Gambling Tax: Expectations vs. Reality

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They say only two things are certain in life: death and taxes. So naturally, you would think your gambling winnings would be subject to taxes, like most other transactions.

But you might be surprised to learn that in the UK, this is actually not the case. Any cash you make from gambling is yours to keep, 100%!

Despite this, many people in the UK believe that their winnings will be taxed. So why the confusion? There are a few reasons for it.

Firstly, in a lot of other countries, gambling winnings are actually taxed. This is the case in the USA, so people might hear through US media about jackpots being taxed, and assume the same rules apply to the UK. Furthermore, in the past, the UK did in fact tax gamblers.

Prior to the 1960s, betting shops were illegal in the UK. When they were finally legalised, players would have a 9% tax levied against them. When you placed a bet, you could choose to either pay the tax on your initial bet, or pay the tax on your winnings.

Eventually, this shrunk to just 6.5%. In 2002, the tax was finally abolished by Gordon Brown, who was then Chancellor of the Exchequer.

Why was the tax removed?

The main reason is because the UK wanted to remain competitive. With the rise of online gambling, removing the tax on gambling levied on players resulted in the UK bookmakers staying competitive on an international level.

These rules apply to all casino games in the country, so there’s never any need to declare your winnings to the taxman. Playing online will be a simple matter with no worries about being taxed.

Who gets taxed then?

Surely the British government has to get their money from somewhere? So where do they get it from?

In the UK, the taxman actually goes after the casino operators, rather than the players. So the country’s casino operators can expect to pay a tax of 15% on their gross profits.

Can operators just move offshore to escape the tax?

It used to be true that a casino operator could simply relocate their operation and pay less tax. This is a big reason why you see a lot of casino sites operating out of Malta and Gibraltar; these countries apply significantly less tax than what the British are asking for. Unfortunately for the operators, this loophole was closed sometime in 2014.

The Point of Consumption Tax was introduced, which stipulated that companies providing a service such as gambling have to pay tax applicable to the end-user of the country who is accessing the service. This means that even if a casino site is operating out of Malta or Gibraltar, they will still be taxed 15% of all wagers from a UK player.

Are professional gamblers taxed?

A popular myth is that professional gamblers still have to pay a tax on their winnings. Luckily for the pros, this simply isn’t true.

The British government doesn’t recognise professional gambling as a taxable trade. If you make a living from gambling, your winnings are as tax-free as everyone else's.

Will the tax ever return?

You might hear people pessimistically suggesting that the taxation of gambling winnings will return one day. This probably won’t be happening anytime soon though, and that is because of how the UK tax system functions.

According to CasinoGuide UK, under the current system, if the government were to try and bring back tax on gambling, gamblers might actually be able to claim allowances for their gambling losses. If the government is taxing income made during a specific activity, they must also offer allowances for those who lose money doing that activity as well. Under this current system, it just doesn’t make sense for the government to bring back the gambling tax on players.

Remember, gambling is tax-free

There you have it: you can play at any casino in the UK without having to pay any tax whatsoever. There’s no need to do any calculations in your head—it’s all yours.