HM 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.
I'm struggling to find other answers, the Daily Mail's 'This is Money' website says the opposite is true and that it's counted as freelancer income.
HMRC has produced guidance in the context of freelancers who win prizes and the short version is that they view most prizes as taxable income of the freelancer.
Re freelancing - the context is that the prize is an industry award; they won it as part of their work and so if they're a sole trader it counts as income in the normal way and would be taxed accordingly.
Gambling income is tax free in the UK as I understand it, you pay tax to take part (the tax at that end is greater unless the company pays out more than it receives!).
Ah excellent, thanks for the clarity regarding the freelancing. Admittedly I skimmed those articles to try and claw the information as fast as I could.
(Having a website which looks like the DailyMail open at work (even during break) isn't the best look!)
For the lottery, yes. I believe because the tickets themselves are taxed you aren't taxed when you win.
I believe the same is true of gambling winnings (The reasoning being that you aren't given tax refunds when you lose, so it's unfair to tax when you win)
Prizes that you haven't payed for entry might be different.
> I believe the same is true of gambling winnings (The reasoning being that you aren't given tax refunds when you lose, so it's unfair to tax when you win)
Which becomes really interesting when you consider professional poker players.
The rule in the US is "It is income unless it isn't."
Everything you receive from everyone is taxable income unless you can find a specific tax code saying that it isn't. Lottery winnings are taxable unless a section exempts them. Non-monitary prizes or awards from competitions are taxable.
As with most tax law, this is necessary to prevent widespread avoidance. Nobody would pay any taxes if only money income was taxed. We'd revert to a barter economy wherever possible, defeating the purpose of taxation. (ir employer pays employees with physical good via a company store.) If all competition winnings were exempt, employers might pay people in gambling tokens simply to avoid them having to pay taxes.
> Do you really have to declare and pay tax on competition winnings in the US?
Yes, and it's why I would always cringe whenever I saw The Price Is Right with someone winning $50,000+ of stuff they didn't need (or often even want).
No, you don't. Often the sticker value that's declared is much higher than the actual value of the goods. There's a good explanation from a winner of The Price is Right here, where she paid taxes on a prize valued at $14,000 but was only able to sell it for $4,500: http://www.avclub.com/article/what-happens-when-you-win-ithe...
I never would have thought..