Tax on Lottery Winnings UK – A Complete Guide

tax on lottery winnings uk


The UK National Lottery has made almost 5,700 millionaires since its beginning in November 1994, but what would you or your clients do with their winnings?

Although this article focuses on tax and investment considerations for substantial lottery winners, many challenges may emerge for other windfalls, such as significant inheritance or compensation claims.

And the huge number of single participants in the lottery.

Many people fantasize about winning life-changing amounts of money and see themselves quitting their jobs, drinking champagne alongside their new swimming pool, or possibly purchasing a stable of supercars.

Lottery winners are exempt from paying both income and capital gains taxes. Continue reading to know about tax on lottery winnings in the UK.

On the other hand, tax advisors have more fascinating opinions about the prizes. One of the first pieces of tax codes and information most individuals learn is that gambling profits, including lottery prizes, are tax-free.

What is a lottery win?

What is a lottery win

A lottery is a kind of gaming in which numbers are drawn at random for a reward. Some governments forbid lotteries, while others support them and even organize national or state lotteries. Governments often regulate lottery games to some extent.

Vendors that sell lottery tickets with the best odds must be licensed, and minors are prohibited from purchasing them. Many nations in Europe and North America and a large portion of Asia outlawed lotteries after they became widely popular throughout the nineteenth century.

It remained thus until well after WWII. Casinos and lotteries started to reappear across the globe in the 1960s as a way for governments to collect cash without increasing taxes.

I won the lottery, but do I have to pay taxes on it?

Lottery winners don’t have to pay taxes on their winnings because lottery winnings aren’t considered income. However, keep in mind that the money will become part of your estate when you die, and your estate may face substantial Inheritance Tax repercussions, with the current rate being 40%!

What Happens to the Money?

What Happens to the Money

The massive issue on everyone’s mind is, “Where does all the money go?” The answer is every £1 spent on UK lottery tickets, Fifty percent of the bet is returned to the punter in the form of winnings.

The remaining 28% goes to a government-regulated fund for “good causes,” the majority of which goes to projects that the government would otherwise be expected to carry out in the areas of health, education, the environment, the arts, sports, heritage, and public works; the remainder goes to private charities. Direct tax credit net the government twelfth of all income. The 25,000 Lottery retailers and 10,000 instant-only stores get 5% of the money.

Profits of one percent are distributed to investors. The remaining 4% is allocated to operations expenses, including the expenditures of competitive employee compensation packages.

Can I distribute my lotto winnings to my family?

Imagine winning the lottery and deciding to distribute your fortune among your immediate family members, such as your parents, children, or even siblings. Depending on how much money you win, you may wish to give part of it to your closest relatives so that they may live a more financially secure and pleasant life.

While lottery wins in the United Kingdom are tax-free, if you choose to divide your prize money with people closest to you, they may be forced to pay Gift taxes on the money they receive.

There are also various tax-free restrictions based on how much money you want to contribute to family members and your connection to the receiver may consider.

More information on Gift Tax may find on the government website or by speaking with a competent financial advisor. Do I have to pay taxes if I give my lotto wins away within my lifetime?

It all depends on who you’re giving your presentation gifts to a spouse or civil partner and charity gifts are excluded from Inheritance Tax. Giving money to children, friends, or other family members does not eliminate the IHT tax.

If you die within 7 years after making that donation, IHT may be due. However, it is essential to remember that even if you do not make it through seven years, the recipient is responsible for the tax owing, which may surprise them.

Can I distribute my lottery winnings to family and friends?

Can I distribute my lottery winnings to family and friends

You could wish to share your wins with your friends and your family. However, it is crucial to remember that the same regulations apply as before.

While you will not be forced to pay any tax or tax codes on the money you win, your friends may be liable to pay Gift Tax on any amount you pass on to them. The same holds for inheritance tax.

What happens to my winnings if I pass away?

The leftover money becomes part of your estate. According to the Rules of Intestacy, it passes according to your will’s provisions if you have one, which determines where your estate goes if you die without leaving a Will.

Unbelievably, 60% of individuals die without having made a Will. It should be a top priority for anybody with assets; make it the first item on your to-do list before scheduling that vacation across the globe.

Can I contribute my lottery winnings to a good cause?

Can I contribute my lottery winnings to a good cause

Winning the lotto jackpot provides you with an incredible chance to help people in need. The good news is that you have no legal obligation to donate a portion of your income to a charitable organization. Furthermore, charitable contributions of any amount are tax-deductible.


You may have fantasized about what you’d do with your lottery wins, aside from the apparent expenditures, such as potentially paying off a portion of your mortgage.

Treating yourself to a fancy car, booking the vacation of a lifetime, or even turning your dreams of starting your own business into a reality, you’ve likely considered giving some of your winnings to family, friends, or you can set up a charity. We hope the information in the preceding guidance was helpful for you.

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