Are you playing the lottery and wondering about taxes on lottery winnings? Then Wizard Slots got the answers for you.
Most players buy tickets but don’t think about their potential lottery winnings getting taxed. So, if you’re wondering, ‘Do you get taxed on lottery winnings in the UK?’, you’ve come to the right place.
Do You Get Taxed On Lottery Winnings?
Lottery winnings are not taxed in the UK as they do not count as income. So, you get to keep all the money if you win. However, there are exceptions.
Saving part of your winnings in a bank account could be a great idea. However, any interest earned will generate income tax, but on the interest only.
Taxes can be due if you decide to gift a part of the winnings. This is because the money becomes part of your estate if you win. If you pass away and leave your property to someone, they will have to pay inheritance tax. Inheritance tax applies to property worth over £325,000.
Additionally, if you give any friends or family the money, it still counts as your property. So, the gift recipients will owe taxes if you die within 7 years of gifting them. However, there are some exceptions.
The £3000 Allowance
Every year, UK citizens are allowed a £3000 gift allowance without incurring inheritance tax.
Worth up to £250, smaller gifts are also allowed. So you can give them to as many people as you want without going past the £3000 mark.
You can support any of your family members with a wedding gift. The classes are as follows:
- Up to £1,000 per person in the extended family. E.g. an aunt, uncle, cousin, nephew, etc.
- £2,500 for any grandchild or great-grandchild.
- £5,000 for any child.
Why Is The Lottery Tax Free?
Lottery winnings in the UK are not taxed. That means you can play in any National Lottery, like the lotto, Euromillions, or scratch cards. Playing the lottery is a form of gambling, so any profits you make are unforeseen and, therefore, exempt from tax.
Therefore, if you win a £2,000,000 lottery, you’ll receive £2,000,000 in your bank account. However, if you put the money in a savings account or gift it to others, then it becomes liable for income tax or inheritance tax.