When it comes to taxes on casino winnings, you might have wondered whether your bingo, slots, or lottery jackpots are taxable. If you’re looking into this age-old question, a similarly vital concern is sourcing a place where you can find casino ratings (such as onlinecasinobuddy.com) to ensure the right choice.
Do you need to declare your winnings and pay taxes if you are lucky enough to win? The comprehensive guide below will help you determine if your winnings are taxable. It also gives you a history of gambling laws and how they might affect you. However, since the UK market is one of the most popular and developed gambling markets globally, we’ll focus on it throughout the rest of this guide.
Taxes on Casino Winnings
Your gambling winnings are not taxable in the UK, so it’s not a problem. The law won’t ask you to pay any taxes on your stakes or winnings, and it doesn’t matter whether you win £100 million or £1,000,000. This fact is valid for all gambling games, including slots, lotteries, horse racing, and bingo. Your winnings will go in any way you choose, even if they are significant.
Your winnings may be paid monthly or in one lump sum, depending on which site you use. You should go through the Terms and Conditions of any site you use, whether you have won recently or are a regular player at that casino or betting brand. This due diligence will provide all you need to succeed.
You’ll likely need to pay tax if you don’t reside in the UK. Take this example:
- Poker cash pots in France are subject to a 2% tax
- You must declare winnings in Spain as income to taxation
- If you win more than €454 from the lottery, there is a 29% tax in The Netherlands
- If you are a UK citizen and gamble abroad, there is no tax to worry about. You won’t need to be subject to any tax requirements in most countries.
Gambling was not always exempt from tax. However, the following section provides a brief overview of the history and taxation of gambling in the UK.
Gambling Laws Through History
When it comes to taxes on casino winnings, betting shows were legalized in 1960 by the Betting and Gaming Act, and this tax applied to winnings and stakes at high-street betting shops. This tax had a staggering 9% rate. However, Gordon Brown abolished it in his March 2001 budget.
The tax on gamblers disappeared in favor of a 15% tax on bookmakers and their gross profits at the point of supply. The “point-of-supply” basis meant that bookmakers not based in the UK weren’t liable. Brown was concerned that the UK might lose revenue to offshore gambling sites.
More bookmakers have moved their online businesses offshore so that they only had to pay local taxes on their profits. For example, this tax was at around 1% in Gibraltar.
The 2005 Gambling Act amended this in 2014. From this moment, the tax amounted to 15% on all gross profits at the point of consumption – including offshore companies. Consequently, gambling operators had to pay tax to obtain a license to gamble in Gibraltar or the Isle of Man. This amendment made it illegal to operate in the UK without a UK Gambling License.
This change had a massive impact in making UK-based bookies and betting shops more competitive – increasing the growth and success of the gambling industry in the UK.
Why the change?
Simply put, when it comes to taxes on casino winnings, this method is easier for all parties involved. It would be possible to recover losses from tax returns if winners are paid taxes the same way as businesses.
This method would be a disaster, considering most people who gamble lose. We all know the ten stages of losing in bingo!
Where Does The Tax Fall, Then?
Casinos and bookmakers pay the tax, which contributes to the UK economy. There are many taxes and gambling duties.
- General betting duty
- Bingo duty
- Machine games duty
- Lottery duty
- Gaming duty
- Remote betting duty.
You should not think about how difficult it is for gambling businesses or how rewarding it could be for you. They do pass on some of these costs to you. Some online gambling sites may have higher wagering requirements than others or offer lower odds.
What’s the Situation When It Comes to Professional Gamblers?
If we refer to a professional gambler, it means someone who uses gambling as their primary source of income. However, even if you’re a professional gambler, your winnings aren’t taxable.
The HMRC’s Business Income Manual, BIM22015, supports this assertion. It claims that gambling and betting don’t count as trading. “The fact that a taxpayer can place bets or is able to make a living from gambling does not make them a trade.”
Therefore, when it comes to taxes on casino winnings, gambling winnings are exempt from tax, regardless of whether they are your primary source of income or just a hobby. The Inland Revenue taxed Alexander Graham in 1925 as an example. Graham earned a living from horse betting, and Inland Revenue sought £300 from Graham under the 1918 Income Tax Act. Graham’s lawyers argued against the idea of betting on horses as a trade. The judge eventually ruled in favor of taxing “habit.”
However, professional gamblers are not exempt from tax, which can be confusing. For instance, if a professional gambling player receives an appearance fee to play at a tournament, this income would be subject to tax.
So, where should you start worrying?
When it comes to taxes on casino winnings, your winnings are not taxable under any gambling laws. However, you shouldn’t be utterly worry-free because other taxes might still apply.
The extra tax is a problem for many lottery winners, including significantly larger wins. Income tax could apply to any income you earn from your winnings. For example, capital gains taxes at 18% would apply to income earned through investments. Your inheritance tax may also apply to your winnings if you are not alive.
Inheritance Tax & Papers
An inheritance tax is a tax on cash or property acquired through a gift or inheritance. This tax has a threshold of £325,000. If your “estate” is worth more, you will be subject to a 40% tax. You can give your money to charities or people, but it is still subject to tax if you die within seven years.
£3,000 can be given tax-free each year to one person. £250 can be given as a gift to another person. This tax will apply if you give away more than that and die. However, the amount will not be subject to inheritance tax if you live beyond the 7-year limit.
You should consult a financial advisor if you win big, whether through the lottery, bingo, or casino. They can help you decide how to invest and protect your money. Find out if it is worth buying your lottery tickets for the week before you go out and buy them.
You can gamble without any tax if you are a resident of the UK. It is unlikely that this will change. The UK is unlikely to require its citizens to pay taxes on casino winnings in the future. However, you must make allowances for losses if you are going to tax income or profits from an activity.