As any true gambler will tell you, a few feelings can compare to winning a hand at a poker table or slots. The exhilaration of gambling and winning is truly a unique feeling, which is the main reason for the popularity of gambling. However, nothing will dampen it as quickly as the realization that you have to pay taxes on your gambling winnings. Governments love to wet their beaks in all monetary transactions of their citizens and gambling is no exception. But not all governments do it the same way. While taxing individual gamblers seems like the simplest and most logical solution, some countries adopted a different approach. The UK is one of them.
Are Gambling Winnings Taxable in the UK?
The short answer is no, at least not for players. No matter how much money you make in a casino, it is yours to keep. The government won’t take a penny of it. For many people, especially those not from the UK, this may seem strange. After all, why would any government, especially the one notoriously short on cash, give the punters a free pass? The answer is not that simple, but it boils down to the fact that there are easier ways of taxing gambling. Chasing every individual gambler and forcing them to declare their winnings as income is just too complicated.
Who Pays Gambling Taxes in the UK?
Instead of going after gamblers, the UK government has adopted a much simpler solution. All casinos pay a 15% tax on their profits, in addition to the standard income tax. In 2018, this tax brought £2.9 billion to Her Majesty’s Revenue and Customs, the government’s department in charge of collecting taxes. This applies to all casinos, regardless if they are online or traditional ones. It also includes lotteries, sports betting, and even small poker rooms and bingo rooms. All in all, gambling provides a sizeable chunk of the UK’s taxes and the government won’t relinquish it any time soon. Brexit may force some changes into the current tax system, but abolishing the gambling levy isn’t one of them. It may change the form or the percentage, but it is here to stay.
History of Betting Duties in the UK
Back in a day, UK punters did pay taxes on their gambling winnings. Those taxes were abolished in 2001 when Gordon Brown was Chancellor of the Exchequer. The Gambling Act of 2005 set up the legal frame for gambling in the UK. For the first time in history, it also regulated internet gambling. It also established the UK Gambling Authority, with the goal of preventing organized crime infiltration into gambling establishments, provide fair conditions, and preventing children from being exploited. To combat gambling addiction, the Act forbids establishments from receiving credit card payments for bets, among other things. It also made it mandatory for all offshore casinos to apply for the UK license and pay taxes on all income derived from the UK players. It doesn’t matter whether they are registered in London, Malta, or Timbuktu, if your casino has players from the UK, you are obliged to pay the tax.
Do Other Countries Tax Gambling Winnings?
The truth is that many countries tax gambling winnings. It is just too juicy of a target to pass it up. The United States are notorious for this, making American gamblers jealous of their British cousins. The IRS takes these taxes very seriously and often go after gamblers who try to dodge them. Every casino is legally obliged to report all winning over $1,200. Even slot winnings are taxable, among other things. This is a stark contrast to how the UK, Australia, New Zealand, and some other countries approach taxing casinos. Even Canada doesn’t tax gambling winnings, making it a desirable destination for American gamblers. On the other hand, France has a 2% tax on poker winnings. In the Netherlands, you will pay 29% on all winnings above €454. Spain has perhaps the most brutal system, where all winnings are taxed as income.
Is This A Fair System?
Some experts argue that the current system is far from being fair. In many cases, operators include the tax levy into their odds, allowing them to transfer the cost to players. In essence, players pay this tax indirectly. Unfortunately, under the current system, players pay the tax regardless if they win or lose. Before 2001, they were obliged to pay taxes only on winnings. This is the main point of contention between supporters and opponents of the current gambling tax. Unfortunately, the old system was simply too cumbersome to implement correctly, leaving the UK punters with no choice but to live with this injustice.
It is easy to see why the UK has adopted this form of tax levy. Compared to the number of individual players, casinos are a lot less numerous category and far easier to control. Since they make a tidy profit from their players, they are not inclined to try and cheat the system. The risk of losing their license and somebody ending up in jail is simply not worth it. Add in the fact that they routinely roll over the cost of the tax on their players and it becomes obvious why tax levy brings so much money to Her Majesty’s government. If royal tax collectors were to go after each individual player, the amount of work would probably not make it worth it to even collect the tax in the first place. With millions of active players, it would be impossible to make sure that even the majority of them, let alone all of them, have paid their dues.