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Do you have to pay tax on a lottery win?

Topic closed. 14 replies. Last post 2 years ago by myturn.

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Bondi Junction
Australia
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December 24, 2007
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Posted: April 26, 2015, 8:33 pm - IP Logged

Do you have to pay tax on a lottery win?

 

Her Majesty's Revenue & Customs doesn't regard lottery winnings as income, so all prizes are tax-free – hurray! However, there could be tax implications once you've banked your winnings.

 

The cash will form part of your estate and be liable for 40% inheritance tax (IHT) if it takes the value of your estate above the current threshold of £325,000.

 

Gifting millions will not save you from paying IHT either: HMRC will tax you on a sliding IHT scale should you die within seven years of gifting any cash to friends and relatives – a 20% reduction in tax if you die between three and four years after gifting, a 40% reduction between four and five years, etc). You can get around this by making sure the recipient signs an agreement that they will pay any IHT due if you do die within seven years.

 

This can cause problems for lottery syndicates who could be caught out if the person who receives the cheque dies within seven years of the win. However, they can protect themselves against IHT liabilities by drafting a simple agreement. As this HMRC document states: "No liability to inheritance tax arises on winnings by a football pool, National Lottery or similar syndicate provided that the winnings are paid out in accordance with the terms of an agreement drawn up before the win."

 

You can download a syndicate agreement template from the National Lottery website.

We all get a lot out of lotteries!

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    Kentucky
    United States
    Member #32652
    February 14, 2006
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    Posted: April 26, 2015, 9:58 pm - IP Logged

    Do you have to pay tax on a lottery win?

     

    Her Majesty's Revenue & Customs doesn't regard lottery winnings as income, so all prizes are tax-free – hurray! However, there could be tax implications once you've banked your winnings.

     

    The cash will form part of your estate and be liable for 40% inheritance tax (IHT) if it takes the value of your estate above the current threshold of £325,000.

     

    Gifting millions will not save you from paying IHT either: HMRC will tax you on a sliding IHT scale should you die within seven years of gifting any cash to friends and relatives – a 20% reduction in tax if you die between three and four years after gifting, a 40% reduction between four and five years, etc). You can get around this by making sure the recipient signs an agreement that they will pay any IHT due if you do die within seven years.

     

    This can cause problems for lottery syndicates who could be caught out if the person who receives the cheque dies within seven years of the win. However, they can protect themselves against IHT liabilities by drafting a simple agreement. As this HMRC document states: "No liability to inheritance tax arises on winnings by a football pool, National Lottery or similar syndicate provided that the winnings are paid out in accordance with the terms of an agreement drawn up before the win."

     

    You can download a syndicate agreement template from the National Lottery website.

    My guess is the majority of LP members don't fly to the UK, Europe or Australia to buy lottery tickets and never won enough in the US to get a W-2G. Is there really a benefit of not paying taxes for players who never win enough to pay tax on the winnings?

      eddessaknight's avatar - nw paladin.jpg
      LAS VEGAS
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      Posted: April 26, 2015, 10:19 pm - IP Logged

      I Agree!

      That makes solid good sense Stack

      Let go and render to Caesar his tribute

       

      Fortes Foeruna Juvat

      Eddessa_Knight Sun Smiley

        noise-gate's avatar - images q=tbn:ANd9GcR91HDs4UJhjxO7cmeMQWZ5lB_FOcMLOGicau4V74R45tDgPWrr
        Bay Area - California
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        Posted: April 26, 2015, 10:38 pm - IP Logged

        There are " some States" in the USA that do not tax lottery winnings- BUT there is NO WAY to avoid paying Uncle Sam or the US treasury taxes on lottery winnings above $599.00 . There are however some shady convenience store owners who may cash scratcher tickets for under a grand or larger, but if found out, could be fined or sentenced to jail.

        **Death &Taxes are the two things that are unavoidable in these United States.

        People who say it cannot be done should not interrupt those who are doing it- George Bernard Shaw.

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          Kentucky
          United States
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          Posted: April 26, 2015, 10:58 pm - IP Logged

          I Agree!

          That makes solid good sense Stack

          Let go and render to Caesar his tribute

           

          Fortes Foeruna Juvat

          Eddessa_Knight Sun Smiley

          I've had my share of W-2G from lotteries, casinos, and race tracks; I didn't like it, but that's the law. I still fail to see the logic of moving to country with no taxes on jackpot winnings when the 99% of the players will never win a jackpot.

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            Kentucky
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            Posted: April 26, 2015, 11:05 pm - IP Logged

            There are " some States" in the USA that do not tax lottery winnings- BUT there is NO WAY to avoid paying Uncle Sam or the US treasury taxes on lottery winnings above $599.00 . There are however some shady convenience store owners who may cash scratcher tickets for under a grand or larger, but if found out, could be fined or sentenced to jail.

            **Death &Taxes are the two things that are unavoidable in these United States.

            I doubt that Myturn is speaking from the experience of winning a jackpot in another country. But seriously, would you move to another country just because there is no tax on lottery winnings?

              cbr$'s avatar - maren
              Cordova,Al.
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              Posted: April 27, 2015, 12:52 am - IP Logged

              In the U.S, yes you pay tax, first if the state that you winning in has tax on lottery win. They take their taxes out before they check for it. Then you get a W- 2G , taxes form, one copy go to your Federal tax, one to state taxes.....etc. There are just some small different. Ex; the lady that just win the PB. that live in ALA. [which is a none lottery state] , The state she win in will get the taxes, here she can only be hit with just federal taxes. All the taxes that state was entitle to was taken out before she receive the check.

                Bondi Junction
                Australia
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                Posted: April 27, 2015, 3:40 am - IP Logged

                Are my winnings tax free?

                National Lottery prizes are not chargeable gains for the purposes of UK Capital Gains Tax and will not normally be assessed for UK Income Tax. If a prize is won and shared by a syndicate who entered into a written agreement before the win, then syndicate members should not be liable to pay UK inheritance tax. However, please note that Her Majesty's Revenue and Customs law and practice may change. The above comments are based on our understanding of HM Revenue and Customs law and practice as of April 2014.

                UK NATIONAL LOTTERY

                We all get a lot out of lotteries!

                  BobP's avatar - bobp avatar.png
                  Dump Water Florida
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                  Posted: April 27, 2015, 8:17 am - IP Logged

                  Most places where the lottery prizes are tax free are because the tax is in the ticket price, all players paid the tax in advance for the winners.  Too bad the U.S. isn't that advanced. 

                  BobP

                  How deep is the water if you can't see the bottom?

                    savagegoose's avatar - ProfilePho
                    adelaide sa
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                    Posted: April 28, 2015, 6:41 am - IP Logged

                    thanks MYTURN for the  info on IHT, we dont have IHT  here in Australia either. but yea we get taxed at purchase time. so the tax man doesnt have to wait till there is a winner to get his cut.  the only time gifts are considered  by the gov here is if they are given   from a  person who is a recipient of a gov pension or welfare. then their  benefit would be reduced if the gift is too high. but ahh winning lotto  should see you  lose any pension or welfare benefit anyhow. if only you could be so lucky

                    2014 = -1016; 2015= -1409; 2016 JAN = -106; FEB= -81; MAR= -131; APR= - 87: MAY= -91; JUN= -39; JUL=-134; AUG= -124; SEP = -123; OCT= -84  NOV=- 73 TOT= -3498

                    keno historic = -2291 ; 2015= -603; 2016= JAN=-32, FEB= +12 , MAR= -86, APR = -77. MAY= -48, JUN= -29, JUL=-71; AUG = -52; SEPT= -43; OCT = +56 NOV = -33 TOT= -3297

                      mypiemaster's avatar - 2015021003pileofcash
                      JACKPOT HUNTER

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                      Posted: April 28, 2015, 8:09 am - IP Logged

                      Some people will claim that they don't mind paying taxes, because they think the I.R.S. is lurking Lurking, or that they will never win a jackpot. Then, out of nowhere, they win the "jackpot" and they start hating on the I.R.S. Nobody likes to give away their money to an uncle they don't even know out of the goodness of their heart. That's why that stuff{tax} is mandatory. What percentage of the population do you think will pay their taxes if it is voluntary?.

                      Seek and ye shall find -Matt. 7:7 ...Ask and ye shall receive -John 16:24 ...Give and it shall be given unto you -Luke 6:38 ...Be careful what you ask for!!! -Mypiemaster 1:1

                      Having Money Solves Problems That Not Having Money Creates Yes Nod ****John Carlton****

                        savagegoose's avatar - ProfilePho
                        adelaide sa
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                        Posted: April 28, 2015, 10:02 am - IP Logged

                        i think the %1 pay their taxes voluntary.

                        2014 = -1016; 2015= -1409; 2016 JAN = -106; FEB= -81; MAR= -131; APR= - 87: MAY= -91; JUN= -39; JUL=-134; AUG= -124; SEP = -123; OCT= -84  NOV=- 73 TOT= -3498

                        keno historic = -2291 ; 2015= -603; 2016= JAN=-32, FEB= +12 , MAR= -86, APR = -77. MAY= -48, JUN= -29, JUL=-71; AUG = -52; SEPT= -43; OCT = +56 NOV = -33 TOT= -3297

                          Saylorgirl's avatar - Lottery-065.jpg
                          Indiana
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                          Posted: April 28, 2015, 10:35 am - IP Logged

                          Most places where the lottery prizes are tax free are because the tax is in the ticket price, all players paid the tax in advance for the winners.  Too bad the U.S. isn't that advanced. 

                          BobP

                          How deep is the water if you can't see the bottom?

                          I hate that idea!  I do not want to pay taxes on every ticket I purchase so the winner can take it all.  If you are lucky enough to win the prize then you can pay the taxes on it.  I am already giving you my "donated" dollars to your winnings.  If I win I will be happy to pay my taxes and would not expect anyone else to pay them for me.

                            savagegoose's avatar - ProfilePho
                            adelaide sa
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                            Posted: April 29, 2015, 4:24 am - IP Logged

                            I hate that idea!  I do not want to pay taxes on every ticket I purchase so the winner can take it all.  If you are lucky enough to win the prize then you can pay the taxes on it.  I am already giving you my "donated" dollars to your winnings.  If I win I will be happy to pay my taxes and would not expect anyone else to pay them for me.

                            I fear if they decided to tax winners here , the gov would also keep the up front taxes to.

                            2014 = -1016; 2015= -1409; 2016 JAN = -106; FEB= -81; MAR= -131; APR= - 87: MAY= -91; JUN= -39; JUL=-134; AUG= -124; SEP = -123; OCT= -84  NOV=- 73 TOT= -3498

                            keno historic = -2291 ; 2015= -603; 2016= JAN=-32, FEB= +12 , MAR= -86, APR = -77. MAY= -48, JUN= -29, JUL=-71; AUG = -52; SEPT= -43; OCT = +56 NOV = -33 TOT= -3297

                              Bondi Junction
                              Australia
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                              Posted: May 2, 2015, 11:00 pm - IP Logged

                              All cash prizes won in Ireland's National Lottery games are paid as tax-free lump sums.

                               

                              All prizes must be claimed within 90 days of the applicable drawing dates and winners have the right to remain anonymous.

                              We all get a lot out of lotteries!