Do You Pay Tax On Game Show Winnings In The UK?
If you are wondering whether or not you pay tax on game show winnings in the UK, you will find the answer to your question in the following blog post. Additionally, we will also provide guidance on the usage of game show winnings determines whether or not tax is to be levied on them; and at what rate.
Do You Pay Tax On Game Show Winnings In The UK?
No, you don’t pay tax on game show winnings in the UK. When an individual participates in a game show or a lottery, this is considered gambling in the UK. As a result of this, any winnings that they get will not be treated as income by HMRC and will not be subject to any tax.
That said, how you use, save or invest your game show winnings in the UK can be taxed in any of the following ways:
- Income Tax
- Capital Gains Tax
- Inheritance Tax
- Dividend Tax
In addition to this, if you gift a proportion of your game show winnings to a family member or a friend, you will have to remain within the annual tax-free limit of £3,000. This means that any amount over and above £3,000 gifted to someone else will be taxed. However, in this case, the tax will be due to the recipient of your gift.
How Does Income Tax Apply To Game Show Winnings In The UK?
While your game show winnings are not directly taxed in the UK; if you keep them in a savings account with a bank and earn interest through your savings, the amount of interest you earn will be treated as income and will be subject to taxation in the same way as your income.
This means that:
- if you earn interest between £12,571 to £50,270, you will pay a basic rate tax of 20%
- if you earn interest between £50,271 to £150,000, you will pay a higher rate tax of 40%
- if you earn interest of more than £150,000, you will pay 45% of the amount as tax
Personal Allowance is applied in the same way as well. This means that for interest earned equal to or less than £12,570, there is no income tax to be paid.
How Does Capital Gains Tax Apply To Game Show Winnings In The UK?
Capital Gains tax does not apply directly to your game show winnings in the UK, but if you invest the amount (wholly or partially) in stocks and shares, or you purchase an asset such as property, Capital Gains tax will be applied if:
- you make a profit from the sale of such investments
- the profit you earn is more than £12,300
This means that any assets or investments purchased from your game show winnings may not be subject to Capital Gains tax at the time of purchase but once you gain a certain amount through the sale of assets and investments, you will be liable for Capital Gains tax on the profit you earn from such transactions.
This includes the following assets and investments:
- possessions such as jewellery or watches that are valued at more than £6,000
- property that does not count as your main home
- shares, stocks and ISAs
- business assets such as land or machinery
How Does Inheritance Tax Apply To Game Show Winnings In The UK?
Inheritance Tax can only apply to game show winning in the Uk in the following ways:
- the winner dies and passes on their winnings to a family member (other than their spouse/partner) as part of the deceased’s estate
- the amount is more than the tax-free allowance of £325,000
This shows that Inheritance Tax will not directly apply to game show winnings especially if they are kept in cash form and will depend on the amount that is passed down to a family member at the time of the winner’s passing away.
In this case, any amount in excess of £325,000 will be taxed at a flat rate of 40%.
How Does Dividend Tax Apply To Game Show Winnings In The UK?
If you invest your game show winnings in the purchase of shares of a company, the dividend that you earn as a shareholder will be subject to Dividend Tax in the UK. in this case too, you will have a certain tax-free allowance that will not be taxed and it will only be amounts in excess of the threshold limit of the tax-free allowance that will be taxed.
According to the taxation law in the UK, if you invest your game show winnings in the purchase of shares of a company and start earning a dividend of more than £2,000 within a tax term, you will be liable to pay Dividend Tax at the following rates:
- if you are a basic rate taxpayer, you will pay Dividend Tax of 8.75%
- if you are a higher-rate taxpayer, you will pay Dividend Tax of 33.75%
- if you are an additional rate taxpayer, you will pay Dividend Tax of 39.35%
The above discussion helps to conclude that you don’t have to pay tax on your game show winnings in the UK. However, how you choose to invest or save the amount will determine whether or not they will be taxed and how much you owe in tax liability. If you wish to speak to a financial advisor regarding the matter, you will find help through TaxScouts.