It’s great to get a win when you gamble. However, you want to be able to keep hold of all your winnings. Taxation can rear its ugly head and see payments having to be made. Those gambling in the United Kingdom (UK) and the United States of America (USA) find themselves in different situations when it comes to taxation.
If you are gambling in the UK, then it’s good news when it comes to taxation. There are many ways in which you can attempt to get wins from gambling. You can bet on horse racing and other sports, play casino games, enter lottery games, or hope for a full house playing bingo.
The good news is when you win in the UK, there is no taxation to be paid. That is the case whether you win a few pounds or become a millionaire.
It hasn’t always been this way though. Lottery wins have never been subject to taxation in the UK but it’s a different story when betting on sport. There was a time when those gamblers going to bookmakers had to pay some tax.
At that time the taxman was going to get some money from you whether you liked it or not. You could either pay tax on the stake you were making or see any winnings be taxed. This was as high as 9 percent at one time.
That’s all changed now with the 2001 budget abolishing the betting tax. Now you may be thinking that this would see the UK government losing out on millions of pounds of tax revenue. To claw back the tax, it was the gambling companies who now had to pay tax.
Lottery wins can be extremely high in the UK, especially if playing the EuroMillions draw. The most won by a UK player is £161m but no tax was paid on that amazing windfall. How the winnings are spent though can lead to taxation, for example, if investments are made. Advice on financial planning is therefore important.
It’s a very different situation in the USA though. Players can win hundreds of millions of dollars in lotteries such as Powerball and Mega Millions. Lottery wins in the USA are subject to taxation. Not just federal taxes but also the state where the winning ticket was purchased want their tax too.
The USA gambling industry has seen a great deal of expansion in recent years and taxation is a key factor. USA states are now receiving millions of dollars in tax revenue as sports betting and playing casino games become increasingly popular.
American gamblers have to report winnings on their tax return, whether they come from lotteries, sports betting, or casinos. Failure to produce the correct figures can put you in big trouble with the authorities. That’s never the case in the UK if you back the winner of the Grand National horse race for example.
In the USA, you can even deduct gambling losses on your tax return. The amount declared must not be more than the gambling income figure you claim.
You can see therefore that the tax situation is very different in these two countries. The UK view is that taxation may well deter gambling and that would affect revenues. Instead, have no tax and then get the revenue from the gambling companies.