Have you ever dreamt about winning big money on scratchcards, but worried about how much you will lose to a scratchcard tax?
Well good news for you all, there is no tax to pay when you claim a UK scratch card win. If you are a UK resident, any prize – big or small – does not count as taxable winnings.
UK Lottery Tax Rules
Are National Lottery winnings tax free? You bet they are!
The UK lottery tax rules state you do not have to pay tax on National Lottery winnings, such as scratchcards, but also any other lottery games from National Lottery such as Lotto, Thunderball and Euromillions.
In fact, you do not have to pay tax on any UK gambling winnings.
However, there are a few exceptions that can apply over the years proceeding your big winners. You need to be aware of the following tax rules:
Scratchcard Gift Tax
When you receive gifts of large value, you are subject to paying gift tax. However, the beneficiary can gift £3,000 per donor per year absolutely tax free.
Scratchcard Income Tax
Whilst you are not paying any income tax on the lump sum winnings you receive, when you deposit the cash in a bank account, you are subject to income tax on any earnings you make through interest.
You are not going to lose any of your initial winnings, but a substantial amount of earnings is likely to be taken from you.
Scratchcard Inheritance Tax
Depending on which scratch card game type you play, it is possible that it takes the total value of your assets over £325,000. This is an important figure, because any assets exceeding this value are subject to a 40% income tax upon your death.
To try and reduce the amount of inheritance tax you pay on your assets, it is possible to gift cash or valuable assets to friends or family. If however, you give away assets in excess of £3,000 per year, you may have to pay inheritance tax if the beneficiary dies within 7 years.
Who Pays Scratchcard Tax?
One of the reasons that scratchcards and other gambling is allowed in the UK is due to the tax the government makes. Whilst we’ve determined that winners aren’t responsible for paying tax, except in the above circumstances, it is actually the National Lottery that pays taxes on all income from sales.
National Lottery pays 12% income tax on all revenue generated from scratch card and lottery sales. This is lower than the standard tax rate of 15% other gambling companies pay.