Do You Pay Tax On Sports Betting?

No, in the UK you don’t pay any tax on sports betting - or on any other form of gambling. This makes the UK a particularly good place to be for punters, who get to keep all their winnings to themselves. It also works out well for bookies, whose customers are more likely to bet with them if they know a big win won’t mean a complicated tax return.

Whether you’re a football, horses or tennis bettor, a lottery winner, a bingo fanatic or a professional poker player, tax is one thing you don’t have to worry about in the UK. But why is that? And doesn’t the government want to pad the Treasury’s coffers with tax from the sports betting industry? In this article, we’ll answer all your questions about tax and sports betting, so you can go out and bet with confidence.

Why Is Sports Betting Tax Free?

Essentially, tax isn’t imposed on sports betting winnings - or any other gambling winnings - because it would be an administrative nightmare. Given that, on average, gamblers will almost always lose money, it’s essential to be able to deduct losses from any winnings, meaning that there’s a high chance that any tax paid on a big win might well have to be refunded subsequently if it’s negated by later losses.

The cost of administering such a system would, therefore, be so high as to render it almost pointless, for the amount it would bring in for the government.

So How Does The Government Gain Revenue From The Gambling Industry?

Tax is charged at the bookie’s end. Instead of a tax on consumers’ winnings, bookies must pay tax at the point of consumption - i.e. the point where a customer actually places their bet.

This wasn’t always the case; until 2001, there was a 9% tax on individuals’ winnings from gambling, but this was abolished by Gordon Brown. He replaced this tax with a 15% rate on bookie’s profits in the UK - but the downside of this system was that online bookies could base themselves offshore (usually Gibraltar), thus avoiding the tax, and giving themselves a significant advantage over in person betting shops.

In 2014, this was amended to the tax at the point of consumption, which prevented bookies from evading it by basing themselves offshore. Nowadays, there are different rates of tax depending on the type of gambling involved. High street betting shops, for example, pay the 15% general betting duty on their profits, whereas remote gaming operators (i.e. online betting sites) must pay 21%.

This may seem like quite a lot - and there are reports that the government is considering raising gambling duties still further - but tax doesn’t seem to have stopped betting sites making huge amounts of money. Tax is simply factored into the odds offered by bookies, ensuring that the bookie always makes a profit.

Is Sports Betting Tax-Free Everywhere?

Definitely not - the UK is very much an exception rather than the rule. In the USA, bettors must pay as much as a 24% tax on gambling winnings, which are considered a form of income by the federal government. This results in some extremely complex calculations when deducting losses for an American doing their yearly tax return. In Germany, meanwhile, gambling winnings are subject to a 5% tax.

In Canada, however, the situation is very complicated. Casual gambling income, where the bettor is clearly only betting as a hobby, is not taxed - but if the bettor goes about their betting in a ‘businesslike’ manner, their income becomes taxable. This doesn’t seem to depend on the amount a gambler is making - in one case, a sports bettor who made a profit of $5 million on their betting was judged not to be required to pay tax on it - but on the nature of their behaviour. A skilled pool player, who managed to make $1000 per week by betting on his own games against bar patrons, was ruled to be engaging in businesslike behaviour, and thus required to pay tax.

Overall, the average British sports bettor is very lucky to be living in the UK, where they generally don’t have to give tax on their winnings a second thought!

What If I Make A Living From Sports Betting?

Fortunately, the UK doesn’t take the same view of things as Canada! No matter how systematic or skilled your betting, you won’t be required to pay tax on it, even if your entire living comes from betting. Even professional poker players don’t have to pay tax on their income - unless, that is, they’re also doing a sideline in giving talks on their career, any earnings from which would be taxable.

To sum up, no matter how good a sports bettor you are, and no matter how much money you’re making from your betting, the government won’t ask for tax on your winnings.

What About Matched Betting?

People are often concerned that the government will consider Matched Betting differently to other forms of betting - after all, your profits are guaranteed (provided you follow the instructions correctly) - but the government has been pretty clear that this isn’t the case.

For tax purposes, Matched Betting is counted as gambling, even though the reasoning for making gambling tax-free, that gamblers usually lose more than they win, doesn’t apply. HMRC has explicitly stated that:

‘The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade.’

Source: HMRC Business Income Manual

This makes Matched Betting one of the best side hustles out there. Along with making guaranteed profits (so long as you do it right) from the comfort of your own home, you keep them all to yourself, with no need to worry about tax!

Can I Come Under Suspicion For Sports Betting Winnings?

It’s natural enough to be a bit concerned if you start transferring large sums of money into your bank account from big wins from your betting. Banks do have a habit of asking probing questions about the source of unexpected large transfers, which can be a red flag for money laundering or other criminal activity.

But sports betting is perfectly legal, and it shouldn’t be difficult to prove the source of your funds. If you’re betting online, the transfer will usually be coming from a registered bookmaker, so the source of your win will be very obvious. Even if you bet in person with cash, you’ll have a receipt for the bet, so it’ll be easy to demonstrate to your bank that your winnings have a legitimate source.

If, however, you decide to venture into crypto gambling - which we don’t recommend, as it’s largely unregulated and therefore much riskier than using a debit card or other established method of payment - you may be more likely to draw attention. Crypto gambling is itself entirely legal, but because cryptocurrency is used extensively for criminal purposes, transfers from crypto accounts can look very suspicious. If you do decide to try your hand at crypto gambling and enjoy a significant win, it may be wise to report your win to HMRC yourself, so that they’re aware of the source of your funds.

In summary, it’s always best to keep track of your bets (which is a good idea anyway when sports betting) so that if any winnings are ever called into question, you’re able to easily provide proof of how you gained them.

Tips For Safe, Tax-Free Betting

• Keep good records. The average sports bettor is unlikely to come under much scrutiny as a result of their betting, but you never know when a big win might change that. Keeping track of your bets (using our handy profit tracker, if you like) ensures you’re able to prove where your winnings have come from - and it also reduces the chances of losing track of what you’re doing, or forgetting about money tucked away in a little used bookie account.

• Don’t get complacent. You may not have to worry about paying tax, but that doesn’t mean you can bet freely with no potential consequences. Sports betting is an inherently risky activity, and most people are more likely to form a gambling addiction than they are to make consistent profits. For this reason, you should be mindful and careful about your betting - and stop gambling if you think you might be becoming addicted.

• Get professional advice. If you start getting into more financially complicated sports betting, such as international betting (i.e. using international betting sites, rather than UK-based ones) or cross-currency betting, you’d be wise to consult a financial advisor if you have any tax-related questions you’re uncertain about.

• Try Matched Betting. To enjoy tax-free profits without the risk of traditional sports betting, give Matched Betting a go!