Tax on Gambling

Why You Don't Need to Pay Tax on Gambling Winnings

In many countries, you are required to pay a substantial amount of tax on any kind of gambling win. As you can imagine, this can put a significant damper on a big win.

Let’s say you win a $10,000 jackpot. You might not actually get all of that, as the tax might be deducted after you win.

But there is great news if you are a UK-based player. You don’t need to pay any tax whatsoever on a gambling win. You are not taxed on your initial stake, and you also don’t need to pay anything on your winnings.

So if you win a £10,000 prize, the whole amount is yours to keep, with no strings attached.

So there’s no catch?

There literally is no catch. Whenever you win at gambling, you don’t owe the government a penny. You’re not required to report your income to the government, and you don’t need to pay them a penny. Don’t let anyone tell you otherwise.

In the past, there was a gambling tax, so some of the older generations might insist that you will need to report a jackpot win to the government. But there hasn’t been any kind of tax on gamblers in the UK for quite some time.

Even if you are a professional gambler, there’s no need for you to be taxed. In theory, if you are fortunate enough to make all of your income from gambling, you won’t have to pay the government even a penny in income tax.

Why no tax?

As you have probably noticed, the government likes to implement taxes for almost anything that involves you making money, so why on earth are your gambling winnings an exception?

Well, it wasn’t always this way. In the 1960s, when gambling was first legalised in the UK, players did have to pay a tax on their winnings. When you placed a bet, you would be given a choice: you could either have a tax levied on your initial bet, or you could choose to have the tax levied on your winnings.

If you were low on funds, you would have to opt for the second option, meaning the government would get a much bigger payout if you won. On the other hand, if you lost, the government wouldn’t get anything.

This tax was gradually reduced until it was eventually entirely abolished by Gordon Brown in 2001. So why the decision to abolish the tax?

With the rise of the online casino and gambling industry, Brown was worried that the UK could become less of a player in the industry. He got rid of the tax to encourage people to continue gambling at UK-based casinos.

As we can see today, the decision was a good one. The UK remains one of the top countries in the worldwide gambling industry.

How does the government make any money?

Of course, the government still needs to get paid. So instead of the players being taxed, the casino operators are required to pay taxes on any profits they make.

Just like the government, the casino operators are quite invested in making money, so they didn’t take this tax lying down. Many casinos opted to move their bases of operations to other countries with much more favourable tax rates. This is why you see certain countries such as Malta coming up all the time; they offer better tax rates to gambling companies than the UK does.

Naturally, the government looked for a way to close down this loophole. In 2014, they introduced the Point of Consumption tax. This meant that companies were obligated to pay the tax of the country their service was being used in. So effectively, this meant that using countries like Malta as a tax haven was no longer as effective.

Will the tax return?

It seems very unlikely that the gambling tax will return for players at any point in the near future. Because of the way the UK tax system is structured, it will be very difficult, if not impossible, for the UK government to bring back the tax.

For the foreseeable future, you will be able to gamble safely with the knowledge that you won’t have to pay the government a penny.