Gambling wasn't always tax-free however—check out the section below for a summary of the history of gambling and taxes in the UK. History of Gambling Laws Betting shows were first legalised with the 1960 Betting and Gaming Act, in which a tax was levied either on stakes or winnings in high street betting shops.
- He is scrapping the system in which the Government collects betting duty of 6.75% from bookmakers, which is passed on to punters in a 9% tax. Bookmakers can absorb all the costs of the new tax.
- Gambling statistics in the UK provided by the Gambling Commission. The official regulator for gambling in Great Britain measures the number of people who gamble in the UK, and how many of them develop gambling problems.
Gaming in many of its forms is perfectly legal in the UK through licensed operators. Stepping into a betting shop and placing a bet on a football game is practically a sport in itself in the UK.
People play the lottery, head down to the local bingo centre, have a spin on the fruit machines at the pub, and place plenty of online bets through sophisticated and fun apps and websites.
Of course, with such a large gaming industry, the government is sure to get a piece of that sweet, sweet gaming pie. The UK taxes companies that offer online gambling services to people living in the UK, whether the company is located in the UK or not.
Let's take a look at what they are taxing and how much they're gaining from this lucrative trade.
Taxation of online gambling for UK-based companies
Taxation of online gambling in the UK by UK-based companies can fall under a number of different duty categories. While you might think that online bingo would be covered under Bingo Duty, it's actually classified as Remote Gaming Duty and taxed at 15% of profits. The same goes for online casino gaming, like the casinos over at BossCasino. Lotteries are charged under Lottery Duty, at 12% of all stake money played and payable within the accounting period.
Taxation of online gambling for offshore companies offering betting in the UK
Under UK law, non-UK companies offering betting and/or gaming services to people living in the UK need to register with HM Revenue and Customs, as well as pay tax. There are a few exemptions.
For these offshore companies, they will be required to pay one or more of the following taxes: General Betting Duty, Pool Betting Duty, or Remote Gaming Duty.
General Betting Duty is derived from the profits from general or pool bets that are made by UK customers on horse or dog racing, or bets placed through an offshore betting exchange. The rates for GBD are:
- 15% for fixed odds and totalisator bets
- 3% for financial spread bets
- 10% for all other spread bets
- 15% of the commission charges charged by betting exchanges to users who are UK people
(source)
Pool Betting Duty is derived from profits made on bets that are not fixed odds and not to do with horse or dog racing. This type of tax is charged at 15% of profits.
Remote Gaming Duty is paid by operators for remote gaming profits on bets and games by UK customers, including casino games, freeplays and bingo. Remote Gaming Duty is also 15%.
Do gamblers have to pay tax on their winnings in the UK too?
Under UK laws, there is no taxation on any winnings from betting – meaning if you place an online gambling bet and win a fortune that you can keep every sweet penny of it and none of it has to go to the tax man. The previous taxation required on winnings was done away with way back in 2001. Some other countries and jurisdictions are far more strict. For instance, in Vegas, the rate is 30% for overseas visitors, and 25% for winning for citizens over $5000.
How much is the UK making from online gambling overall?
According to Statistica, betting and gaming tax receipts from the UK hit £2.7bn in 2017, over double the amount that it was just 10 years ago. While this figure doesn't distinguish between in-person and on-premise bets compared to online gambling, this is a hefty figure.
In a report from the UK Gambling Commission in 2017, it says that remote gambling is the largest sector within the gambling industry, accounting for 34% of the overall market, with a gross gambling yield for the year standing at £4.7bn, with slot games making up a majority of this figure at £2.6bn.
If we take 15% of that original number of £4.7bn (15% being the taxable rate), we'll see that it amounts to £705mn for the year. That's a whole lot of money going back into the country's coffers from remote gambling and the figure is only expected to climb with more and more companies offering services and more and more players getting in on the action.
When you think about it, 15% being fairly much the standard across the board for online gambling taxes in the UK isn't really that much. Income tax rates for individuals in the UK are far higher, 20% and more, unless you're earning under £11,850 per year, when it is 0%. £705mn only amounts to funding for one major infrastructure works project in the UK.
The taxation rates for online gambling in the UK are fair and the profits made by the government from this activity aren't as staggering as you might have thought. However, it's still an industry on the rise so we may as yet see this taxation profits heading up into the billions very, very soon.
If you've ever won a jackpot through bingo, slots or the lottery, you might have wondered if your winnings are taxable..
If you find yourself lucky enough to win big, do you have to declare it and pay taxes? If that thought has ever crossed your mind, you're in luck because BingoPort has you covered. We've put together a guide that will answer whether your winnings really are taxable, a brief history of gambling laws and a look at how this might impact you.
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Are Bingo Winnings Taxable?
The short answer is no—your gambling winnings aren't taxable, at least in the UK. Here you won't have to pay taxes on any of your winnings or stakes. It doesn't matter if you've won £100 or £1 million. This applies to all types of gambling—from bingo, to slots, to lotteries, and even horse racing. So if you win big, you can rest assured knowing that you can spend your money in whatever way you'd like.
Depending on the site you're using, your winnings will either be paid to you in one lump sum, or as a certain amount each month. If you've won recently, or you frequent a particular site, casino or betting brand, you should check their Terms and Conditions—this will lay out everything you need to know should your lucky day come.
If you don't live in the UK your winnings might be subject to a tax, so it's important that you check in advance. For example:
- France has a 2% tax on poker cash pots.
- In Spain, you need to declare winnings as income for taxation.
- The Netherlands has a 29% tax if you win more than €454 in the lottery.
If you're a UK citizen and you find yourself gambling abroad, you generally won't need to worry about taxes. Most countries have treaties with the UK, so you won't be subject to their tax requirements.
Gambling wasn't always tax-free however—check out the section below for a summary of the history of gambling and taxes in the UK.
History of Gambling Laws
Betting shows were first legalised with the 1960 Betting and Gaming Act, in which a tax was levied either on stakes or winnings in high street betting shops. This was charged at a whopping 9% for punters. It was abolished by Gordon Brown in his March budget of 2001.
This tax on gamblers themselves was replaced with a 15% tax on bookmakers and their gross profits at point of supply instead. This ‘point of supply' basis meant that if a bookmaker wasn't based in the UK, they weren't liable however. This was a pressing concern for Brown, who feared that the UK was losing revenue to offshore gambling sites.
In fact, more and more bookmakers moved their online operations offshore where they would only have to pay the local tax rate on profits—this was capped at 1% in Gibraltar!
This changed with an amendment to the 2005 Gambling Act in 2014. From this point, the tax was changed to 15% on all gross profits at point of consumption—including offshore companies. This meant that gambling operators in Gibraltar and the Isle of Man for example, were now obliged to pay tax in order to obtain a gambling licence. This amendment essentially made it illegal to operate in the UK without a UK gambling licence.
This had a huge impact in making UK-based bookies and betting shops more competitive—increasing the growth and success of the gambling industry in the UK.
So, Why Aren't They Taxable?
To put it simply, it's just easier for everyone involved to leave winnings untaxed. For example, if people are paying taxes on their winnings just like businesses do, then it would potentially be possible to claim back losses on tax returns. As you can imagine, this would be a nightmare, especially considering the fact that most people lose when it comes to gambling. After all, we all know what the 10 stages of losing at bingo are like!
Who Exactly Pays The Tax?
The casinos and bookmakers are the ones now paying the tax—this is the way they contribute to the UK's economy. There are a variety of different taxes and gambling duties:
- General betting duty
- Bingo duty
- Machine games duty
- Lottery duty
- Gaming duty
- Remote betting duty
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.
What If You're A Professional Gambler?
When we say ‘professional gambler', we mean someone who essentially uses gambling as their main source of income. But even if this is the case and you are a professional gambler, the answer is still no—your winnings are not taxable.
This is backed up by the HMRC's Business Income Manual at BIM22015. Their position is that betting and gambling don't constitute trading:
'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'.
Gambling winnings, therefore, remain tax-free, regardless of whether it's your main source of income or a simple hobby. An example of this goes back as far as 1925, in which a man named Alexander Graham was taxed by Inland Revenue. Graham made a living out of betting on horses, so Inland Revenue claimed £300 from him under the 1918 Income Tax Act. This case went to court, where Graham's lawyers argued that betting on horses couldn't be considered a trade. The judge eventually ruled that you can't tax 'habit'.
Depending on the site you're using, your winnings will either be paid to you in one lump sum, or as a certain amount each month. If you've won recently, or you frequent a particular site, casino or betting brand, you should check their Terms and Conditions—this will lay out everything you need to know should your lucky day come.
If you don't live in the UK your winnings might be subject to a tax, so it's important that you check in advance. For example:
- France has a 2% tax on poker cash pots.
- In Spain, you need to declare winnings as income for taxation.
- The Netherlands has a 29% tax if you win more than €454 in the lottery.
If you're a UK citizen and you find yourself gambling abroad, you generally won't need to worry about taxes. Most countries have treaties with the UK, so you won't be subject to their tax requirements.
Gambling wasn't always tax-free however—check out the section below for a summary of the history of gambling and taxes in the UK.
History of Gambling Laws
Betting shows were first legalised with the 1960 Betting and Gaming Act, in which a tax was levied either on stakes or winnings in high street betting shops. This was charged at a whopping 9% for punters. It was abolished by Gordon Brown in his March budget of 2001.
This tax on gamblers themselves was replaced with a 15% tax on bookmakers and their gross profits at point of supply instead. This ‘point of supply' basis meant that if a bookmaker wasn't based in the UK, they weren't liable however. This was a pressing concern for Brown, who feared that the UK was losing revenue to offshore gambling sites.
In fact, more and more bookmakers moved their online operations offshore where they would only have to pay the local tax rate on profits—this was capped at 1% in Gibraltar!
This changed with an amendment to the 2005 Gambling Act in 2014. From this point, the tax was changed to 15% on all gross profits at point of consumption—including offshore companies. This meant that gambling operators in Gibraltar and the Isle of Man for example, were now obliged to pay tax in order to obtain a gambling licence. This amendment essentially made it illegal to operate in the UK without a UK gambling licence.
This had a huge impact in making UK-based bookies and betting shops more competitive—increasing the growth and success of the gambling industry in the UK.
So, Why Aren't They Taxable?
To put it simply, it's just easier for everyone involved to leave winnings untaxed. For example, if people are paying taxes on their winnings just like businesses do, then it would potentially be possible to claim back losses on tax returns. As you can imagine, this would be a nightmare, especially considering the fact that most people lose when it comes to gambling. After all, we all know what the 10 stages of losing at bingo are like!
Who Exactly Pays The Tax?
The casinos and bookmakers are the ones now paying the tax—this is the way they contribute to the UK's economy. There are a variety of different taxes and gambling duties:
- General betting duty
- Bingo duty
- Machine games duty
- Lottery duty
- Gaming duty
- Remote betting duty
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.
What If You're A Professional Gambler?
When we say ‘professional gambler', we mean someone who essentially uses gambling as their main source of income. But even if this is the case and you are a professional gambler, the answer is still no—your winnings are not taxable.
This is backed up by the HMRC's Business Income Manual at BIM22015. Their position is that betting and gambling don't constitute trading:
'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'.
Gambling winnings, therefore, remain tax-free, regardless of whether it's your main source of income or a simple hobby. An example of this goes back as far as 1925, in which a man named Alexander Graham was taxed by Inland Revenue. Graham made a living out of betting on horses, so Inland Revenue claimed £300 from him under the 1918 Income Tax Act. This case went to court, where Graham's lawyers argued that betting on horses couldn't be considered a trade. The judge eventually ruled that you can't tax 'habit'.
That's not to say that professional gamblers can't ever be subject to tax. It can get a little bit complicated. For example, if a professional gambler is being paid an appearance fee for playing at a particular tournament, then this would be a type of income that would be liable for tax.
So, I Don't Have To Worry At All Then?
While your winnings aren't taxable by any gambling laws, that doesn't mean you don't have to worry. After all, other taxes may still be applicable.
A problem that many lottery winners have is extra tax—particularly on the ‘bigger' wins. Any income that you generate from your winnings could be subject to income tax—for example, income earned through investments would be subject to a capital gains tax at 18%! And that's not all—your winnings might even be liable to an inheritance tax when you die.
An inheritance tax is levied on property or cash acquired by a gift or inheritance. The threshold for this tax is £325,000, so if your ‘estate' is worth more than that, you're looking at a 40% tax. While you can give your money away to people or charities, it's still liable should you die within 7 years of the gift.
You can give away £3,000 each year tax-free to any one person, or £250 as a gift to someone as long as they're not gifted any further. If you give more than this away and you die, it will be liable to this tax. If you live longer than the allotted 7 years, it will be exempt from the inheritance tax.
Online Gaming Tax Uk
If you do end up winning big—whether it's through bingo, the lottery or a casino—you should definitely look to a financial advisor for help on how to invest your money and how to protect it.
Online Gambling Taxes
Before going out to buy your lottery tickets for the week, find out if the lottery is worth playing.
Conclusion
Well, there you have it. If you live in the UK, our tax laws mean that you can gamble tax-free, without a single worry. Generally speaking, it isn't very likely that this will ever change—taxing gambling winnings will never be viable for the UK. After all, if you tax the income or profit made from an activity, you have to make allowances for any losses made from the same activity.
Now you know that, you can keep playing bingo without a care in the world!
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