12%
Lottery Duty
Charged on National Lottery stake money. It is based on ticket sales, not the operator's accounting profit.
Lottery Money Explained • Tax & Duty
Lottery tax is not one number. In the UK, the National Lottery pays a 12% Lottery Duty on stakes, ticket sales are VAT-exempt, and taxable company profit sits inside the separate Corporation Tax system. U.S. state lotteries work differently again.
The most important distinction
Separate these first and almost every lottery-tax question becomes easier.
Charged on National Lottery stake money. It is based on ticket sales, not the operator's accounting profit.
A separate company-tax calculation. The normal UK main rate is currently 25% for profits above the applicable threshold.
UK National Lottery prizes and U.S. lottery prizes have very different winner-tax rules. Neither tells you what tax the operator pays.
The UK National Lottery-specific duty
HMRC says Lottery Duty is charged at 12% of all stake money paid — and stake money payable but not yet received — for National Lottery tickets or chances in the accounting period. No deductions are allowed before calculating the duty.
Simple one-pound illustration.
Current Lotto line.
Current UK EuroMillions purchase.
Current UK Powerball line.
National Lottery ticket/chance sales create the tax base.
£12 is the simple Lottery Duty amount on £100 of stakes.
Prizes, retailers and costs do not reduce the stake amount used for Duty.
Prize funding, Good Causes, retailers, costs and company profits are separate parts of the economics.
A second tax people expect to see — but generally do not
HMRC's VAT guidance says granting someone the right to participate in a lottery is exempt from VAT. That exemption covers the sale of lottery tickets to the public.
The price of the lottery ticket is not treated like an ordinary VAT-inclusive retail product.
HMRC's internal guidance says the service of selling lottery tickets is an exempt supply.
A commercial lottery-management company's services can have their own VAT treatment even though the public ticket itself is exempt.
Tax on commercial company profit
Lottery Duty and Corporation Tax tax different things. The first is calculated on National Lottery stakes; the second applies under the normal company-tax system to taxable company profits.
Current small-profits Corporation Tax rate, subject to the detailed rules and associated-company adjustments.
Eligible companies can receive Marginal Relief between the small-profit and main-rate limits.
Current main Corporation Tax rate for company profits above the threshold, subject to the full Corporation Tax rules.
Ticket-level UK calculation
Enter any amount of UK National Lottery stake money. This calculator applies the current 12% Lottery Duty only — it does not estimate Corporation Tax, Good Causes or winner tax.
The final figure is not operator revenue or profit. It simply shows the stake less Lottery Duty before the rest of the lottery's prize, Good Causes, retailer and operating economics are considered.
Why Postcode Lottery and charity lotteries are different
HMRC's rule is unusually clear: all lawful lotteries are exempt from Lottery Duty except the National Lottery. That means a licensed society lottery does not simply copy the National Lottery's 12% ticket-duty model.
Lawful society and local-authority lotteries fall outside the National Lottery-only Lottery Duty charge.
The Gambling Commission requires at least 20% of the gross proceeds of each society/local-authority lottery to be applied to its permitted purpose.
HMRC says charities can be exempt from tax on profits from qualifying lotteries run to raise funds for their charitable purposes.
The U.S. structure
There is no U.S. equivalent of one national 12% Lottery Duty imposed on every Powerball or Mega Millions ticket. U.S. lotteries are generally governmental or quasi-governmental operations, or entities licensed by governments, and their proceeds are allocated under jurisdiction-specific laws.
Federal law exempts qualifying wagers in a lottery conducted by a state agency under state law when the wager is placed with that agency or an authorised employee or agent.
Lottery proceeds can support education, conservation, older residents, veterans, general funds, tax relief or other public purposes. Those statutory transfers are not a national ticket tax.
The Multi-State Lottery Association describes itself as a non-profit government-benefit association. Member lotteries retain their independent statutory responsibilities.
Mega Millions says its consortium is not an actual legal entity; participating lotteries handle most accounting individually.
What remains after prizes, retailers and operations can flow to the public beneficiaries prescribed by that state or territory.
Keep winner tax in its own lane
| Question | UK National Lottery | U.S. lotteries | What it measures |
|---|---|---|---|
| Ticket-level gambling tax/duty | 12% Lottery Duty on National Lottery stakes | No equivalent single national 12% duty; qualifying state lotteries have federal wagering-tax exemption | Tax on the lottery/wager structure |
| VAT / sales tax concept | Lottery ticket participation is VAT-exempt | State treatment varies; no one national VAT system | Tax treatment of the ticket transaction |
| Commercial company profit tax | Normal Corporation Tax principles can apply to taxable company profits | Depends on entity and jurisdiction; state lotteries are often government/quasi-government bodies | Tax on an entity's taxable income/profit |
| Tax on the winner | Normal National Lottery prize generally paid without UK Income Tax deducted from the original prize | Lottery winnings are generally federal taxable income; state/local treatment varies | Personal tax after winning |
| Public-benefit transfer | National Lottery Good Causes allocation | State/jurisdiction beneficiary allocations | Where proceeds go — not automatically a “tax” |
Money under the microscope
UK National Lottery stake-level duty.
VAT treatment of participating in a lottery.
Main company-profit rate — not 25% of ticket sales.
A Powerball public-benefit allocation, not a federal lottery tax.
Frequently asked questions
Click a question to reveal the answer.
The National Lottery is subject to Lottery Duty at 12% of stake money. HMRC says the duty is charged on all stake money paid or payable in the accounting period, with no deductions from the amount on which duty is calculated.
At the current 12% Lottery Duty rate, a £2 National Lottery stake produces 24p of Lottery Duty.
At 12% of the full £2.50 UK National Lottery purchase, Lottery Duty is 30p.
At the current 12% rate, a £4 UK Powerball line produces 48p of Lottery Duty.
No. Lottery Duty is charged on stake money, not on the operator's accounting profit. HMRC says no deductions are made from the stake amount before the 12% duty is calculated.
HMRC says granting someone the right to participate in a lottery is exempt from VAT, including the sale of lottery tickets to the public.
No. Lottery Duty is a gambling duty on National Lottery stakes. Corporation Tax is a separate tax on taxable company profits. A commercial operator can therefore face normal company taxation in addition to the lottery-specific duty system.
For companies within the normal UK Corporation Tax regime, the main rate is 25% for profits above £250,000, the small-profits rate is 19% at £50,000 or less, and Marginal Relief can apply between those limits. A company's actual tax bill depends on its taxable profits, accounting period, reliefs and other rules.
No. HMRC says all lawful lotteries are exempt from Lottery Duty except the National Lottery. Society and local-authority lotteries therefore operate under a different tax structure.
HMRC guidance says charities can be exempt from tax on profits from qualifying lotteries run to raise funds for their charitable purposes, provided the relevant legal and licensing conditions are met.
The sale of lottery tickets to the public is VAT-exempt. However, commercial management services supplied to a lottery promoter can have their own VAT treatment, so the tax treatment of the ticket and the service company should not be confused.
Federal law provides an exemption from the federal wagering excise tax for qualifying wagers in lotteries conducted by a state agency under state law when the wager is placed with that agency or its authorised employees or agents.
No. State lottery beneficiary transfers are statutory allocations of lottery proceeds. They can flow into education, general funds, parks, senior programs and other purposes, but they are not the same thing as the UK's 12% Lottery Duty.
No. These are separate layers. In the UK, a normal National Lottery prize is generally paid without Income Tax being deducted from the original prize. In the U.S., lottery winnings are generally taxable income under federal rules, with state treatment varying. Neither rule tells you how the operator itself is taxed.
Primary research
Tax rules can change, so this page uses current government, regulator and official lottery sources and keeps ticket taxes, company taxes and winner taxes separate.