Gambling Tax: It’s not as difficult as you think

Whenever someone makes money, the government always finds some way to tax it, so gambling winnings shouldn’t be an exception right? But the answer might just surprise you.
Read on if you want to learn more about how the UK gambling tax works.

The history of gambling tax

In the past, it was illegal to gamble in the UK. All of the gambling done was on the black market and therefore, the government couldn’t make any money from taxing it.
All of this changed in the ‘60s when gambling was legalised. In the original betting shops, players would have a 9% tax levied against them by the government.
Whenever you placed a bet, you would be faced with a choice. You could either pay the 9% tax on your initial stake or you could opt to have the tax taken out of your winnings.
Over time, this tax was reduced until it was eventually abolished by Gordon Brown in 2001. The reason for the abolition of the tax was that Brown wanted the UK gambling industry to remain competitive in the face of ever-increasing competition from online gambling.
This decision was definitely a good one, as the UK remains one of the best countries in the world for casino companies to operate in.

So it’s tax-free?

This means that whenever you play at a casino or place a sports bet in the UK, you don’t have to pay any tax whatsoever. Even if you win a million pounds when gambling, you don’t have to pay a penny to the government.
You also don’t need to declare any of these earnings to the taxman either. In fact, even professional gamblers who make their livings from gambling don’t have to declare their winnings. So if you are lucky enough to gamble for a career, you don’t need to pay any taxes on your earnings.

Who pays the tax?

But the government still has to get paid somehow, right? They make their money by taxing the operators rather than the players. If you happen to own a casino, then it’s not really the ideal setup for you, but for the average consumer, it’s a great system.
In other countries, such as the Netherlands, you need to report your gambling wins to the government and you need to pay a tax on it. This means you don’t actually win the amount stated; you have to pay a percentage to the government.
This isn’t an issue in the UK. The amount you win is the amount you get, and there is no need to fill out any forms or worry about any taxes. The responsibility for paying tax falls squarely on the operators who need to allocate 15% of their total profits to taxes.

Are the operators happy about this?

The primary purpose of running a betting site or a casino is to make money, so naturally, operators don’t want to pay such a high rate of tax on their profits. Operators are always looking for new ways to circumvent tax laws and pay as little as possible.
One technique that has been used is to move company operations offshore to another country that has a more favourable tax rate for casino operators. This is a big reason why certain names pop up constantly when you look at UK casinos online; for example, Malta or Gibraltar.
Unfortunately for the operators, these tactics have been cracked down on by the UK government. In 2014, the UK government introduced a Point of Consumption tax.
This law meant that operators were now obligated to pay tax in the country their customers were based in. By extension, this meant operating out of a “tax haven” country is now a much less effective way of avoiding paying tax.

Don’t worry about tax

If you are simply a player, there is nothing to worry about when it comes to gambling taxes in the UK. You are not obligated to pay any tax on either your bets or your wins, and it is quite unlikely that is going to change at any point in the future.
The only reason you would need to worry is if you are a casino operator or owner.