Is Gambling Income Taxable Uk
If you’re the recipient of any kind of benefit, then you’re likely no stranger to having your income assessed.
This may be income from a part-time job, interest on savings or perhaps help from friends and family, all of which may cause your benefits to reduce if you go over a certain threshold.
The UK benefits system has a track record of making things complicated when it comes to assessing tax – something which they’re in the process of simplifying, with the introduction of the Universal Credit system back in 2013.
While employment and savings are all considerations for income, one thing that we may overlook is gambling winnings.
Gambling and Taxation Essentially betting is ‘tax-free’ in the UK – the professional gambler is outside the scope of tax. This is confirmed in HMRC’s Business Income Manual at BIM22015. The basic position is that betting and gambling, as such, do not constitute trading. 'Gambling winnings in Switzerland and abroad are taxable in all cantons. This includes wins from sports bets (pools). The lottery organisers retain 35% of the money won in the form of anticipatory tax and transfer this amount to the Federal Tax Administration. This can be reclaimed when you correctly declare your win in your tax return. Takeaway #2: Casual gamblers report total gambling winnings on line 21 of Form 1040 (Other Income), and report total gambling losses as an itemized deduction on Schedule A. There are several possible tax consequences from separate reporting of winnings and losses. I will mention a few.
Gambling winnings and tax
First of all, it’s important to understand that gambling winnings are not taxed. No matter what size they are, from winning on a scratch card to taking home all the numbers on the lottery, the amount you win will always be the amount that goes into your bank.
What is taxable, however, is interest.
This means that if you were to suddenly receive a large amount of money into your bank account one day, any interest you received on that money would be taxed – therefore, it’s not the original sum which is taxed, but any additional earnings you get from it.
Gambling income and benefits
So, how exactly does this apply when it comes to benefits? We can keep in mind the same principles for benefits as we can tax and additional income.
Certain factors can affect your entitlement to benefits, just like certain factors can affect whether or not your money is taxed, e.g. if it is income tax on wages or tax on your savings’ interest.
As the recipient of any benefit, you’re assessed based on your “capital”. That is to say, if you do have savings which one day go over a particular threshold, then you may lose your entitlement to some of your benefits as a result.
Housing benefit
Your “capital” is any savings or assets you may have. Currently, if you receive housing benefit, you are not eligible to receive it if your capital exceeds £16,000.
While you won’t be entitled to any housing benefits with a capital of more than £16,000, you should also be cautious of anything over £6,000. Your benefits will be reduced if you do have a higher capital than this.
There are exceptions to this, of course – for example, if your partner has a Pension Credit Guarantee, then the £16,000 threshold doesn’t apply. Similarly, if you are a pensioner, then the £6,000 capital figure is increased to £10,000.
So, if you do find yourself “in the money” one day, then you’ll have to let your local authority know so that they can re-adjust your housing benefit accordingly. You must declare this to avoid being convicted of fraud.
Regular income – affecting income support
While an occasional big win (that does not take you over a £6,000 capital) is unlikely to be highlighted with the Department for Work and Pensions, regular income could be a different story.
Indeed, you don’t have to declare your gambling winnings to the HMRC because they’re not taxed. However, the HMRC regularly share information with the Department for Work and Pensions (the department responsible for benefits) to prevent fraud.
This effectively means that you could be liable to produce bank statements if there is any suspicion of regular income that could be in violation of income support.
For example, if you take part in matched betting, where there is far more chance of a regular income (and far more propensity to lose money too – beware), then this may be assessed.
In this situation, it’s always best to be completely honest with whoever you’re claiming benefits from. It’s up to them ultimately whether they can class your earnings as capital or regular income.
For example, there have been cases of gamblers winning a significant sum, and the DWP categorising this into 12 monthly payments which could, therefore, be classed as regular income.
The difference in benefits
Not all benefits are the same, of course. Some benefits are means tested, which means that the DWP will assess your individual circumstances and look at your “capital” in order to make a decision on whether or not you are entitled to these benefits.
The current means-tested benefits are:
Income-based Jobseeker’s Allowance
Income-related Employment and Support Allowance
Income Support
Pension Credit
Tax Credits (Child Tax Credit and Working Tax Credit)
Housing Benefit
Council Tax Support
Social Fund (Sure Start Maternity Grant, Funeral Payment, Cold Weather Payments)
Universal Credit
Jobseekers’ Allowance
Income Support.
If you’re receiving non-means tested benefits, then it is far more likely that the DWP will take a lenient approach. However, the majority of non-means tested benefits concern those with disabilities, some of which could indeed affect our ability to gamble.
However, if you’re able to gamble lawfully and receive a non-means tested benefit, then this will have no effect.
Other non-means tested benefits include statutory benefits such as maternity or paternity leave – if you have time to make a big winning on a scratch card with a baby, then by all means, play away!
Abiding by the law
Benefit fraud is a very serious offence, but there’s no need to risk this by gambling irresponsibly and risking losing money you’re entitled to.
In most cases, the DWP will fairly treat anybody who is upfront and honest about any additional earnings they may make from gambling.
It’s also wise not to rely on gambling as a source of regular income. Firstly, a regular income affects benefits, and additionally, there’s no guarantee that one good month’s winnings will be repeated the next month.
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As with all gambling, it is most advisable to approach it as a leisurely pursuit – just make sure you declare winnings of over £6,000 if you do win big.
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.
So, if you’ve bagged yourself a big jackpot, congratulations! If you’re just here for the information, don’t worry—we’re sure your time will come someday.
Are Bingo Winnings Taxable?
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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”.
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.
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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.
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.
Before going out to buy your lottery tickets for the week, find out if the lottery is worth playing.
Professional Gambling Income
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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