If you ever get lucky enough to reach to a point where you actually win large amounts of money from your gambling pursuits online, you will definitely be thinking possibly about whether or not your income is actually taxable by the HMRC, right? Well contemplate no longer, we are here to help you with all the questions you can think of regarding tax and your jackpots, all you need to do is scroll down and take in all the information that we are about to tell you because it is definitely a justified question and you deserve to know!
Are my winnings open to getting taxed?
To answer this question in a short and straightforward response, the answer is in fact no. However- yes there is always a but that comes after every question! You do need to know that this rule applies to here in the UK and on all forms of gambling-from slot gaming, bingo, the lottery, horse racing etc. Therefore, you can rest easy knowing that your money is safe in your hands from the moment you withdraw it.
Things that you need to clarify when gambling online and hoping to win large sums of money, is the way that you will receive the payment i.e. withdraw that amount from the bingo site. Some bingo sites will pay you in one singular transaction or payment, whereas some bingo sites depending on the amount that you are owed, will pay you in separate transactions, that can run consecutively every day, week or month. Therefore, definitely use this opportunity to check the terms and conditions that come with the bingo site that you are using, because they will elaborate on any fees that will be taken out from your winnings, or the payment method procedure (particularly when gambling on international bingo and gambling sites).
The taxing that will get charged onto your winnings abroad is as follows-based on the most common gambling locations outside of Britain.
A European country that will surely attract many players from within the residing UK, this gambling location will charge you a fee of 2% on taxing for poker game cash amounts.
Within Spain, any gambling earning that you directly make will need to be declared within the country’s taxing system from the moment it has been withdrawn and cashed into your account of choice. Spain considered gambling as income and thus sees it as taxable.
If you are living within the Netherlands or considering a move there, hold that thought. This location will have you being taxed a total of 29% on anything above the threshold of 454 Euros. So, gambling enthusiast definitely needs to make note of that completely.
Do bear in mind, that all these taxing principles are all based if you permanently reside within the countries mentioned above. If you are legally residing within the UK, the UK will give you rights to never be taxed from gambling earnings you make abroad. This is due to treaties that have been made up between these countries. The history of gambling and taxing was not always as smooth as the pointers that have been briefly elaborated on above. The history of gambling how various moments that were up and down. Read on to find out more on this matter.
Gambling Laws and its History
So, Gambling within the UK was officially legalized within the year of 1961, by the named Betting and Gaming Act. However, the taxing system which was emplaced within those laws was ridiculously high for punters. If you were gambling within that time, you will be subjected to a huge 9% of every amount-regardless of the amount you make. £10, £100, all had the same taxation principles and you pretty much couldn’t evade it at all. Yet just over 40 years later, prime minister Gordon Brown introduced a law that abolished that completely, an act within the 2001 budget that allowed everyone to no longer be obligated to those laws. However, there was a slight loophole… There was an increased taxation applied to the bookmaker houses instead-and at a higher rate too! Your local bookmakers had to pay 15% on their profits which they were not happy about, so what do they do? Bookmakers began to become ‘offshore’ and base their point of supply outside of the UK. This was increasingly so and easily achieved by people who had online establishments, meaning they could jiggle their way around the new taxation laws. This essentially then became such a huge problem for the UK and its economy, as essentially all the funds will no longer be within the UK economic system. Meaning in turn that was a loss of revenue. The bookmakers cannot be blamed however, as the tax laws within Gibraltar, for example, was capped at 1%, meaning that whopping 14% difference is completely justified from a business perspective.
To counteract such huge loss in revenue, there was an amendment to the laws surrounding gambling. In the year 2014, the 2005 Gambling Act was changed permanently to 15% on all offshore account establishments. They made it deemed as an illegal activity if any gambling locations that belonged to the UK, to pay under the newly established 15% cap on point of commissions. This means all the bookmakers that managed to pay only 1% on their gross profits would now be obliged to pay the compulsory 15% if they wanted to maintain and keep their gambling licensing. Such strict laws all get regulated and monitored through the UK Gambling Commissions and other bodies such as Gibraltar. Strict rules were the only way to ensure revenue was maintained within the UK economy.
But this still doesn’t answer your question of why your earning within the UK are not taxable right? Continue for more on the matter.
Why aren’t my gambling earnings taxable?
Not that you are complaining-we know, but it is a completely justifiable question. The reason why you will not be taxed on anything you earn on gambling is that it will be treated as a business. This would then mean then that, you would be able to claim back losses on your tax returns and imagine how it is more guaranteed to lose than to actually win, so this would be a rather chaotic process through and through…
Who pays the gambling tax?
The tax gets paid now by the actually gambling bodies themselves and this is how the UK economy can actually manage and keep afloat with the gambling industry. You may find in some places that you gamble on that they charge a fee for withdrawals, or they ask you to withdraw in a series of payments- all for taxation reasons see? Not forgetting also, the very high wagering requirements within the process of your gambling-this all take into consideration their fee outputs. So, you really are contributing to the fees of the taxation system in the long-term, rather than directly. These are the different taxes that are applied to gambling constitutions:
– General betting duty
– Bingo Duty
– Lottery duty
– Machine game duty
– Gaming duty
– Remote betting duty
So, the question that comes into mind is, what if gambling is your main source of income and you are in fact a professional gambler-would you still be subjected to laws of taxation? Since it is your full-time employment. The answer is no. You will still never be expected to pay on anything that you earn, meaning if you have a gambling lucky streak, you could be very lucky indeed with all of your disposable income!
If you still are having quite hard time believing us, read this passage directly from the HMRC’s Business Income Manual. They do not constitute gambling as an official form of business trading:
“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”.
That means that essentially all your gambling earnings will never be considered as a form of income and will always remain tax-free. It is easily justifiable also, as your gambling success is never guaranteed, even less more so than independent businesses. Therefore, for that reason gambling is put straight down to a past time and hobby that coincidently gives you some extra money!
There have been many examples within history for example that showcased where gambling sought out to be defended and not considered as tax. Alexander Graham for example, was an avid horse better, that had a lucky streak very much consistently within his favour. The inland taxation revenue, therefore, ensured that every time out of his winnings he would be taxed a total of £300 from his total earnings. HE did fight his case with the defence of his income being income of habit and not solely independent on regular official trading standards. Therefore, for that reason he was freed from his obligation and the judge gave a ruling that his income was not obliged for it wasn’t official employment liable to be sourced to tax. There are some moments where this justification can get tangled and misunderstood, however. If you are gambling and using the establishments of bookmakers and online gambling sites, then you are not liable. However, if you are to make an appearance for tutorials or a gambling tournament, then your payments for these events are actually classed as self employed income. For that reason, then, your income will be obliged for taxation and cannot be evaded.
Tax is a no worry situation in gambling then?
Taxation for yourself is pretty much cleared when you think of it as a straight win and withdrawal from a bingo site or any other gambling establishment. However, it does get a little more complicated when you go into inheritance aspects and the generation of future income earning.
If you do decide to invest your money within a business investment or any outcome that could potentially give you hard-earned winnings, then you will be subjected to a capital gains tax, that isn’t cheap we kid you not. You will be subjected to paying a total of 18% from anything that you make from your investments.
Inheritance tax is a different matter entirely. This taxation principle is established when for example you have large amounts of money that you pass on through inheritance or as a gift. So, you could make a large amount through your gambling pursuits and thus decide to actually pass this on to a family member, or gift them something directly from yourself. These gifts will be liable to get taxed a total of 40% over a threshold of £350,000. Meaning if you die within a 7 year period of passing such money over, they will be required by law to pay nearly 50% of that. There is a way to get around this in terms of gifting people sums of money. You are permitted to give a total of £3000 per tax year as a gift, without them being subjected to the inheritance fees that surround it. Anything greater than this will be at risk to the taxation if you personally pass away within the 7 year period. However, if you outlive that period, then whoever you gift the amount too will not have to pay anything at all.
We do recommend that if you earn a large amount of money, it may be best to seek legal accredited advice that will give you the support on making big decisions with your recently received funds. They ill clearly advise you what actions to take, to minimise any big changes to your financials.
To conclude overall, this article has elaborated on all the taxation history that is subjected to residents within the UK. All your winnings that you receive will not be liable to any taxation, due to it not being considered as a form of trading or business. Everything you make is yours to keep, unless you are a professional gambler that attends events for your skills as a gambling individual. Tutorials and appearances that attain you income are then seen as a form of business and trading and thus will be subjected to tax, depending on how much you earn within that process.
If you gamble within an international location, yet are a fully fledged UK citizen, all the fees that come into play to withdraw and move money from international gambling sites will not be seen as income earned abroad, due to the treaties and partnership deals that the UK have, you are lucky enough to get away with any tax laws that are applied to international citizens such as Spain, France and Netherlands. There is a taxation that is applied to your winnings if you so wish to pass on your winnings to a person via inheritance or if you wish to gift the money accordingly. If you so choose to give some of your winnings, they will be charged 40% inheritance tax if you die within the first 7 years of gifting it. If, however, you do not pass away after this specific time period, then the tax is exempt and will not be obligated. Do remember that you are permitted to gift up to £3000 per year as a gift to whomever you choose, as this is the threshold that is allowed y taxation laws.
Finally, if you so choose to invest your winnings within a business opportunity, that will earn you income on a regular basis, there is an investment taxation that will be applied on all your earnings. The reason for this is because your gambling winnings are no longer classified as an ‘habit’ form of income. You are now actively making profits in form of trading that go beyond a hobby, but also are liable to claim tax returns which is therefore considered as fully fledge business trading momentum.
If you do however have any questions further about your earnings and tax relations, the best decision is to seek answers within the HMRC, as they have a handbook to elaborate further on the all the details regarding gambling and taxation.