Taxes on lottery wins in the UK – the rundown
We all dream of taking home a big win, but it’s understandable that you might not want to share a portion of your winnings with the taxman…
Is the lottery tax free?
The short answer is yes; you won’t pay any tax on your lottery winnings. Unlike many other countries, where lottery winnings are taxable, in the UK the winner takes it all. If you’re wanting to play the lottery or scratch cards, you can rest easy knowing there won’t be any tax on your potential winnings.
Do lottery providers pay tax?
Yes. So, instead of the UK Government charging the player, they instead take a portion from the industry. This is called the “point of consumption tax”. This came into effect in the late 1990s, however it has been updated to include online gambling.
Due to some loopholes in the way the law worked back then, a gambling company could move offshore, and avoid customers paying 9% tax on their winnings. This forced Gordon Brown, the Chancellor at the time, to change the law on gambling and tax within the UK.
Due to the ability to play the lottery online, profits for gambling companies have soared. This has meant that regulations need to be much tighter to protect the general public from scams and exploitative organisations.
Any gambling activity in the UK requires a licence, and for-profit gambling companies are charged a 15% tax on all profits. However, online gambling providers will be charged a 21% tax on their profits. Despite the high taxes, the industry continues to grow rapidly because of constant innovation and loyal player bases.
The gambling industry is a vital industry for the UK Government, as they provide crucial funding for public services. The industry supports the economy, providing a means of not just entertainment, but also employment for a variety of people.
Lottery tickets and scratch cards are subject to strict regulations
The gambling industry is heavily regulated by the UK government and is accountable for every one of their players. The industry is dedicated to protecting its players, by contributing essential funding to initiatives to prevent problem gambling.
The UK’s gambling watchdog, the Gambling Commission, ensures that there are well-regulated spaces for all types of gambling, whether it be in a casino, or online lottery tickets and scratch cards. Charity lottery providers like The Health Lottery are a crucial fundraising tool as they provide lottery tickets and scratch cards that raise money for good causes, and they are also subject to the same strict set of rules and regulations as for-profit gambling companies. However, they are not subject to the same taxation rules as for-profit companies.
Regardless of whether you use a charity lottery provider, or a for-profit company, and how much you win, you will not have to put the amount on your tax return. Just be aware that expensive purchases may be subject to fraud and anti-money laundering checks. It’s a good idea to keep a record of your winnings, and it’s always better to bet with licensed providers, as you’ll have no trouble explaining where your winnings originated from.
We can confirm that all legitimate lottery, online gambling and scratch card winnings are tax-free in the UK, which means whether you win £1, £100, or £1million, you won’t pay a single penny to HMRC and the UK Government and you won’t have to worry about not getting all your winnings.
This is not necessarily the case for lottery winnings in other countries. In the United States, for example, lottery winnings are treated as taxable income by the federal government, and depending on where you live or win a US lottery, you could owe state taxes too.
If you’re looking for a charity lottery provider to play with (in Britain!), why don’t you try out The Health Lottery? We have a variety of games to play, from our main lottery draw known as The Big Win, All or Nothing - the innovative game that pays out if you match no balls, QuickWin, that has £12 million in jackpots every day of the year, to online scratch cards... and remember, you won’t pay any tax if you win!
