Introduction To Online Gambling And UK Taxes

Tax Guide

It was American president Benjamin Franklin who famously said nothing was certain in life but death and taxes. Sadly we haven’t come any closer to avoiding the first of those, but when it comes to taxes and online real money gambling there’s some rather good news for UK players.

On this page we’re going to outline the tax rules for real money gambling in the UK. We’ll get into how tax applies to your winnings and tell you how to stay on the right side of law when it comes to keeping the UK taxman happy. We’ll also touch on how tax applies to companies who own real money online casinos or betting sites that serve those based in the UK.

This might not be our site’s most riveting page, but it’s surely among the most important to read.

What are UK taxes and where does the money go?

Let’s start at the very beginning. A tax is a monetary amount charged by a ruling body that helps fund the public services they provide. In the case of the UK Government, taxes collected go towards supporting the following main areas:

  • Benefits and housing
  • National Health Service
  • Education
  • Public protection (police, fire brigade, prisons etc.)
  • Government
  • Transport (roads, rail, buses)
  • Industry and economy
  • Housing
  • Recreation, sport and culture
  • Waste and environment
  • Overseas aid
  • Debt interest

Where does the tax money come from in the UK?

The most obvious way you pay tax in the UK is through your salary. For full-time salaried workers it’s typically taken at source and calculated as a percentage of your earnings. For the self-employed, tax is paid on an annual basis when you complete a tax return.

Here are some other ways that the UK government collects tax from residents and visitors:

  • National insurance contributions
  • Value Added Tax (VAT) on goods and services
  • Corporation tax
  • Council tax
  • Business tax rates
  • Excise duty (alcohol and cigarettes coming into the UK for example)
  • Stamp duty on property
  • Inheritance tax
  • Capital gains tax
  • Carbon tax
  • Airport tax

Do I have to pay tax on my gambling winnings in the UK?

In some countries gamblers have to pay tax on their winnings, but those in the UK can sleep easy in the knowledge that they get to keep every penny. There is no tax due on monies won at a land-based gambling/betting venue, or from winning a bet at a racetrack or bookmaker.

The same rules apply to those in the UK who get lucky gambling or betting online for real money. Whatever you win is yours to keep and there will be no tax payable to the UK Government on it. This is even true of full-time professional gamblers in the UK, who play as their primary source of income.

As per HM Revenue and Customs, “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.”

Do I have to report gambling winnings to the Government?

Our advice here is to keep a detailed record of your gambling winnings. We can find no evidence of an obligation to report details of these winnings, but in the event your tax situation comes under investigation you may need to demonstrate where certain funds emanated from.

Some successful gamblers in the UK have reported situations where the tax authorities have asked to see evidence of their income streams. The law states clearly that no tax is payable on gambling winnings, so providing you can demonstrate where the money came from you have absolutely nothing to worry about.

How do tax laws apply to companies who run gambling businesses in the UK?

Gamblers don’t play tax in the UK, but the companies who own land-based and online gambling businesses that operate there do. This applies to both companies based in the UK, and those operating overseas who serve their product online to UK gamblers.

These tax rules were updated with the passing of the 2020 Gambling (Licensing and Advertising) Act, to make the law as clear and simple to understand as possible. As things stand now a tax of 15% is due on all gross profits made “at the point of consumption” for gambling companies.

This was an important update on the previous law, which had tax due at the point of supply, meaning it applied to where your business operated.

How are gambling companies regulated in the UK?

All UK gambling is regulated by the Gambling Commission, which serves as a body of the Government’s Department for Culture, Media and Sport. They are tasked with issuing licenses and maintaining standards for the industry.

All companies wishing to serve real cash gambling to people in the UK must hold a license from the Gambling Commission to do so. This is true of both companies based in the UK and those operating online gambling operations from overseas.

What if the gambling companies fail to pay taxes?

Failing to pay tax owed would represent a major infringement by a licensed gambling company in the UK. The Gambling Commission could decide to revoke their license and HM Revenue and Customs would likely follow a path to recoup the owed funds using all measures available.

Will the law change anytime soon on gambling taxes in the UK?

Things are unlikely to shift anytime soon for the gambling companies, as the 2020 overhaul represented a big change in the system. UK gamblers themselves can feel confident that they’ll be free from paying tax for the foreseeable future.

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