The UK has one of the best gambling industries in the world, thanks to its regulatory framework and governance that protects consumers and provides operators with the transparency required for growth. Both land-based and online gambling operators are popular among consumers, with taxation being met by operators.
The rise of online casinos has improved choice for consumers: European casinos can offer flexible, multi-currency payment options (crypto included), generous promotions, and a bigger selection of games. Plus, offshore casino operators don’t need to abide by UK gambling laws. This makes them popular among gamblers who are looking to bypass Gamstop restrictions (source: ukgamblingsitesnotongamstop.com).
But how do taxes differ across these different jurisdictions? We examine the tax requirements of operators across the top UK, EU, and offshore operators.
UK Gambling Taxes
One reason that the UK gambling industry is so popular is that consumers do not pay taxes on winnings. This came after a change in regulations in 2001 that saw the betting tax of 9% axed. Before this, players could choose to pay 9% tax on their stake when placing the bet, or wait for any winnings that would be taxed at the same rate.
This could change how much players are paid depending on results. For example, if someone paid tax on a £1 bet at 100/1, the total cost would be £1.09, and they would get £101 returned if the selection won.
If the player chose not to pay tax on the stake and the same bet won, the player would receive £92, with £91 in winning following the 9% deduction and the return of the £1 stake.
Following the change, consumers no longer had to worry about betting taxes, with operators shouldering the burden at a 15% rate on net stake receipts for fixed odds betting. Remote gambling sites are subject to tax rates of 21%, while gaming machine duty varies from 5% to 20% and 25% based on the cost to play.
Unlike some other jurisdictions, gamblers are not required to pay tax on their winnings, even if they are professional gamblers. These winnings are not subject to capital gains tax, however, this can be different for players of crypto casinos in some circumstances.
Crypto casinos are a popular option for modern consumers who want to stake and win popular cryptocurrencies like Bitcoin. The benefit of this for many bettors is that it can improve the speed and security of transactions, as well as lowering the costs of exchanging currencies when betting with international sites.
If a player immediately transfers winnings into their local currency, they will not be liable to pay capital gains tax. However, if they hold on to their cryptocurrency and it rises in value, they may then have to pay tax on the amount above the original winnings. The same is true of winnings that are used for investment purposes, with capital gains tax applicable to profits made.
Offshore Betting Sites
Offshore betting sites are a popular option in locations where gambling is restricted, providing a secure way for consumers to place bets. While this isn’t an issue for UK consumers, these options can provide a better choice, more competitive odds, and impressive bonuses. Lower tax rates in jurisdictions that are popular among offshore operators, like Gibraltar, Curacao, and Malta, can help operators become more competitive against established operations.
Different regulations can also result in fewer restrictions, and bettors can also avoid GamStop checks, with some even offering no-KYC signup that can have players enjoying games in minutes.
EU Gambling Operations
The EU’s gambling tax regulations differ by country, with Maltese operations enjoying some of the lowest fees of between 0.5% to 5% of the company’s GGR. Similarly, Germany introduced a treaty that would set online gambling tax rates at 5.3%, while France is at the other end of the scale, with operators paying 55% on GGR for sports markets and 83.5% on casino betting like poker.
Like the UK, many European and EU countries only tax the operator, leaving winnings tax-free. Some of the countries where this is in operation include Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Finland, Germany, Hungary, Italy, Sweden, Luxembourg, Romania, and Malta.
Potential Changes
Because bettors are not taxed on winnings but can access international betting sites, there is the potential for the UK government to work with external jurisdictions by limiting the exposure of offshore betting sites. Not only would this be related to taxable earnings, but it would also improve customer protections, with the UK’s Gambling Commission unable to influence foreign betting sites on how they must treat consumers.
While the ability for the UK government and gambling regulators to influence international sites is limited, there are calls to make changes at home. It has been argued that the tax rates in the UK limit operators and make it difficult for them to compete with offshore competitors. Lower tax rates would allow them to offer competitive odds and more enticing bonuses, but the government would have to trust that savings made from tax reductions would be passed to consumers and not used to bolster profits.
It is likely that any attempts to reduce tax rates in the UK would be met with opposition, with revenue being used to fund regulators and education programs. 2024-25 tax revenue in the UK from betting and gambling was worth approximately 3.6 billion, which is a significant increase from the £1.29 billion generated in 2002-03.
Conclusion
UK gambling regulations are consumer-friendly, and compared with some other jurisdictions, are relatively fair to operators. The strength of UK gambling regulations gives the industry a great platform for new and existing operators to grow, but the threat of offshore alternatives can’t be discounted.
Lower tax rates in other jurisdictions allow some operators to work with lower overheads, which frees them up to provide more enticing services and offers to consumers who are now able to access worldwide betting sites.
As more betting operators in the UK shift towards online betting and away from the High street, it is unlikely that regulators will reduce costs in the foreseeable future.
