Are Taxes Due on Casino Winnings?

Often when in a casino, the lure of huge winnings is enough to entice any gambler to dabble in an array of games with the promise of winning. When lucky enough to win, the hope of having that jackpot value deposited into your account is thrilling – until questions about taxation are raised.

Due to legislative differences in different casinos across the globe, it is difficult to establish whether your winnings will be taxed. However, in the UK with more relaxed legislation and laws surrounding gambling, this issue arises more than in comparative countries that facilitate gambling.

Is Taxation Present in the UK?

In essence – no. Following the abolition of the tax in 2001, at the hands of Gordon Brown, the Chancellor of Exchequer at the time; no gambler gambling within the UK, whether it be online or in the casino, has to pay any taxes on their earnings.

With this change enforced, the government later enacted a series of changes to further litigate the UK gambling scene and ensure that offshore bets were less of a threat to legislation than they had been prior.

So, no matter how much you earn at your local casino or a more upscale one in the city, your winnings will be entirely tax-free and yours to spend as you please.

The previous State of Affairs

As noted prior, the UK government had not always been so relaxed when it comes to taxation, as in previous years gamblers and bookmakers equally had to pay a share of their earnings to the government.

1961- 2001

Throughout this forty-year period, gamblers had to pay a 9% taxation on all of their winnings and bookmakers had to pay 6.75% of all their revenue annually. However, betters were allowed some leeway with how they chose to pay this taxation. Players could either pay the taxation upfront based on the stake or they could opt to pay tax on their earnings, only if the bet or game was successful – which for many was a more viable option, as it meant no cost unless they reaped in some profits.

2001-2014

Following the dismantling of taxation on betters, the government began to focus on the gambling companies themselves. With many gambling companies moving offshore to individual tax havens such as Gibraltar, Malta, and The Isle of Man, they were able to evade the typical taxes the UK government would impose on them.

Due to this loss in tax revenue, the UK government implemented a bookmakers tax that required a hefty 15% of all revenue produced by gambling companies from bets taken from their customers. Inevitably, this led to a surplus of issues, with online gambling companies operating outside of Britain itself claiming under international tax laws that they were exempt, despite the fact that a notable portion of their customers were the British people.

2014-Present

Clearly, the previous legislation arose a series of issues – so the government subsequently issued ‘The Point of Consumption Tax’. This is where the government can seize 15% of all profits made by gambling companies operating within Britain, its surrounding territories, and even the tax havens that previously protected sleuth-like companies looking to avoid this proportionate tax.

Whilst this weakens some businesses who are filtering tens of millions of pounds worth of revenue from offshore into the UK government – yet for regular betters, it means entirely tax-free winnings which are likely to remain this way!

Banking Your Winnings

Now that your earnings are free of tax and you can input the full jackpot into your bank account, it appears as if the final hurdle is past – however, this is not necessarily the case.

Due to the often proportionate size of banked winnings, they may be subject to either the ‘Gift Tax’ or the ‘Inheritance Tax’, with the former applying is you transfer or withdraw a specified value with the intention of gifting it to someone; and the latter if you choose to designate some fo your lifetimes accrued earnings to your family if the worst happens.

Yet, it may also be taxed as income, which can reduce your winnings by a hefty slab and might leave you bewildered following the previous promise of no taxation.

Of course, not all winnings are subject to these taxations but it is highly likely that those with a high value will be. Hence why professional gamblers tend to keep comprehensive transaction logs and winning/losing logs if gambling is their sole source of income, so that they can avoid raising any red flags and can just have their gambling earnings taxed as income.

Remote Casinos

A majority of the previous information has been solely focused on brick and mortar establishments – yet it is crucial to note that remote, more commonly referred to as online, casinos are also taxed a huge portion of their revenue.

Under the ‘Remote Gambling Duty’, companies who offer online betting, bingo, or casinos are taxed at 21% as of October 2019 – meaning that almost a quarter of their annual revenue enters the government’s pocket. This is likely due to the exponential increase in profitability and accessibility of online gambling opportunities, meaning consumers can gamble as they please anywhere around the country.

Niched Taxing

As alluded to above, the government has regularly shifted the amount in which they tax gambling companies – yet over the years, this has transformed from a generalisable amount across their entire revenue to an individual tax based on specific games on top of the yearly tax.

For example, per game of blackjack, poker, or roulette, taxation can vary between 15-50%, which is an incredible value, particularly within high-stakes games, whilst slots range between 5-25%. Additionally, sports betting is also capped at a tax of 15% and is one of the few not set to rise.

However, it is important to note that the UK government taxes each gambling conglomerate based on an average of their yearly earnings – likely as a means of preventing them from monopolising the gambling market.