Lottery tax is one of the most common questions asked by the lottery players. Do the winner of the lottery has to pay tax in the United Kingdom? The answer is no, but it’s worth noting that there are 5 types of tax that the winner might have to pay.
Here are 5 lottery tax facts in the UK:
- Deposited interest or Income Tax – This is based on the money you deposit. If the player earns interest from their deposit money, they will have to pay for income tax. The basic rate for this deposited interest tax is 20%. Winners need to pay this based on the paid on income over the tax threshold of £10,400.
- Gift Tax – This tax should be paid by those who received some or all your winnings fund. For example, if you want to give the fund to a friend or family member, there will be a tax-free limit on this gift tax which is $14,000. The winner can give away $14,000 to many individuals as they want without having to pay for the gift tax.
- Inheritance Tax – Applicable for someone who inherits the fund you received from the lottery winning. Inheritance tax is act as an allowance that has a tax-free limit of £3,000 per year.
- Consumption tax – The rate for this tax is 17.5%. This consumption tax includes the value of goods and services the winner might use with the winning fund. A consumption tax also includes excise, sales taxes, and tariffs. In other words, this consumption tax will be taxed based on what people consume in their daily life necessity.
- National insurance contributions – This tax is similar to income tax that is based on the income winner get. The rate will be depending on the type of employee winner are. The rate may be varied from 0% to 13.8% depending on the earnings per week.