UK49s lottery does not offer taxes in the UK directly however once the amount is submitted to the bank as a savings account, income tax is charged on the interest gained. The taxes that you might have to pay are income tax, capital gains tax, and inheritance tax depending on the amount you win.
The national lottery in the United Kingdom was first introduced in 1994. Since the time of its inception, the UK49s lottery is now one of the largest in the world, played regularly by over 70% of the population and with a turnover of about Euro 5.5 billion per annum of which well over 80% comes from the national lotto game, and the rest from scratch cards. No other lottery organization is allowed by law to offer prices of over Euro 100,000 and in practice no other organization competes significantly with the national lottery with respect to offering huge prices for very small stakes.
1. Where does the money go?
Here we have a big question in our mind where does the money go?
The answer is that for every Euro spent on the UK49s lottery:
- 50% is returned to the candidate in the form of prices.
- 28% goes to the government. And the government used this percentage for the good cause of society. For example: health, education, the environment, sports, arts, heritage, and public work; the rest goes to private charities.
- 12% goes to the government again in the form of taxation.
- 5% goes to the 25,000-odd lotto retailers and the 10,000-odd instant-only retailers.
- 1% goes to investors in the form of profits.
- The remaining 4% goes to operating costs, including the costs of competitive salary packages for employees.
2. Taxes on lottery winnings
This may be surprising, as other countries’ tax collectors do take money from tax winnings. But in the UK, lottery winnings are not liable for either capital gains tax or income tax. What’s more, winning on foreign lotteries, like winning on Euro Millions will also not be subject to any income tax. Well, that’s great news, isn’t it? In reality, it’s best you read on without jumping to a quick conclusion just yet.
3. How much tax do you pay if you win a lottery?
You do not pay any tax on winning the lottery in the UK, however, you have to pay income tax on the interest again when you keep the amount in the bank. If your amount is higher, you might have to pay almost 40% to 36% as inheritance tax.
4. Taxes on savings account
Despite lottery winnings enjoying a non-taxable status, it is highly probable that once you deposit your winnings into your bank account you will have to pay taxes in the interest accrued which will be counted as income tax. This could happen by HMRC levying taxes on your savings account. Your independent savings account ISA is limited to Euro 15,240, per year, which is sure to be a tiny fraction of your jackpot winnings. So if you choose to deposit anything above that, your winnings will be liable to capital gains tax. In this scenario there are only two options that present themselves to you; either you put the winnings in a non-interest savings account, or you invest the money into something that is non-taxable.
However, if you are a resident of another country, you may be liable to pay taxes on your UK49s winnings in your home country. It is important to check the tax laws of your home country to determine if you are liable to pay tax on your winnings.
Here are some additional things to keep in mind about UK49s tax:
- You are only liable to pay tax on your winnings if you actually claim them. If you do not claim your winnings, you will not have to pay any tax on them.
- If you win a prize that is less than Euro 1,000, you do not have to fill out a tax return. However, if you win prize that is more than Euro 1,000, you will need to fill out a tax return and declare your winnings.
- You can claim your winnings online, by mail, or in person at a National lottery retailer.
I hope this may help you out.
Final thoughts
For most, taxes could be the last thing on their mind, while they are overjoyed by the prospect of winning a huge sum of money. However, keep in mind that the inheritance tax could take a chink (40%) out of your lottery winning if you were to die. After all we are dealing with huge jackpot numbers that add up to millions of pounds. IHT could very well bite into a sizable chunk of your winnings leaving your loved ones short by a lot. Imagine you won 100 million pounds in the lotto; you would end up paying 40 million pounds to the government. The point to keep in mind is that it’s important to spend all the money while you still can. If you are buying something big, that great! Just make sure you live for the next seven years to really enjoy it.