As a nation of sports lovers, the gambling industry benefits significantly from football, golf, rugby, tennis, and racing revenue. Land-based and online casinos also provide entertainment for consumers who love new and traditional casino games.
Improved access to high-speed internet connections, increased smartphone adoption, and state-of-the-art technology have brought immersive gaming experiences to the masses, and with it, there have been some big winners.
One thing that might concern UK consumers is whether or not gambling winnings are taxable.
UK Gambling Regulations
The UK’s gambling industry is regulated by the Gambling Commission who work to make sure gambling operators behave fairly and openly, protect consumers, and ensure the long-term success of the industry.
Providing a comprehensive regulatory framework helps the UK gambling industry attract new business as operators don’t have to worry about market volatility. This can be caused by large-scale regulatory changes that are commonplace in developing markets.
The UK operates an 18 and over age restriction on all gambling activities, with the National Lottery the last to move to this. Previously, anyone aged 16 or over was able to buy Lottery tickets, but this changed in October 2021 to bring it in line with other markets.
Many bookmakers and land-based gambling operators now operate Think 21 or 25 policies. This sees them challenging anyone who could be 21 or 25 as a way of clamping down on underage gambling.
UK Gambling operators must also offer a voluntary self-exclusion service that allows customers to ban themselves from the betting operators they choose. Gamstop is the online version of this that all licensed operators must sign up for.
Gamstop creates a register that notifies operators when consumers try to sign up. Alternatives are available to consumers with benefits including greater game and payment method choice, excellent bonuses, and improved gameplay, with a full guide available here.
Other laws have been implemented in the UK to protect consumers, including maximum spin amounts on gaming machines and strict advertising rules.
Tax Implications of UK Gambling Winnings
Tax in the UK gambling industry is relatively straightforward, and it is great news for consumers. UK gamblers do not have to pay tax on gambling winnings as gambling is not viewed as a trade by HMRC.
This means that even professional gamblers with consistent winnings do not pay tax on their winnings. However, other earnings including sponsorships or appearance fees are taxed.
Gamblers should also be aware that winnings earn money through interest or investments. This means that Capital Gains Tax will be owed in profits made through investments or saving schemes.
The tax owed will only be on the profit, so if you invest your winnings in shares only the value above the initial investment will be taxable.
Those who put their gambling earnings into a savings account have a tax-free allowance of £1,000 if they are on the basic tax rate. Those at the higher rate are allowed to earn an additional £500 before paying tax on it.
There are options available for those who want to avoid taxes without suffering the wrath of the tax man, with ISAs (Individual Savings Accounts) offering a tax-free way of saving up to £20,000 per year.
This wasn’t always the case with gamblers previously being taxed 9% on their stake or winnings. This allowed consumers to choose whether they wanted to pay when placing the bet or have it taken from their winnings.
For example, a £1 bet at 10/1 odds would cost £1.09 and they would get back £11, including their stake. Not paying tax at the time the bet was placed would result in the £1 bet returning £10.10 with only the winnings being taxed.
In contrast, the gambling industry is taxed 15% on income. This is a massive revenue stream for the UK with 2023 to 2024 figures showing General Betting Duty earnings hitting £653 million.
Offshore Betting Tax
The same regulations apply regardless of whether the operator you gamble with is in the UK or operators offshore.
Crypto casinos can cause some confusion, but winnings work in a similar way to profits made on winnings after gambling. In this case, UK winners are not taxed for cryptocurrency winnings. However, consumers who go on to trade their crypto must pay taxes on the increase in value from the time it was won.
The volatility of the crypto market means that most cryptocurrencies will fluctuate in value, so it is important that consumers keep a record of their gambling activities to make it easier to fill out their tax returns.