Gambling Winnings Tax In The UK
You’ve just sealed the deal on the biggest gambling win of your life – a potentially life-changing sum of money is on its way to you as a reward for many hours spent on the Slots or at the Blackjack table, or as a result of that one inspired tip you took a gamble on while betting.
Your first thought, and your second and third too most probably, will be “what should I spend my newfound wealth on first?” – and quite rightly so!
After the buzz begins to wear off a little though, it may occur to you to check how much of your winnings you are able to retain, after the dreaded tax man has paid you a visit. Many online casino, bingo, poker and sports betting fans quite rightly wonder the same thing – so what is the gambling winnings tax UK players have to pay?
Don’t forget, it’s tax free!
That’s right, 0% of your gambling winnings are counted as taxable income in the UK! It may seem a bit too good to be true – after all when does the Government turn down an opportunity to take a little extra tax? It is completely true though; the tax burden from gambling is shouldered by the operators, rather than the players.
Fans of former tea-time TV sensation Deal Or No Deal may even recall a certain player named Harry (surname unknown) – who became very well-known on the show for a certain phrase throughout the series. As fans of the show will know, players are offered a monetary ‘deal’ over the phone by an unknown and unseen man, in return for the contents of their box, which ranges from 1p all the way up to £250,000.
Upon receiving their offer, players would invariably turn to the other contestants and audience members for advice. Harry’s advice was always the same: “don’t forget, it’s tax free!”. This became a running joke, so much so that when it was Harry’s turn to play the game, his fellow contestants did this:
Gambling winnings tax in the UK abolished
Going back to how this came to be the law in the UK, you could say that it started with the legalisation of betting shops, which took place in the 1960s - during a time when liberalism was enjoying a lot of popularity in the UK.
Despite the legalisation of the betting shops however, players still had a tax of 9% levied against them and would decide prior to placing the bet whether this would be applied to their stake, or their winnings. This tax shrunk to 6.75% over time, before being completely abolished in March 2001 by the then-Chancellor of the Exchequer Gordon Brown. This change fully came into effect on the first day of the following year, January 1st, 2002.
The reason for this decision by Gordon Brown? He was concerned about the possibility of the UK losing revenue and jobs – particularly with the growing popularity of online gambling platforms – to offshore gambling sites. The move predictably resulted in gambling enjoying higher levels of popularity in the UK, and by extension, made the bookmakers based in the UK more competitive on an international scale. It can also be at least credited for the massive growth that the UK gambling industry has experienced since the turn of the century.
Taxing the operators, not the players
In order to ensure that the public purse was not negatively affected by this, the Betting Duty tax was replaced by a 15% levy applied to the gross profits of all bookmakers. As time has gone on, with the legalisation of further forms of gambling such as casinos and poker both online and offline, this 15% levy has continued to be applied while players enjoy the benefits of tax-free winnings.
Initially, some gambling companies reacted to this by moving their operations offshore, to countries like Gibraltar, Malta, Isle of Man and Curacao who offered a relatively low rate of tax on their profits. For a long time, this was an effective means of offering gambling services to UK players while not having to pay the 15% levy – until 2014, when the Point of Consumption Tax was introduced by a combination of the Gambling (Licensing and Advertising) Act 2014 and the introduction of ‘Remote Gaming Duty’.
The Point of Consumption Tax basically says that companies providing services, including gambling, must pay tax applicable to the country in which the end-user of that service is accessing it. Put simply, if someone was playing online casinos in the UK, it wouldn’t matter whether the operator was based in the UK, Malta, Gibraltar, or the Moon - a 15% tax on all wagers accepted still applies. It is estimated that the UK Government gained approximately £300m from this move.
Are professional gamblers taxed?
This seems like it would be a slightly tricky question – after all, we are almost always taxed on our primary income, particularly if we spend the majority of our time accumulating it. But if gambling winnings are not taxable, which law takes precedence?
The answer lies within the definition of a ‘taxable trade’, which is essentially legalese for ‘paid work wherein the salary qualifies for taxation’.
Fortunately for professional gamblers, the tax authority in the UK (the HMRC) does not officially recognise ‘professional gambling’ as a taxable trade – meaning that their winnings are tax-free just like the winnings of any other player. HMRC have this to say on the matter:
“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.” (Source: BIM22017)
Will taxation on gambling winnings in the UK return?
It is unlikely that gambling winnings tax in the UK will increase, at least not any time soon. That isn’t down to the generosity of the Government, more a result of the way the UK tax system works – it simply wouldn’t be viable.
Essentially, the reason for this is that the way UK taxes work, if a tax is levied on the income that is made by an activity, the Government must also offer allowances for losses made through the same activity. This leads to the potential situation where people could claim back their losses from the Government tax pot.
Changing the law back to taxing the player would therefore most likely lead to a net loss in revenue for the UK Government – so don’t expect it to happen anytime soon!
Gambling Winnings Tax UK FAQ
As you now know, the short answer to the question ‘will I be taxed on my online casino winnings?’ is a very simple NO. However, if we haven’t successfully answered your question yet, you can check out the FAQ below for the information you seek.
Is there any difference in gambling winnings tax between different games?
Short answer: no. All forms of gambling, both online and offline, whether it is Bingo, Slots, Poker, Sports Betting, or anything else, fall under the same category and are bound by the same laws. Which is good news for you, the player, as it means that your winnings won’t be taxed at all!
Should I declare my winnings?
Short answer: no. Your winnings are not taxed in any way at all, and there is absolutely no requirement or obligation for you to declare your winnings to the HMRC in your tax return.
Which other countries do not tax gambling winnings?
Along with the UK, you will also not be taxed on money you win by gambling in the following countries: Canada, Germany, Austria, Belgium, Bulgaria, Australia, Denmark, Italy, Sweden, and Malta.