June 2, 2022

How Are Casino Bonuses Taxed in the UK and Other Jurisdictions?

Ethan Williams
Written byEthan WilliamsWriter

Playing at a live casino online in the UK or any other gambling jurisdiction for that matter is fun and highly rewarding. The best live casinos offer players bonus incentives to lure and encourage them to deposit and play more. 

 How Are Casino Bonuses Taxed in the UK and Other Jurisdictions?

However, after the passage of the Finance Bill of 2017, free bets or casino bonuses are subject to tax in the UK. This begs the question; how are bonuses taxed? Keep reading to learn a thing or two.

UK tax regulations affecting bonuses

The General Betting Duty (GBD) is part of the Finance Act 2014 was enacted on August 1, 2017. In this law, bookmakers and live online casinos in the UK are subject to a 15% general tax on all discounted and free wagers. This gambling regulation targeted live casino operators who pay their duty via electronic media like the internet, telephone, TV, etc.

Previously, the exchequer didn’t get anything from winnings accrued from online casino bonuses. But with these regulatory changes, the HMRC (Her Majesty’s Revenue and Customs) closed this loophole to collect more taxes. Back then, the treasury wasn’t sure about the collection estimate and behavior of the industry operators.

William Hill’s Commercial Director, Ciaran O’Brien, said that the new tax measure was something the industry could do without after the initial £500 million taxations. But on their part, the HMRC reaffirmed its commitment to making the industry a better place for all operators. 

Following the new tax measures on live casino bonuses, no-deposit bonuses were reduced significantly in the UK. As a matter of fact, taxation is one of the reasons why finding no-deposit bonuses is a challenge in the gambling industry. These days, most casinos prefer deposit bonuses, where players must make a minimum deposit to activate the bonus. 

Do UK gamblers pay duty on their bonus winnings?

Look at this; you sign up at the best live casino and claim your £100. Then, Lady Luck smiles on you, and you win $1,000 from your bonus money after meeting all the wagering requirements. But then you realize that the HMRC requires you to hand over 15% of your hard-earned winnings. That would be disappointing, right?

But calm down because the UK isn’t one of those countries where gamblers pay taxes on their winnings. Gordon Brown ended this ‘bad’ behavior in 2001 after getting rid of the 6.5% levy that threatened to bring down the industry. Since then, no casual UK gambler has paid taxes on their winnings. Of course, this also applies to professional gamblers and jackpot winners.

UK gambling operators pay the taxes instead

As good as it is for gamblers, the shoe isn’t that comfortable for betting companies in the UK. That’s because gambling operators pay the price on behalf of players. The exchequer charges a percentage on all casino winnings, depending on the bet type and the casino itself. So, for instance, casinos pay 5% to 25% on all slot machine profits. 

In 2014, the 2005 Gambling Act was amended to include a 15% point of consumption tax applicable on all casino profits. And in 2019, the rate went even higher to 21% on all ‘games of chance.’ At the same time, the government imposed a £2 betting limit on FOBTs (Fixed Odds Betting Terminals). 

The newly increased rate means that players will now see lower betting bonuses or none at all. Also, the wagering requirements are now a little bit tighter as live casinos in the UK seek to stay afloat. But still, the industry is only getting bigger and better. 

Gambling winnings tax in the US

Unfortunately, the IRS isn’t lenient to player winnings in the US. The body stipulates that the following win amounts must be reported to it by the player:

  • Over $600 on horse track bets.
  • Over $1,200 on slot machines and bingo bets.
  • Over $1,500 on keno winnings.
  • Over $5,000 in poker tournament winnings.

Players must provide their Social Security number and fill out the IRS Form W2-G form to report the amount. But in most instances, online casinos in the US will deduct 25% of your winnings and remit it to the taxman before paying you. Now that sucks!

But as you’ve seen above, not all winnings are subject to IRS taxation. For example, winnings from live casino games like craps, baccarat, roulette, and blackjack aren’t subject to filling the IRS Form W2-G. And that’s regardless of the amount in hand.

In addition to these federal taxes, many state authorities also tax gambling income. However, each state has a unique taxing formula, with others exempting players from taxation altogether. 

Ask the accountants for more answers!

Overall, betting taxation varies depending on where you live. As you’ve seen, players in the UK are exempted from tax, with operators carrying all the burden. Unfortunately, the same can’t be said about the US. So, read your local gambling laws and talk to a licensed tax professional if possible. Always play by the rules!

About the author
Ethan Williams
Ethan Williams

Ethan Williams, a lively 24-year-old lad from the UK, brilliantly fuses his passion for online casinos with top-notch English localisation, creating bespoke casino guides for Britain's keen gaming lot.

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