Gambling Tax in the United Kingdom

Gambling Tax in the United Kingdom

The gambling and betting landscape in the UK is very friendly towards the punter. All forms of gambling, including casinos, sports betting and lottery, are highly regulated but extremely accessible to anyone aged eighteen or over – sixteen in the case of the National Lottery.

Not only that, but current taxation laws allow winners to keep every single penny without having to give any to HM Revenue and Customs. Difficult though it may be to believe, the tax authorities have good reasons for the decision not to take a portion of gambling winnings for their coffers.

Is there a tax on gambling in the UK?

In a word, no. If you as a private citizen win money at a casino, bookmaker or any other gambling provider then all of your winnings are absolutely tax free. This state of affairs stands in contrast to many other countries, where levies of anything up to 25% can apply. Gamblers in the US in particular can get stung by a series of different taxes that can leave them with not much more than half of their original win.

UK gamblers are more fortunate. Gambling tax was scrapped in 2001, followed by a major overhaul of the legislation in 2005 with the Gambling Act. This was when online casinos started to be regulated, and when the UK Gambling Commission (UKGC) was established. So, for the last couple of decades, UK citizens and residents have access to a huge number of gambling options both online and in physical establishments. Since the law does not class gambling winnings as a form of income, everyone keeps what they win.

Playing at casinos with high payouts

Since there is no tax burden on a gambling win, it is in the best interest of all UK players to seek out the best casino payouts available. Not all casinos or sports betting providers have the same payout percentage rates, so don’t be fooled into thinking that they are all equal. Online operators should make their return to player (RTP) percentages publicly available, and with so many available there is little excuse to choose one that has less than 95%.

How does the government make money on gambling?

The government makes a lot of money on gambling tax receipts, amounting to £2.83 billion in the fiscal year ending in March 2021. This amount was even slightly down on the year before, largely due to the many sporting events that failed to go ahead during 2020. These tax pounds come from the provider, rather than from the pocket of the punter.

HMRC levies a tax of 15% on sports betting and 21% on remote gambling providers, all charged at point of consumption (POC). Before 2014 there was point of sale (POS) taxation, which allowed providers to base themselves overseas and avoid paying tax to HMRC even when serving the UK population. While there are still many online operators with headquarters in other countries, they can only be granted a UKGC license if they comply with the tax requirements.

Professional gamblers and spread betting

You might expect that there would be some exceptions to the gambling tax exemption. For example, some professional poker players make a living from the game – but even here there is no tax to pay. No matter what proportion of your income is from gambling, it is still classed as a hobby under the law and therefore exempt from income tax.

Spread betting, whether it is on sports or financial markets, is not regulated by the UKGC but falls under the jurisdiction of the Financial Conduct Authority. At the same time as the government was deciding to change gambling provider tax from POS to POC, debates took place about taxing winnings from spread betting. Ultimately it was decided that to do so would be pointless, as it would not generate any money.

In spread betting, the whole model is based on losses offsetting wins. In other words, the money generated for those who win comes from those who lose – with some extra skimmed off for the bookmakers. If the government were to charge tax on wins, then they would also have to give tax credits for losses. After paying the middleman this would amount to a loss for the tax office, so there would be no sense in the FCA imposing capital gains tax on spread betting.

Declaring gambling winnings

If you have nothing to pay, then there is nothing to declare. However, anyone who has had a large win would be well advised to include it on their tax return anyway. Imagine winning the jackpot on the National Lottery and becoming a millionaire overnight. Undoubtedly you will be making some big purchases, and your bank balance will suddenly look very different.

Even something more modest than winning the lottery may provoke some questions, so it is better to declare winnings to HMRC in the name of transparency. The form contains a field specifically for such windfall events. Although it will still not be taxed, making such a declaration will keep the taxman satisfied that everything is above board.

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