UK Taxation Laws
This guide only applies to those that are in the UK, even if you’re playing at a UK site, the laws on what you pay will be governed by where you live – not where you play. This may mean that you do have to pay tax on winnings, as some places in Europe and overseas will place a levy on what you win. This can also depend on the game, for France imposes a 2% tax on poker winnings and the Netherlands imposes a larger tax on lotto winnings.
In 2005, a new point of consumption tax was brought in to increase the amount that operators pay. This basically means that the operator pays a tax on your behalf each time you pay in, which covers any tax you would pay on the cash generated. This helps to keep things nice and simple for the government, as they don’t have to try to keep track of who wins what and when.
Casino jackpots can be paid in one of two ways, in a lump sum or in a recurring payment. Either of these will be free from taxation, even if you do choose to accept a monthly amount this will not be counted as part of your income. Even if you did find yourself playing casino games professionally, you wouldn’t be paying money on your jackpots – though you would pay tax on sponsorship deals or any other income generated from your fame. We can only dream!
When you may be Required to Pay Tax
Although you won’t be paying tax initially, depending on what you do with your money you may pay some taxes off the back of your big win. Say you invest this cash into a business, the income that you receive from doing so would be subject to taxation. This would be the same if you earn interest on a current account in which you keep this money or whether you invest in stocks and shares.
Basically, if you use this money to invest or change it into more money then any gains would be subject to regular taxes. The more you make from the money, the higher the rate of taxation will be, especially if you hit a large jackpot amount and invest the lot. Bear in mind that you can make losses on this kind of transaction, then if you regain some of your cash you will need to pay tax on this.
Declaring the amount that you have won will also mean that you may lose existing benefits and assistance. This should be declared upon receipt of the money, or you may be fined and required to pay these back. There is a publicity clause on many large jackpots, so you can’t always keep this kind of cash under wraps.
If you wish to leave your cash to someone else, then they will need to pay an inheritance tax too. Many people choose to avoid this tax by giving the winnings to those that they are intended for over seven years in advance. This may seem like overkill, but a 40% tax applies on your estate over the amount of £350,000. There are a lot of resources online from the government that can help you to understand these taxes and how you can make sure you’re on the right side of the law with them.
Should you Declare your Winnings?
If you are in receipt of any financial assistance, then the answer to this question is yes. Usually when it comes to claiming your aid for the upcoming year, you will be asked how much cash you have in savings and how much interest you have received from your bank in the last year. By filling this out accurately, you will be declaring the fact that you have won this cash and may no longer be eligible for this kind of assistance.
Other than this, only self employed people would generally place this kind of information on their tax return. These are the only real cases in which you would be required to inform the UK government that you have won anything. In most cases, the money is paid and then it’s up to you what you want to do with this.
Some jackpot winners choose to employ the services of a financial advisor after a win, these professionals are best placed to provide information on these processes. There are so many horror stories out there about jackpot winners blowing their cash without a care, only to be back to their regular life in just a few years. Wise spending and investments can make this cash grow rather than shrink, many jackpot winners feel that this is the most prudent way to go.
There can be a few hurdles to jump through before getting your hands on your winnings, including press events and verification of identity. Retaining the services of this kind of advisor can help you to navigate this and ensure that you’re following all the due diligence correctly. We can just imagine ourselves with all that cash right now!
If you do win a jackpot in the UK then you’re incredibly fortunate to not have to pay tax on this influx of cash. In a lot of ways, this gives you a lot more flexibility on what you choose to do with your money but it does mean that you should be careful too. Just ask a professional or stay in contact with the government if you’re in any doubt as to what you should do with this cash.