Money & odds
Do you pay tax on competition prizes in the UK?
Generally no. Prizes from competitions, raffles and draws are not taxed as income, though there are a few exceptions and knock-on effects.
One of the most common questions people ask after a big win is "how much will the taxman take?". For ordinary prizes won by individuals in the UK, the answer is usually nothing. Winnings from competitions, raffles, prize draws, lotteries and betting are not treated as taxable income.
The general rule
There is no income tax on a prize you win as a private individual, whether it is cash, a car or a holiday. You do not declare it on a tax return simply because you won it. The same is true of the cash alternative many competitions offer instead of the main prize.
Where tax can come in
- Interest and investment returns. Once a cash prize is in your bank account, any interest or investment growth it earns is taxed in the normal way. A large win can push savings interest over your personal savings allowance.
- Selling a prize. Winnings themselves are not a chargeable gain. If you later sell a prize such as a watch for more than it was worth when you won it, the increase could in principle be a gain. Private cars are generally exempt from capital gains tax.
- Prizes linked to your job. Prizes from your employer, or won because of your work, can be taxable as a benefit or earnings.
- Competitions as a trade. Someone who runs competitions as a business pays tax on the profits. That applies to operators, not to ordinary entrants.
- Gifting large sums. Giving away part of a win is generally fine, but large gifts can have inheritance tax consequences if you die within seven years. Small annual exemptions apply.
Other costs to plan for
Tax-free does not mean cost-free. A car prize comes with insurance, road tax (vehicle excise duty, which can be high for expensive cars), servicing and depreciation. A holiday may exclude spending money or travel to the airport. Read what the prize actually includes before choosing it over a cash alternative.
Benefits and means-tested support
If you receive Universal Credit or other means-tested benefits, a cash win counts as capital once it is in your account. Above certain thresholds it can reduce or stop your payments, and you must report changes in your circumstances. Check the current limits on GOV.UK or with an adviser.
This is general information about UK tax as we understand it, not tax advice. Rules change and individual circumstances differ. For a large win, speak to HMRC or a qualified tax adviser.
General information only, not legal, tax or financial advice. Questions or corrections? [email protected]