Gambling may be an enjoyable past time, but as with all things in life, there are not-so-fun details attached to it. Since gambling involves the exchange of money, that means taxes are attached to it too.
In this article, we discuss the details of the UK gambling tax and what it means for both players and operators.
It’s good for the players
In the UK, the gambling tax system is the ideal setup for you as a player. The rules are pretty straightforward; basically, you will never be taxed on any form of gambling winnings and you won’t be taxed on your initial bets either.
But, of course, only two things in life are for certain: death and taxes! So how does the UK government make their money from the gambling industry? The answer is quite simple—they tax the operators rather than the players.
This beneficial system for players wasn’t always in place. In the past, a tax was, in fact, levied on players. Previously, you would have to give either 9% of your stake or your winnings to the taxman.
This tax was removed in 2002 by Gordon Brown, although he wasn’t Prime Minister yet; he was still Chancellor of the Exchequer. The tax was removed because the UK government was concerned about the rise of online gambling.
They wanted to ensure the UK could remain competitive in the lucrative gambling scene. As we can see today, they were quite successful. The UK has a flourishing gambling industry that shows no signs of slowing down.
So are there any exceptions to this rule? Surprisingly not. In pretty much any circumstance, you never need to pay a penny to the UK government as a player. This even includes people who gamble as a profession.
The UK isn’t the only country that doesn’t tax gambling winnings. Similar taxation systems are also in place in countries such as Germany, Belgium, and Italy. Find more information about the gambling tax here.
Bad for the operators
As we all know, casino operators like to do what they can to turn a profit. Under the rules implemented in 2002, they needed to pay a 15% tax on all their total profits.
Naturally, operators looked for a way to circumvent these rules in order to maximize their earnings. Eventually, operators discovered they could avoid the tax by basing their companies in other countries.
Certain nations offered very favourable tax rates for casino companies. This is a big reason you often see casinos based in small countries, such as Malta or Gibraltar. According to CasinoGuide.co.uk, by using this method, operators were able to bypass the 15% tax ruling entirely.
Things turn ugly: the Point of Consumption Tax
Of course, governments don’t take kindly to people circumventing the rules to avoid paying taxes. In 2014, new legislation was implemented to stop casino companies from avoiding paying tax in the UK.
This legislation was known as the Point of Consumption Tax. Essentially, these new rules meant that companies must pay the tax applicable to the end user. So if a customer plays on your online casino and they are based in the UK, you are obligated to pay the 15% tax rate.
This move worked quite well for the UK government and they managed to generate an additional £300 million from the gambling industry.
Good for the players, bad for the operators
So there you have it; if you are a player, you will find the UK gambling laws serve you quite well. You won’t ever be taxed on your winnings and it doesn’t look like that will change any time soon.
The way the taxation system is set up now allows for people to claim reimbursement from the government if they lose money doing a taxed activity. This would mean players could claim money back from the government on their gambling losses.
Unless the UK does a complete overhaul of their tax system, don’t expect these taxes to ever return.