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

Gambling TaxIf you’re a gambler from America, the United Kingdom approach to casino winnings can look crazy. While in the States there’s a 25% tax on any winnings over a certain value, in the UK there’s no tax on winnings whatsoever. Whether you win on a pub fruit machine, playing with an online casino bonus, or in an opulent bricks-and-mortar casino, you’ll not pay a penny in tax on your winnings. While this is hardly revolutionary, a lot of countries around the world employ the same laws. It is interesting to see that this ruling is relatively new and there are still a few exceptions where your gambling winnings may incur tax.

Betting shops were first legalised in the UK with the Betting and Gaming Act, 1960, in which a tax was levied either on the stakes or winnings of bets placed in High Street betting shops. This was charged at a whopping 9% for punters until the levy was abolished by Gordon Brown in his March budget of 2001. The reason he gave for this was that he was concerned about the possibility of the UK losing revenue and jobs – particularly with the growing popularity of online gambling platforms – to offshore gambling sites. The move predictably resulted in gambling enjoying greater popularity in the UK and, by extension, made the bookmakers based in the UK more attractive to international punters. In order to ensure that the government still profited from the gambling industry, the Betting Duty tax was replaced by a 15% levy applied to the gross profits of all bookmakers in the UK.

Initially, some gambling companies reacted to this by moving their operations offshore, to countries such as Gibraltar, Malta, the Isle of Man and Curaçao who offered a relatively low rate of tax on their profits. For a long time, this loophole held and was a good way of offering gambling services to UK players while not having to pay the 15% levy. That is until 2014, when the Point of Consumption Tax was introduced by a combination of the Gambling (Licensing and Advertising) Act, 2014 and the introduction of ‘Remote Gaming Duty’. The Point of Consumption Tax basically says that companies providing services, including gambling, must pay tax applicable to the country in which the end-user of that service is accessing it. Put simply, if someone was playing online casinos in the UK, it wouldn’t matter whether the operator was based in the UK, Malta, Gibraltar, or anywhere else – a 15% tax on all wagers accepted still applies.

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