Whether you play poker, bet on sports, casino or bingo, Do I have to declare gambling winnings? and do you pay tax on gambling winnings UK? are one of the most asked questions by UK players. Understandably you want to know if your HMRC is going to be taking a chunk of your hard earned casino, poker or sports bet winnings.
Along with traffic wardens, bailiffs, cold callers, and debt collectors, the taxman is someone that you don’t want to be on the wrong side of. And, if you’re partial to land-based or online casinos, poker sites or bingo sites, you may be concerned that HMRC will be eyeing up your winnings.
Many players are fortunate enough to win a few hundred pounds, but there are some who are lucky enough to land a massive win such as a progressive jackpot. If you are ever fortunate enough to find yourself in such a situation, you might be wondering whether you would need to declare your winnings due to gambling winnings tax regulations.
Admittedly, gambling winnings tax isn’t a nice thought, as you may have already created a wish list in your head of things that you’d want to spend your winnings on such as a holiday, a new car or even a new home.
So, if you’d like to know, “are winnings from gambling taxable?”, let your friends at ThumbsUp Bonus set you straight…
ARE GAMBLING WINNINGS TAXABLE?
If you live in the UK, you can breathe a huge sigh of relief because the good news is, you don’t have to pay tax on gambling wins! However, this isn’t necessarily the case in other parts of the world such as the US where both cash and non-cash gambling winnings are considered taxable income.
The only exceptions to the rule are index betting, spread betting and binary options which are regulated by the FCA (Financial Conduct Authority) rather than the UK Gambling Commission. If spread betting forms your primary source of income, you may be liable to pay either stamp duty or 18% Capital Gains Tax.
Betting Duty Abolished in 2001
The betting duty was 6.75% when the decision to completely abolish it was taken. The purpose of this move was to encourage bookmakers to continue operating from the UK instead of migrating to offshore locations and thus retain revenue and jobs in the UK economy.
However, this does not mean that the UK does not impose any tax on gambling. It just means that bettors do not have to pay any taxes on any cash prizes they might win while playing casino games, slot machine games, poker games, and bingo games either at online casinos or at land-based hotel casino resorts.
Do you pay tax on gambling winnings uk? No, operators are taxed, not players
The betting duty that was abolished in 2001 was replaced by a tax rate of 15 percent on gross profits for providers of gambling services. Initially, this tax was charged on the basis of “point of supply.” This means that the tax did not apply to providers of gambling services who were operating from outside the UK.
But in the second half of 2014, the tax laws changed once again. The Gambling (Licensing and Advertising) Act was introduced in 2014, through which the “remote gambling duty” was established. Today, gambling operators have to pay 15% of their gross profits as taxes irrespective of where they are based if they want to continue accepting bets from UK customers.
WHY AREN’T MY CASINO WINNINGS TAXED?
Considering that some other countries levy taxes on winnings, you might be surprised that in the case of gambling winnings tax UK players don’t have to pay a bean. However, this hasn’t always been the case.
When the 1960 Betting and Gaming Act was introduced, anyone who placed a bet in a high street betting shop was either charged 9% on their stakes or winnings. Making gambling winnings taxable understandably had a significant impact on anyone who is partial to a flutter on the horses or their favourite football team.
Therefore, to make things fairer on customers, Prime Minister Gordon Brown decided to abolish gambling winnings tax for gamblers in his 2001 budget. However, in their place, he introduced a system which would make the biggest winners (i.e. the bookies and online gambling operators) pick up the bill.
Initially, making gambling winnings taxable for operators required bookmakers, casinos, and bingo operators and the like to hand over 15% of their gross profits to the taxman. However, as the new laws used the wording, “gross profits at point of supply”, any companies operating from remote locations could avoid paying gambling winnings tax.
Hence a flurry of operators hurried off to set up shot in faraway locations such as Antigua, Gibraltar, Alderney, and Curacao to ensure that they weren’t liable for the 15% gambling winnings tax. In fact, these “tax havens” often only required the operators to pay local taxes on their profits and, in the case of Gibraltar, this was as low as 1%.
In 2014, the 2005 Gambling Act was altered so that the UK would no longer continue to lose revenue through offshore gambling operations. No matter where the operators were based, they were now required to pay 15% tax at the point of consumption rather than the point of supply.
ARE GAMBLING WINNINGS TAXABLE IF I VISIT LAS VEGAS?
As we just explained, punters in the UK are not subject to gambling winnings tax, but in other parts of the world, they are. So, if you’re planning on taking a trip to Las Vegas, do you have to pay taxes on gambling winnings?
Thankfully, the answer to, “are gambling winnings taxable if you’re visiting the US?” is no. Anyone who holds a UK passport or is a resident of the UK is exempt from paying tax on winnings gained in US casinos. However, the casino will usually require you to complete a form and provide a valid form of identification (such as a passport or driver’s licence) so that it can pay the tax on your behalf.
For residents of the US, it’s a different story as punters must report all of their winnings on their tax return.
In the US, an individual’s total annual income consists of employment income, gambling income, and any other income. They must also declare non-cash winnings and prizes such as holidays and cars won via lotteries and raffles.
The IRS (Internal Revenue Service) has strict rules which make gambling winnings taxable, but on the plus side, they also help to turn a player’s losses to their advantage. Winnings are taxed at 25% although the 25% is usually deducted by the casino prior to cashing out. The casino then provides the customer with a W-2G form that allows them to report their winnings to the IRS.
Certain games have different tax rules. For example, players must declare prizes of over $1,200 gained from slots or bingo, wins exceeding $5,000 gained from poker tournaments, wins of $1,500 and above won through keno games, and winnings of over $600 gained through horseracing bets.
ARE GAMBLING WINNINGS TAXABLE ELSEWHERE IN THE WORLD?
We’re often asked, “is betting tax free everywhere in the world?”, and as we know from having just used the US as an example, the answer is no.
Countries where gambling winnings are tax-free include Austria, Australia, Belgium, Bulgaria, Canada, Czech Republic, Denmark, Finland, Germany, Hungary, Italy, Luxembourg, Malta, Romania, Sweden, and the United Kingdom.
ARE GAMBLING WINNINGS TAXABLE UK IF I’M A PROFESSIONAL GAMBLER?
Some people are lucky enough to escape the rat race and rely on making enough cash through professional gambling. Poker players are the most obvious example.
In the UK, just like those of us who enjoy bingo, poker, slots or sports betting, professional gamblers get to keep all of their winnings without the taxman taking a slice. However, this also means that you can’t apply for a tax refund when you lose.