check out:
Slotnite & Bitstarz Casino
Both casinos are in our list of the Best Jackpot Casinos but we were able to give them an overall top rating for their services. And while we recommend players who are looking for a superb site to use their cryptocurrency to pay a visit to Bitstarz. Especially bettors who love a fresh and fun environment offering a sheer endless number of Jackpot Slots should see what Slotnite has up its sleeve.
Both casinos further boast an utmost safe gaming environment, fast and reliable banking methods and competent 24/7 customer support.
Besides Bitstarz and Slotnite you can find a wide variety of the Best Jackpot Casinos here.
And now that we have thoroughly answered all your pressing questions on “Do you pay tax on gambling winnings UK?”, you can dive right into all the fun, without any worries and time spend wondering, if you can keep all of your winnings.