Tax On Betting & Gambling In The UK
Do I need to pay Tax On Betting? What Tax Operators Are Paying?
Customers don’t need to pay any tax when involved in betting activities in the UK: not when they are placing a bet and neither when they are getting the winnings. If you are not living in the UK though you will need to check the regulation of your country, especially if you are taking the winnings with you. It is suggested that you check this before starting to bet.
You might be puzzled as to why the UK Government doesn’t charge punters for betting. The reason is that they are taking the taxes directly from the bookmakers with the point of consumption tax.
To ensure the British Government will get his share of taxation with the arrival of online betting, new laws were created but in 2001 and in 2014. The new legislation removed the levy from the punters and shifted the attention to the operator switch particular focus on those betting sites that were abroad.
There are some types of bets where taxes need to be paid like for example index and financial betting. In this page, you will find all the information you need to know in regards gambling tax and we will also explain if you need to declare your winnings, how to position yourself in regards to taxation if you are a professional gambler, past rules and history and lots more.
The Old Gambling Law
Before 1960 it was illegal to place bets unless you were in a race course. The gambling industry was regulated by the 1892 Gaming Act which also created the Totalisator board also called the Tote: this allowed bets to be placed at horse or dog courses. It was illegal to bet off course unless the wagers were made by post or telephone.
During those times, there were lots of illegal bookmakers operating as the demand for off-site betting was huge: this means that the government was losing lots of potential tax. The 1960 Act was done for precisely this reason and legalised high street betting shops.
In 1961 the first betting shop was opened, and bookmakers were charged at 6.75%: bookies decided to pass this tax to the punters in what was called the 9% betting tax. The punter could have either pay the tax when placing the bet or on the winnings: since paying 9% on the winnings could have been lots of money, lots of people were paying the tax on the stake.
What Is The Current Gambling Tax Law?
With the turn of the new millennium, the gambling industry was changing at a fast pace with the majority of activity that was moving towards online and telephone betting. This meant that lots of companies started to move offshore to avoid paying higher taxes in the UK. One of the most famous earlier move was from Victor Chandler bookmaker, now called BetVictor. Victor Chandler decided to move the bookmaker to Gibraltar in 1998: this action pushed the then Chancellor Gordon Brown to make a new gambling tax law.
In 2001 the decision was to abolish the betting levy and have a 15% tax on bookmakers gross profits. Punters were for the first time bet legally in the UK without having to worry about paying any taxes on the win. In reality, bookmakers did pass their tax costs to the punters in the form of poorer odds and higher operating margins.
The new law tough didn’t resolve the issue as more and more bookmakers were moving their operations abroad. Since the tax was ‘point of supply’ betting operators that were overseas didn’t have to pay the UK tax. That was hugely advantageous for betting sites as in Gibraltar, for example, the tax was capped at 1% or a maximum of £400k.
This situation forced lots of traditional bookmakers like Coral also to move their operations abroad to compete with online-only betting sites: in this way, they only had to pay the UK tax on the betting shops, but their online profits would have been taxed at a much lower rate than in Great Britain.
The online betting industry continued to grow, and the issue became even more visible to the UK Government that in 2014 made an amendment to the 2005 Gambling Act. This amendment had a new 15% point of consumption tax on all gross profits. Offshore companies were now forced to pay tax to the UK government on all profits earned from customers that were living in the UK. Failure to pay the point of consumption tax would result in their license being suspended or revoked.
Gambling Tax Questions & Answers
Do Professional Gamblers Have To Pay Tax?
Professional gamblers that make a living out of fixed odds gambling are not required to pay any tax on their winnings in the UK. Apparently, you cannot get a tax refund your losses. If you are living in another country though, the situation might be different, and you might be required to pay tax on the winnings. If you are not sure, do check the local betting tax laws.
I Am Visiting The UK, Do I Have To Pay Gambling Tax?
Again, you won’t need to pay any money to the UK government, but depending on the laws in the country you live, you might need to declare the winnings. Remember that if you get winnings in physical cash and you are travelling outside the EU, you can only take a maximum of 10,000€ in cash away of the country in a single instance.
Do I Need To Pay Tax On Spread Betting?
The UK Gambling Commission are not regulating Spread betting, Binary Options or Index Betting as those are under the responsibility of the Financial Conduct Authority (FCA). You are not required to pay the 18% UK Capital Gains Tax or any stamp duty on any wins from Spread Betting. Similarly, you are not required to pay tax on fixed odds currency and stock market fluctuation with bookies.
If, however, you declare spread betting to be your first source of income, you might be required to pay the tax as you would be classed as a trader. On the positive side, you will be able to write any losses against tax. If you usually are trading on the stock market, the situation might be different as this is a type of trading that is required to pay capital gains tax and also stamp duty.
Are You Required To Declare Winnings To The UK Tax Authorities?
The answer is no since your winnings cannot be taxed and there is no need to declare them. Since you will get no rebate against your losses, there is no need to report them. If you have managed to win lots of money though it makes sense to declare them on your tax return: there is a specific field where gambling winnings can be entered. You will not need to pay any tax on those, but it will help in case you are audited.
We do suggest you keep records of your winnings in case you need to prove where you have obtained the money. Usually, high-value purchases do require a fraud check, and without being able to determine where your money is coming for, you might have problems. Similarly, if you like to buy a car or a house, you will need to prove where you have obtained the money. This is another reason why it is crucial to wager only with reputable UK betting sites that have a regular license and that pay taxes.
Can I Give My Gambling Winnings Away as a Win?
Sometimes. If someone in your family will inherit your winnings, they might have to pay inheritance tax if the amount is significantly big. You can also give your money to other people or charities, but they will have to pay inheritance tax in case you die within 7 years. You can also give £3,000 tax-free every year to any person you like, or you can give £250 away in a gift to any one of your choices as long as the gift is not more than this limit. In case you give away more, and you die within 7 years then the person will be liable for a percentage of the tax, also called tapor rule. If you will live longer than 7 years than the inheritance tax won’t have to be paid.
Do I have To Pay Gambling Tax Abroad?
If you win money in a country that is taxing gambling profits, then you will be required to pay the tax there, and you won’t need to declare it in the UK. If however, you are planning to bring your winnings in Great Britain you might be subject to restrictions on the money you can carry.
Currently, there is uncertainty in regards to what the future holds for the UK: it is not known how Brexit will impact bringing gambling winnings from other European countries. If you want to know more about betting abroad check our dedicated section.
The History Of Gambling Taxes
Gambling hasn’t been taxed in the UK for the majority of history. Since most of the activity was unlicensed and illegal, it was not possible for the Treasury to claim any tax on it. In the late 1800’s gambling was finally permitted by only if run by the government with the Tote or on selected race tracks. The Tote did deliver profits back for the UK Government from gambling for the first time in the history.
Football Pools did emerge in the 1900’s: this was a UK phenomenon that was allowed as a game of skill also because of the low wager. It was however heavily taxed and did bring revenue for the Treasury.
In the late 1950’s the illegal market increased, and the government decided to legalise betting shops in the 1960’s finally. This decision increased the income significantly from betting of the UK Government, and since then those have continued to grow steadily in the following decades.