Horse racing is a popular pastime in the UK with many thousands of people placing bets on their chosen horses each year. For some, the thrill of the race is enough, but for others the potential to win money provides an added incentive. But with any potential winnings, comes the question of taxation. Do you pay tax on horse racing winnings in the UK?
HMRC Tax Rules
The answer to this question is yes. According to HMRC (Her Majesty’s Revenue and Customs), any profit made from betting on horse racing is liable to UK income tax. This means that any winnings must be declared as income on your tax return. However, it is important to note that losses cannot be claimed against your tax bill.
How Much Tax Is Payable?
The amount of tax you will have to pay depends on the level of your income and other financial circumstances. The current rates for UK income tax are:
- Basic rate (20%)
- Higher rate (40%)
- Additional rate (45%)
So, for example, if you are a basic rate taxpayer, you would have to pay 20% of any winnings over the personal allowance (£12,500) as income tax.
Tax on Winnings from Overseas Races
It is also important to note that any winnings from overseas races are also liable to UK income tax. So, if you are betting on a race in another country, you must declare any winnings on your tax return.
Tax on Professional Gamblers
The tax rules are slightly different for professional gamblers. If you are a professional gambler, you may be liable to pay gambling duty on your winnings. This is a flat rate of 15% and is paid directly to HMRC.
Registering as a Taxpayer
Before you can start paying tax on your winnings, you must first register as a taxpayer with HMRC. This can be done easily online, and you will be given a unique reference number which you must use when filing your tax returns.
Tax Returns
Once you have registered as a taxpayer, you must file a tax return each year. This must be done by the 31st of January and must include details of all winnings and losses throughout the previous tax year.
Claiming Expenses
If you are a professional gambler, you may be able to claim certain expenses against your winnings. These could include costs such as travel, accommodation, and any other expenses related to the gambling activity.
Record Keeping
It is important to keep accurate records of all winnings and losses, as well as any expenses incurred. This will make it easier to file your tax return and will ensure that you pay the correct amount of tax.
Conclusion
So, to answer the question: do you pay tax on horse racing winnings in the UK? The answer is yes. All winnings from horse racing must be declared as income on your tax return and you may have to pay income tax or gambling duty, depending on your circumstances. It is important to keep accurate records and to register as a taxpayer with HMRC before filing your tax return.
Sources
- HMRC. (2020). Gambling and betting income. Retrieved from https://www.gov.uk/gambling-and-betting-income
- HMRC. (2021). Income tax rates and personal allowances. Retrieved from https://www.gov.uk/income-tax-rates
- HMRC. (2021). Registering as a self-employed person. Retrieved from https://www.gov.uk/register-for-self-assessment