Are Gambling Winnings Taxable?

There are only two things in life which are certain: death and taxes. The latter definitely seems to crop up on just about everything we do, but what about our gambling winnings?

The issue of taxing gambling income essentially comes down to location. Thankfully, in the United Kingdom, we don't have to pay tax on our gambling winnings, but there’s a little more to it – including some history!

The story behind taxing gambling winnings

Taxing gambling winnings isn’t the same for every country. Over in the United States, for example, all income from gambling must be reported to the IRS (their version of the HMRC) including lotteries, raffles, horse races, casinos, trips, and cash prizes.

Up until 2001, residents in the UK were subject to “betting duty”. After legalising betting shops in the 1960s, a tax of 9% was levied on all winnings.

This lasted for four decades until, then Chancellor of the Exchequer, Gordon Brown abolished the taxes. The changes came into effect officially on January 1st 2002, in what was considered a move to bolster the economy.

The effects of online gambling

Part of Mr Brown’s decision was based on the previous actions of larger UK online gambling operators. Many of these operators moved offshore to avoid the taxes, which meant that players could bet there instead without being taxed.

As part of the Chancellor’s changes, a 15% levy was placed on the operators’ gross profits, thus abolishing the need for taxes. The benefits were passed on to us!

Taxing the operators

As more UK gambling operators moved to areas like the Isle of Man, Curacao, Malta and Gibraltar to avoid the 15% levy, the UK decided to introduce a new tax to further the economy even more. In 2014, they introduced the Point of Consumption Tax.

What is the Point of Consumption Tax?

The Point of Consumption Tax is a combination of the Gambling (Licensing and Advertising) Act 2014 and Remote Gaming Duty.

The Remote Gaming Duty is the 15% levy on all operators’ gross profits, while the Gambling (Licensing and Advertising) Act 2014 is an update to the original Gambling Act 2005, which related to the licensing and advertising of gambling. 

The 2014 update was brought in to account for “remote gambling”, that is, online gambling on mobile devices and computers.

Will the tax on UK gambling return?

The tax on gambling income in the UK was abolished as a way of improving the UK economy, so it is unlikely that the tax will return. 

Currently, the UK gambling industry turns over £14 billion a year, so it would be a mistake at this stage to reintroduce the taxes.

When the tax was abolished, an extra £300 million was generated for the UK economy. With online gambling growing more and more, this is a number that should continue rising for years to come.

In addition to this, for all taxes in the UK, the government must also offer allowances for any losses. This means that reintroducing the tax could potentially cost money in more ways than just preventing the practice; it would also mean that people could try to claim back for their gambling losses – not ideal!

Where in the world is gambling taxed?

There are small taxes in France for poker, horse racing and sports, with players being charged 2% and 7.5% respectively. Horse racing winnings are also taxed in South Africa at 6%.

Some countries tax lottery winnings only, including Greece, which is 10%, or a jaw-dropping 50% for all lottery winnings over €4,000 in Slovenia.

The USA and Latvia tie with a straight gambling tax of 25% for all winnings, while in Spain, gambling winnings are not taxed, but they must be declared as income.

Deductions from lottery winnings in the UK

In the UK, there is no tax on lottery winnings. However, players should be aware that, just like any other savings, the interest on their winnings will be taxed.

Where else can I go to avoid gambling tax?

The good news is if you visit Commonwealth countries such as Australia, Canada and Malta, as well as Germany, Austria, Belgium, Bulgaria, Denmark, Italy and Sweden, then you won’t have to pay any taxes on your winnings.  

The interesting part is, like the UK, many of these countries’ operators have to pay tax. However, in some of the abovementioned countries, the tax payable for operators is astronomical!

Germany, for example, can pay operating taxes of up to 90%. France, Australia and Luxembourg pay 80 – suddenly Kenya doesn’t seem so bad!

Where else are gambling operators taxed?

If you’re heading over to Kenya on your holidays, it’s wise not to bring up taxes with casino owners. Up until 2016, the gambling operators’ tax in Kenya was only 12%, but come 2017, it was hiked to an incredible 35%!

This actually came as a surprise to operators, who thought they were in for an eye-watering 50% tax in their casinos.

However, the tax hike was introduced for noble reasons – it was cited as a boost for the Kenyan economy, while it was also designed to encourage younger citizens to take up careers in other industries besides gambling.

Cambodia also explored new options in 2016, having seen a 38% increase in gambling revenue during this period. With gambling only legal in casinos and to foreign visitors, the country was in discussions to lower tax rates for operators to a “single figure” sum.

Your gambling winnings

Once you have claimed your winnings, they are yours to do whatever you want. Be aware, however, that just like lottery winnings, any interest on your bank account containing them will be taxed.

It’s hard to believe we’ve only been free of taxes since 2001, but it’s safe to say it’s made gambling better for all of us!