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Understanding Gambling Taxation in the UK

Author: Preston Davis | Updated: October 29, 2023

Gambling in the United Kingdom has undergone significant legislative developments over the past few decades. Regardless of whether you gamble recreationally or professionally, understanding the tax implications on winnings is essential. This guide will delve into the nuances of gambling taxation in the UK, touching on its history, current status, and related considerations. We will also explore other forms of gambling-related taxation, including Machine Games Duty and Gaming Duty.

Is Gambling Income Taxable in the UK?

In the UK, gambling winnings are not subject to taxation. Whether you win a small sum or a lottery jackpot, you can keep your winnings in full. This contrasts with countries like the USA, Spain, and the Netherlands, which tax gambling profits.

Taxation Through History

The UK introduced a law in 1960 taxing either stakes or winnings in high street betting shops. This changed in 2001 when Gordon Brown abolished the tax, introducing a 15% tax on bookmakers’ gross profits. By 2014, even offshore gambling operations had to pay this tax.

Who Bears the Tax Burden?

While gamblers don't pay tax on winnings, the gambling industry does. The industry pays various duties, such as General betting duty, Bingo duty, and Gaming duty. Customers can indirectly feel these costs, for instance, through lowered betting site odds.

Machine Games Duty

If you have machines on your premises offering cash prizes like slot or fruit machines, you might need to pay Machine Games Duty (MGD). However, machines where the prize is less than the play cost, takings from charity events, tournaments, lottery machines, or machines for domestic use are exempt from MGD. Also, takings from machine games are VAT-exempt if MGD is paid. Those responsible for MGD include holders of licences for gambling, selling alcohol, various gaming and club permits, and certain others. Tenants of pubs are typically responsible for MGD rather than the premises' license owner. The duty mandates registering for MGD, sending HMRC a return every three months, paying dues within 30 days of sending a return, and maintaining game takings records for four years.

Gaming Duty

Gaming Duty applies to casino gaming profits in the UK. The duty is based on the gross gaming yield of premises, which represents stakes received minus winnings and gaming-related fees. Gaming Duty doesn't apply to dutiable machine games. If gaming is offered remotely, for instance, over the internet, it's liable to Remote Gaming Duty. The duty rate varies based on the premises' gross gaming yield, ranging from 15% to 50%. Registering and payment processes involve specific forms and periodic returns.

Bingo Duty

Bingo Duty is levied on the profits from organising and promoting bingo games played in the UK, with certain exceptions. The duty rate is 10% of the profits in your accounting period, which are bingo receipts minus any payouts. There are specific registration requirements, return and payment timelines, and penalties for non-compliance.

Professional Gamblers: A Special Case?

Professional gamblers don’t pay taxes on winnings, but they might be taxed on appearance fees or other income related to their profession.

Offshore Betting: A Changing Landscape

The rise of online gambling led to many operators moving offshore to enjoy lower tax rates. However, the UK now requires all sites catering to its residents, regardless of location, to be licensed and pay the standard 15% tax.

Record Keeping: Best Practices

While winnings are tax-free, many gamblers keep detailed activity records. This can justify expenses, track profitability, and prove large funds sources if needed.

Potential Pitfalls: Other Taxes to Consider

While gambling winnings aren't directly taxed, other taxes might apply. For example, investment income from winnings can be subject to capital gains tax. Also, large winnings could be subjected to inheritance tax.

FAQs

Are there any types of gaming machines exempt from MGD?

Yes, you do not have to pay MGD on machines where the prize is less than the cost to play, machines solely used for charity events, tournaments, or domestic use, and takings from lottery machines.

Who needs to register for Gaming Duty?

Entities that need to register for Gaming Duty include those holding a casino operating license under the Gambling Act 2005, providing premises for gaming where Gaming Duty is due, and managing or organizing gaming on unlicensed premises.

What are the exemptions from Bingo Duty?

Exemptions from Bingo Duty include bingo played at home, by non-profit organizations without a fee, or under certain limits at amusement arcades and travelling fairs. There are also exemptions for small-scale bingo under specific conditions.

What should I do if my small-scale bingo operation exceeds the exemption limits?

If your operation exceeds the limits for small-scale bingo exemption, you must notify HMRC within 5 days of the date you exceeded the limit.

What records must I maintain for Gaming Duty purposes?

You must keep all records required by the Gambling Commission and any other documents used to complete your returns for at least 3 years.

Preston Davis is a gambling writer based in London. He's always on the lookout for new Online casinos, bonuses, and games to write about - so you can be sure he's on top of any news as soon as it breaks. Preston takes his work seriously but likes to have fun too - which is why he thoroughly tests everything he reviews before giving his final verdict. Preston enjoys spending time with his wife and two young children when he's not writing or playing games.