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Many people are more than happy to place a few bets every year. If you live in the UK, you’ll be pleased to know that gambling is completely legal and regulated. Therefore, you can potentially place a bet as and when you please without getting on the wrong side of the law.

The evolving gambling industry

Those who have gambled online for a while may have noticed that the gambling industry is always evolving. Some of the sites that players can place a bet on are located offshore. Sites such as these may operate this way so that they can reduce how much they pay in taxes. However, the UK Gambling Commission has upped the game a little. While this authority may be happy for sites to operate offshore, there are a few conditions they have to adhere to. 

Should an offshore site wish to welcome UK players, they have to be fully licensed. Additionally, the sites in question have to pay as much tax as the sites based in the UK. The good news is that these taxes do not have to be paid by players. Rather, it’s the site in question that has to pay the bill. 

Do you pay tax on gambling winnings in the UK?

A lot of players may wonder whether they need to pay taxes on their winnings. The truth is that they don’t. While players in the USA have to pay taxes on winnings, UK players don’t. What this means is that you can keep every penny you won. This is the case even if you are lucky enough to play professionally. 

Those who play professionally don’t have to pay taxes as gambling isn’t a recognised trade. However, if a professional poker player is paid to attend a tournament they may have to pay tax on their earnings. Therefore, it makes sense for players to know what they do and don’t have to pay taxes on. 

If you’re unsure as to whether you should be paying tax on your winnings, don’t worry. You can always inform HMRC of your win. It’s unlikely that you will be asked to pay any taxes, however. Informing HMRC can simply bring peace of mind knowing you’re on the right side of the law. 

The history of UK gambling tax

Gambling in the UK has not always been a tax-free affair. There was a duty (tax) placed on winnings from 1961 until 2001. During this time, gambling operators were charged a 6.75% tax. This tax was then passed onto players who have to pay a 9% tax on any winnings they received. 

Players could choose between paying taxes on their stake or on their winnings. Most players decided to opt to pay tax on their stake. They no doubt did this so that they ended up paying out less. After all, everyone would rather pay 9% on their £20 stake than 9% on their £200 win. 

In 2001, the gambling tax was replaced by a 15% tax on the casino’s gross profits. What this meant is that the operators had to absorb all of the tax. As a result, players no longer had to pay taxes on their winnings. One of the main reasons behind this was the concern surrounding UK players visiting offshore sites. If players didn’t have to pay tax on their UK winnings, they’re less likely to go elsewhere. 

Unfortunately, however, the 15% tax on gross profits didn’t solve many issues. Yes, it meant that players would not have to pay taxes. However, offshore gambling sites would not have to pay the 15% tax. For example, those sites that were based in Gibraltar only had to pay a 1% tax. In 2014, things changed as a result of an amendment to the 2005 Gambling Act. The amendment meant that offshore companies had to pay taxes. They had to do this in order to be awarded a gambling license. Should an online casino or sportsbook not have a license they would not be permitted to conduct any business in the UK. 

Why gambling winnings are not taxable

One of the reasons why gambling winnings are not taxable is that it makes life easier. If people in the UK had to pay taxes on their winnings they could potentially claim back their gambling losses. This could prove to be expensive, particularly as most people lose money when they gamble most of the time. 

It makes sense, therefore, to refrain from asking players to pay taxes on their winnings. As we have already seen, even professional gamblers don’t have to pay taxes on their winnings. So, if you’re lucky enough to win big, all of the money is yours. While most people are unlikely to win big, it’s still good to know that you won’t have to pay taxes on your winnings

Generating income from winnings

Let’s imagine you’ve won millions of pounds and you choose to invest your money. Any income that you generate as a result of investing your winnings could be liable for tax. Some players may have to pay as much as 18% capital gains tax. 

If you die and you leave your winnings to someone they may have to pay inheritance tax. However, this is only the case if your estate is worth more than £325,000 (Correct at the time of writing). If you give some of your money away, they won’t have to pay inheritance tax if you die more than 7 years after giving them money. If you die within 7 years of gifting the money, the recipient may have to pay inheritance tax.

While you may not have to pay any tax on your winnings, there could still be other tax-related payments. 

If you live in the UK you can gamble without worrying about taxes. Even if you win thousands of pounds you won’t have to pay taxes on your winnings. It’s this that helps to make gambling in the UK so popular