How Does Tax Impact Gambling in the UK and Across the World?
Written by Phoebe
Published date · Jan. 13, 2021 |
Last Updated · June 28, 2023 | Read Time: 4 mins
There are three certainties in life – birth, death and taxes. The old saying has proved to be very true over the years and it still remains relevant today. Different countries have different laws when it comes to gambling and tax on casino wins. Not each government has the same outlook on gambling so it is interesting to take into consideration the different laws in each country. Some nations are tax free altogether for gambling winnings, whilst in other parts of the world you should expect to pay a considerable amount of tax on a big win. Is this fair? It really depends which way you look at it, so let’s run through the finer details…
Gambling and Tax in the UK
The short answer as to whether you have to pay tax on gambling wins in the UK is no. Any win which a punter has in a casino, on a horse or any other bet will not be taxed. This means that 100% of any winnings you get will all be yours to keep. So, if you win a life changing amount of money, you will not get taxed as if it was a payslip. This, of course, makes for a great advantage to the few who gamble professionally in the UK. It may be strange to think that there is an opportunity to have a legal tax-free job in the UK but it is not easy to gamble for a living. It takes years of experience to be able to build up the knowledge, and even then, it is likely you will be at a disadvantage thanks to the house edge. We always recommend that you gamble only for fun and make sure you only spend what you can afford to lose. The UK was not always tax free in gambling though. When betting shops were first legalised back in the 1960s there was a tax of 9% on stake and winnings. This eventually decreased to around 7% before being wiped away altogether in 2001.
The laws with gambling and tax are similar for game shows in the UK. You will collect your winnings tax free if you win the jackpot on a famous show like Pointless, The Chase or Who Wants To Be a Millionaire? Many often speculate whether these winnings are subject to tax or not, but they definitely are given away tax free! HMRC (the UK’s tax authority) do not recognise professional gambling as a taxable trade, this is what their representative said: “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.” This makes it unlikely that tax will be introduced on UK gambling anytime soon.
Tax on Gambling in America
The laws on gambling tax in the UK are simple enough to understand. Unfortunately, the laws in America are a little more complicated. The short story is that yes, gambling does get taxed in the US. The rates of tax depend on which state you are in though. None of the gambling taxes are progressive which is different from tax on income. In other words, the tax percentage will always be the same regardless of how much you win. Across most of the states in the US this will always be 24%, a small reduction from the old 25%. This is what the tax laws around gambling in Nevada are, they are most important to know as many consider Las Vegas to be the gambling capital of the world.
The tax in this country is paid to the Internal Revenue Service (IRS). It is only the big wins that are taxed though, you must win more than $5,000 for the tax to apply, or more than $1200 on a slot game. This helps with fun gambling and stops punters going over the top with their stakes. The money is automatically taxed when it comes to withdrawing at an online casino. It almost works like a payslip when you see how many deductions you have had applied. It is vital that any taxable winnings are reported to the IRS. Failure to do so can result in disciplinary action being taken such as a fine or imprisonment.
Tax Laws on Gambling in Other Countries
The laws around gambling in India are complex. Section 115BB of the Income Tax Act 1916 (used to regulate tax as income in India) says that all winnings from any kind of lottery, competition, card game or any kind of gambling whatsoever should be taxed at 30%. It is incredibly easy for all gambling tax to be paid in India as the tax is automatically deducted from any winnings. In some instances there can also be a surcharge tax in Indian gambling which means that some extra tax may be applied depending on income. Other countries with high gambling tax consist of Germany, France and Denmark. Russia, Belgium and Spain have low tax rates when it comes to gambling.