Do You Need To Submit A Tax Return For Gambling Winnings?

TaxGambling and tax is an interesting beast in the United Kingdom. In short, winners are not taxed on their winnings, so in theory there is no need to declare them on a tax return. In reality, however, doing so could be helpful to you in the long-term. The issue of money laundering means that people need to show where money has come from if they buy anything big and expensive, so having a record of large gambling wins is a good thing.

If you declare your gambling winnings when you fill in your tax return then you won’t be charged any tax on them but there will be an official record of the money on your tax account. This can be used as a paper trail to prove that the money is not from ill-gotten gains if you later look to buy something expensive such as a car or a house. This is an especially useful thing to do if the money that you won was paid out in cash for whatever reason.

Gambling Tax In The UK

tax calculatorElsewhere on this site we’ve looked at the tax that people have to pay on their winnings in other countries, such as the United States of America. In the United Kingdom, the player is not taxed on their winnings and instead the tax is paid by the companies that offer gambling services. They have to pay a Remote Gaming Duty, which is otherwise known as a Point Of Consumption tax.

If someone from the UK wins big in a foreign country, say by playing the slots in Las Vegas, then the tax that is paid on their winnings can be claimed back from the Inland Revenue Service. Because gambling winnings aren’t taxed in the UK in the same way, they also don’t need to be declared in the manner that they need to be in the United States.

It doesn’t matter how much you win nor the manner in which you win it, no tax is payable on the winnings themselves in the United Kingdom. That means that you could win £10 on the bingo or £10 million on the National Lottery and both will be paid to you without you losing a penny to the tax man. That’s also true for professional gamblers just as it is for people who are complete amateurs.

There Are Other Taxes To Worry About

inheritance taxJust because punters aren’t charged any tax on their winnings doesn’t mean that you can just forget all about it as and when you win money through betting. One of the most obvious examples of this is with people who win big on the lottery and then invest their money. Any profit made via an investment of those lottery winnings are liable to receive income tax charges.

There’s also the small matter of Inheritance Tax. If you were to win big and your money was to go to a member of your family or a friend then the money would be liable for an Inheritance Tax. That is payable if you die within seven years of giving someone a gift and is payable on your estate. The rules around thresholds and gift limits change on a regular basis, so make sure you check them.

There’s also the fact that you will have to pay tax on interest that your winnings accumulate. Whether you put your money in a trust fund, a savings account, a bond or even just a standard bank account, the interest earned will be taxable. Not all of it will be taxable, of course, given that the UK government give a certain amount of allowance to tax payers on that front.

Why A Paper Trail Is A Good Thing

Tax Letter HMRC

The United Kingdom’s rules on money laundering regulations changed at the start of 2020, with new laws on the matter introduced. The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 were put before parliament in December of 2019, working in accordance with the fifth AML directive from the European Union.

Whilst the details are worth reading about, the upshot of it is that the rules and regulations around money laundering have been tightened. It means that people gaining large sums of money will have to show where those sums come from if requested to. You might well know that you won a huge amount playing poker, but can it be proven?

Keeping records can help you prove where your money has come from, also having the added benefit of letting you keep track of the ups and downs of your betting. Of course, that won’t necessarily please any authorities that want to know more about the origins of your funds, which is where ensuring that you’ve declared it on your tax return comes in.

By declaring your winnings on your tax return, you’ll have an official governmental record of where the money came from and the fact that it belongs to you and was won in entirely legal and fair circumstances. It’s obviously not the same as having proof from the casino or poker room or what have you, but it’s at least something that you can fall back on.