What we do advise you to do if you’re a successful gambler is to keep a record of your winnings, especially if they are substantial. If you’re living off your winnings, or have used them to purchase cars or holidays, then HM Revenue & Customs (HMRC) may wonder how you’re living beyond the means of any taxable income you have earned at work, etc.
If the HMRC ever asks you about your lifestyle, you will then have the proof to show them that you have won this money gambling, and not got it from any criminal activity or by evading paying taxes on the money you’ve earned from legal employment but not declared.
History Of Betting Tax In The United Kingdom
The United Kingdom is one of the best countries in the world to gamble. Not only do you not have to pay income tax on any winnings to the HMRC, but you also don’t need to pay betting tax. But this hasn’t always been the case in the UK.
Betting was illegal in the UK until 1960, when the Betting and Gambling Act of the same year decreed that punters must pay a 9% betting tax on either their stake or their winnings. Thankfully, betting tax in the UK was abolished in 2001 – thanks, Gordon Brown!
Does Anyone Pay Betting Tax In The UK?
While amateur or professional gamblers don’t need to pay betting tax of any form in the United Kingdom, bookmakers and other types of betting sites do have to pay betting tax to the government.
Bookmakers and betting sites fall into different categories when it comes to taxation, such as general betting duty, lottery duty, remote betting duty, bingo duty, gaming duty, and machine games duty. But as a punter, this isn’t something that you need to worry about.
If you are interested in how much tax gambling businesses must pay in the United Kingdom then, as of 1 October 2019, online bookmakers must obtain a license to operate in the United Kingdom and are required to pay tax of 15% on their earnings from UK customers. Online gambling sites, such as online casinos, are required to pay 21% tax on any profits from their UK-based gambling activities.
Gambling Tax For Professional Gamblers
While some people think it’s unfair that professional gamblers are not taxed on their earnings, the UK government has yet to determine a difference between amateur and professional gamblers. It doesn’t matter if you win £50,000 in one bet or win the same amount of money by placing thousands of bets over the course of a year, the answer to do you have to declare gambling winnings to HMRC is no.
However, if you’re the type of professional gambler that ventures to other countries to place bets, then you may have to pay betting tax in other countries. So, whether you’re taking a trip to the US to bet on the Breeders Cup, gambling at a casino in a foreign country, or playing in poker tournaments, you may be liable for betting tax on earnings in other countries.
Do Professional Betting Tipsters Have To Pay Tax To The HMRC?
Professional betting tipsters that offer subscription services to punters will have to pay tax on these earnings, as they are selling a product at the end of the day. This is no different to how your self-employed electrician will be paying tax on his or her earnings.
But professional betting tipsters also boost their incomes by betting on their own selections, and they don’t have to declare their gambling winnings to the HMRC for taxation purposes.
Do I Have To Declare Winnings From Tips To HMRC?
No, just because tipsters must pay tax on the subscriptions they earn, doesn’t mean you have to pay tax on the winnings you make by betting on your tipster’s tips. That’s one of the many reasons why professional betting tips have become a popular way of making an extra income, while some professional gamblers also use a wide variety of tipsters so that they don’t need any other form of taxable employment.
How To Prove Gambling Winnings
In the UK, gambling winnings are generally not subject to tax. This is because the government views gambling as a leisure activity rather than a taxable profession. However, if someone is classified as a professional gambler in the UK, the situation might be different.
For a professional gambler UK-based, it’s essential to maintain clear records of their gambling activities. This includes keeping track of all bets placed, the outcomes of those bets, and any associated receipts or online transaction records. These records serve as proof of winnings and losses.
While the tax on gambling winnings UK law generally exempts most players, those who gamble as their primary means of livelihood might find themselves in a grey area. In such cases, having a well-documented record can be invaluable, both for tax purposes and for any other financial transactions where proof of income is required.
In conclusion, while most UK gamblers don’t need to prove their winnings for tax purposes, maintaining good records is always a wise practice, especially for those who gamble professionally.
Can Gambling Affect Benefits?
In the UK, the welfare system is intricately designed to provide support based on an individual’s financial circumstances. While gambling activities aren’t inherently tied to benefit eligibility such as Universal Credit, the financial implications of gambling can have a bearing on one’s entitlement to specific benefits.
If a person secures a substantial win from gambling, it could inflate their savings or capital to a threshold that affects their eligibility for means-tested benefits. For instance, accumulating savings beyond £16,000 might render someone ineligible for benefits such as Universal Credit or Housing Benefit. It’s crucial to note that while gambling winnings aren’t categorised as ‘earnings’ and are therefore not taxable, they must still be declared to the Department for Work and Pensions (DWP). Any oversight in this declaration can be construed as benefit fraud.
Furthermore, for those on Jobseeker’s Allowance (JSA), there’s an expectation to be actively seeking employment. If an individual is found to be dedicating substantial time to gambling, it could be perceived that they aren’t genuinely in search of work, potentially jeopardising their JSA. On another front, problem gambling can lead to mental health challenges. If these challenges impede someone’s capacity to work, they might qualify for benefits like Employment and Support Allowance or Personal Independence Payment.
In essence, while casual gambling might not have a direct bearing on one’s benefits, significant winnings or the repercussions of excessive gambling can influence benefit eligibility. It’s always prudent for individuals to remain transparent about their financial situation and seek advice if uncertain about their benefit entitlements.
A Summary Of Betting Tax In The UK
Betting tax in the UK is something that punters don’t have to worry about, whether you’re an amateur or a professional gambler. It doesn’t matter whether you’re winning small or big amounts, you don’t have to pay betting tax on your bets and you don’t need to declare your gambling winnings to the HMRC.
We hope that’s answered your question, do you have to declare gambling winnings to the HMRC.
