GAMBLING WINNINGS TAX IN THE UK: DO YOU HAVE TO PAY ANY TAX ON WHAT YOU WIN?
Newcomers to betting in the UK may have heard that you have to pay tax a gambling winnings tax. While this was true in the past, it no longer applies. Rather than punters paying tax on what they win, the burden of taxation in the gambling industry now falls on the bookie rather than the bettor, which means no tax is paid on your winnings.
Here, we will take a closer look at the gambling tax UK residents pay, its history, and how the system works now. You should be able to pick up some useful tips about how to shape improved betting strategies too.
- No tax on winnings in the UK.
- This changed in 2001.
- Bookies pay 15% levy on earnings.
No one has to pay tax on any of the winnings that they acquire from betting in the UK since the law changed in 2001. Prior to that, tax had been applied to all winnings, with the rate being set at nine percent in the latter days of the tax. The Chancellor of the Exchequer in 2001, Gordon Brown, changed the law due to concerns that revenue was being lost to overseas gambling websites. The growth of digital technology meant that punters could now access gambling websites from anywhere in the world.
At the time, many of the UK’s biggest bookmakers and other gambling service providers were moving overseas, where they would not have to pay any tax on their earnings. This meant that the burden of taxation for the gambling industry was falling on the shoulders of punters rather than bookies. The gambling tax UK residents had previously been compelled to pay was replaced with a 15% levy that was charged on the gross profits of bookmakers.
BOOKIES PAY THE TAX NOW
There is a variety of gambling taxes that now need to be paid by bookmakers and other service providers in the UK. They are liable for general betting duty, if they offer sports betting services, and other duties are also payable on bingo, lottery, slots games and remote betting activity. While you as a punter do not pay tax on what you earn, you still have to meet some of the costs of these taxes. Bookies alter their odds in order to ensure that they make a profit. The tax burden faced by bookies obviously has an effect on the odds that are offered to customers.
- Betting shops first legal in 1960.
- Tax changed with 2005 Gambling Act.
- Bookies pay 15% tax on earnings.
Some punters are good enough at betting to make their living from it. Very few people manage to make a living from gambling, but some do. The vast majority of online bookmakers are aimed at recreational gamblers, who bet for fun and entertainment, rather than professionals who are looking to make a living from betting. If you are thinking of becoming a professional gambler, the best advice to take is not to do it. It is a stressful and difficult way to make a living, even though you will not pay any tax on your winnings.
GAMBLING IS NOT A TRADE
So why don’t professional gamblers pay any tax on their winnings? Their winnings are, after all, their source of income, their wages, and all of us pay tax on our wages. Her Majesty’s Revenue and Customs (HMRC) confirm this in their Business Income Manual, which includes this statement: “The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade.”
This aspect of gambling law was put to the test in a case in 1925, when a gambler called Alexander Graham had to pay £300 to the Inland Revenue, a sum they claimed on his winnings from horse racing betting, under the terms of the 1918 Income Tax Act. Graham’s lawyers argued in court that you cannot tax a ‘habit’. The judge concurred, ruling that betting could not be considered a trade under law.
This means that professional gamblers and recreational bettors do not have to pay gambling winnings tax on their profits from betting. While gambling for a living is not considered to be a good idea, at least recreational gamblers can also benefit from all winnings being tax-free.
So now that you know that you will not have to pay any tax on what you win from betting, how can you go about boosting your chances of taking home big winnings? Well, there are no easy answers to that question, but there are a few simple things you can do to improve your chances of placing successful bets, and taking home more tax-free winnings. Here, we’ll take a closer look at a few steps to take that will make you a more successful sports punter.
STUDY THE STATS
Successful betting is often a case of number crunching. While the kind of statistical analysis deployed these days by professional sports teams is beyond the abilities of most sports bettors, keeping your eyes on the relevant stats is a useful thing to do, if you want to improve your chances of placing winning wagers. The number of wickets that a certain bowler is taking, or the number of sets that a tennis player wins with a tie break, are the kind of stats which are useful to punters.
FOLLOW THE FORM
It also pays to check out the recent form of players and teams, if you are thinking of betting on them. Recent runs, of wins or defeats, always give the best indication of how a team or player is performing at a given time. In many ways, form is the most important stat to study, whatever your favoured sport is when it comes to betting. It is a key indicator when it comes to spotting winners.
STAY FOCUSED ON YOUR FAVOURED SPORTS
It also pays to remain focused on just two or three sports when it comes to betting. Any more than that and your perspective becomes too diluted. Following more than two or three sports with the kind of attention that you need to be a successful bettor is too time consuming, and is something that professional gamblers rather than recreational bettors would do.
REMEMBER THAT BETTING IS SUPPOSED TO BE FUN!
It is also vital that you remember that betting is about entertainment and fun, not about stress and anger. If you feel that you are becoming frustrated and angry when betting it is probably a good time to stop. If the losses are mounting up, then chasing them with ever bigger bets at ever longer odds will not help you. Chasing losses is a great way of making everything in your life worse, especially financial problems.
Betting will not solve any financial problems that you are experiencing, and could well make them much worse. If you are getting angry and frustrated while betting, just stop and walk away. Your luck will be better on another day, so there is no point digging yourself into a hole if your bets are going badly. Small stakes placed on carefully chosen bets is a much better strategy than betting big to chase losses.