Are Gambling Winnings Taxable?
In the UK, players are advised not to look at gambling as a source of income or as a way of making money. But nobody gambles with the intent of losing. We are more likely to lose than win when gambling, so we want to keep hold of any winnings we do manage to acquire. With this in mind, we are looking at whether or not you need to pay taxes on any winnings you collect while gambling at British casinos.
UK Players Do Not Pay Tax
Gambling is tax-free for UK players. In France and most USA states, people who enjoy gambling activities have to handle taxes of up to 25%. In the UK, your gambling is completely tax-free regardless of whether it is online or in person at a bookmaker’s shop or a casino. The government does not discern between professional and amateur gamblers either.
Anyone who was allowed to gamble in the 20th Century might remember having to deal with betting duties decades ago. The government used to collect a 6.75% betting duty from bookmakers; this was charged to customers through a 9% tax. Tony Blair’s Labour government abolished this in 2001. The decision, made by the Chancellor of the Exchequer at the time, Gordon Brown, was one of the first steps the UK made to address the loss in betting turnover from oversea betting companies.
It was initially not successful at doing this. The tax was originally applied at the point of supply, so companies decided to move out of the UK to avoid paying these taxes. This has since been addressed, but more on that later.
Why Does Gambling Need To Be Taxed?
While players in the UK do not need to pay taxes on their winnings, the potential cost to the public has to be assumed by someone. The British government would never let such a regulated activity like gambling go on without making some return for the country.
Gambling can lead to addiction, which in turn can lead to a litany of issues. The cost of providing support for the various mental, health, and financial issues that can arise from addiction has to be assumed by someone. The total cost to public spending of problem gambling was estimated to be £1.27 billion.
In this country, health services are free at the point of sale, but it is estimated that the NHS spends £760 million treating people suffering from gambling addiction. The rest of the one-and-a-quarter billion is spent on the economic costs of suicides caused by problem gambling and support for people made homeless by problem gambling.
How Does A Company Pay Gambling Taxes?
Any person or company providing gambling services, online or in person, to the UK public has to pay gambling taxes. This also applies to the lesser-known activity of spread betting on financial indexes.
The people responsible for paying duty on gambling services do it through their profits. Bookmakers pay 15% of their net stake receipts for the taxing period as a general betting duty. The net stake receipts are worked out by subtracting how much they have paid out in winnings from the total amount of stakes taken.
There are plenty of casino operators who proffer their services in the UK while based elsewhere. Many of these companies were launched by UK residents and set up in the UK. They have since chosen to move abroad, usually for tax reasons.
Malta is packed with gambling companies including games developers, casino operators, and other iGaming related businesses. Common names you will have encountered, like Mr Green Casino and JackpotJoy, are run by companies working from within Malta. This is most likely due to favourable taxing and licensing regulations. The government asks for a 5% gambling tax from players based in Malta and a 35% tax from remote gaming operators. They offer 10-year licences alongside four more different iGaming approval options to explore. The annual license fee is only €25,000, which is a mere drop in the ocean of the profits of massive gambling companies.
Companies providing gambling services, to residents in the UK, from abroad are playing a part in the harm caused by problem gambling. In December 2014, the UK introduced a Remote Gaming Duty of 15%, equal to duties paid by companies working from within England. This was increased in April 2019 to 21%, and just like other gambling-related taxes and duties, it is paid on the profits made but only related to revenue from UK players. The UK Gambling Commission (UKGC) now also require all iGaming websites that offer their services to British players to be fully licensed no matter where they are based.
The UK Tax Authority and the UKGC ask these offshore operators to keep accurate records of their customers in order to determine whether they are UK players. This must be verified by a Know-Your-Customer protocol where customers are asked to provide proof of their identity, including addresses which help determine whether they are a UK player.
Keeping A Record
You do not need to keep a record of your spending and earnings related to gambling for tax purposes. It is still recommended that you do keep track of how much you lose and win because it can help you to manage your gambling behaviour, allowing you to extend the fun. UK players are regularly reminded that when the fun stops, you should stop playing. Keeping track of incomings and outgoings will help prevent things from spiralling, and you can stem your betting before you are adversely financially affected.
Essentially, as a UK resident who likes to gamble, you do not need to worry about paying taxes on any of your winnings. UK players paying taxes on gambling winnings is a thing of the past and you can enjoy your jackpots without giving anything to the government. The issues related to public gambling are picked up by the public but paid for by duties applied to the purveyors of betting services. Casinos pay a general gambling duty of 15% on their profits.