1. Introduction: why the tax rules matter

Winning Euromillions — whether a modest £10,000 or a multi-million jackpot — is life-changing. The first reaction is usually excitement; the second should be prudence. Knowing the tax framework that surrounds lottery winnings in the UK matters because:

• It determines how much of the prize you immediately keep (in the UK this is typically 100% of the announced prize).
• It affects the after-tax yield of any investments you make with the money (savings interest, dividends, rental income, capital gains).
• It shapes estate planning: large wins add to your estate and may trigger Inheritance Tax (IHT) implications.
• It determines whether you must report anything to HM Revenue & Customs (HMRC), and what future tax returns need to show.

This guide unpacks the legal and practical tax position under UK law, referencing HMRC guidance and independent professional analysis so you can make sound decisions.

2. What HMRC says: are Euromillions winnings taxable in the UK?

Short answer: Euromillions prizes delivered to winners in the UK are not subject to Income Tax or Capital Gains Tax when the prize is received. HMRC treats lottery prizes and gambling winnings as non-taxable for the recipient. The UK’s taxation of gambling is operator-focused (duties, levies) rather than winner-focused. Multiple authoritative tax guides and official HMRC materials confirm that lottery proceeds are not taxed as income to the winner.

Why: The legal and administrative approach in the UK treats the activity as a non-taxable gambling gain for the participant. This is consistent across National Lottery, Euromillions and most other lottery formats available to UK players.

Important nuance: HMRC guidance and related government pages make a clear distinction between (a) the prize itself (non-taxable) and (b) subsequent income generated by the prize (taxable). For example, interest earned on money deposited in a bank account is taxable as savings income under normal rules.

3. Why winners get the full amount: Lottery Duty vs. winner taxation

It might seem odd that the government doesn’t tax winners directly. The UK raises revenue from lotteries in two main ways:

1. Lottery Duty and other operator levies — regulation imposes duties on ticket sales and operators, not on winners. That means the public purse receives revenue at the point of promotion and sale.

2. Tax on secondary economic activity — once prizes are paid and the winner invests or earns income from the money, HMRC collects tax on interest, dividends, rental income, salaries, capital gains on investments, etc. That is to say: the tax system captures subsequent income created by the winnings.

Policy rationale: Treating lottery prizes as tax-free simplifies administration, avoids disputes about characterisation of windfalls, and focuses revenue collection on the regulated operator side and on subsequent taxable returns arising from use of the funds.

4. Immediate tax implications after receiving the prize

When your name is on a Euromillions winning ticket and the prize is paid to you (or the nominated bank account/claimant), the following immediate tax positions apply:

• No Income Tax on the prize receipt itself. The raw prize amount is not reported on a normal PAYE or self-assessment as income.
• No Capital Gains Tax on receipt. CGT does not apply to the act of receiving the prize. However, CGT rules will apply later if you use funds to buy assets that appreciate in value and you dispose of them.
• No National Insurance contributions. NI is employment-related and does not apply to that windfall.
• No automatic tax withholding. Unlike some other countries where tax is withheld on large winnings at source, in the UK you typically receive the announced payout net of any operator’s internal fees — there is no HMRC withholding from the prize itself. (Exception: if you won abroad in a country that withholds tax at source, the foreign country’s rules may apply first.)

Practical implication: The full prize often lands in your bank account or is paid via a cheque/scheduled transfer. That does not mean you are free from all tax consequences — subsequent income and estate consequences still apply.

5. Tax on interest and investment returns from your winnings

The most immediate and material tax issue after a lottery win concerns interest and investment returns. If you place all or part of your winnings into interest-bearing accounts, buy bonds, shares, property, or other assets, the tax rules for those income streams apply as usual.

• Savings interest — interest earned on bank accounts is taxable as savings income. Depending on your other income and allowances (Personal Savings Allowance, starting rate for savings), some interest may be tax-free, but large sums will generate taxable interest. Use HMRC guidance on savings and interest to compute liability.
• Dividends — dividends from shares are taxable above the dividend allowance at the applicable dividend tax rates.
• Rental income — if you buy property with winnings and rent it out, rental income is taxable after allowable deductions.
• Capital gains — if you later sell investments or property bought with winnings for more than their purchase price, CGT rules apply (subject to annual exemptions and reliefs).

Example: If a £10 million jackpot sits in a bank account paying 3% interest, that’s £300,000 of interest a year — well in excess of most savings allowances — and will be taxed at your marginal rate (so tax planning here matters).

6. Capital Gains Tax: does it ever touch lottery money?

Directly: No. You do not pay Capital Gains Tax on the act of receiving a lottery prize. HMRC explicitly notes that betting, lottery, and pools winnings are not subject to CGT.

Indirectly: CGT applies when you dispose of assets acquired with the winnings (e.g., selling shares bought with your prize, selling buy-to-let property). The base cost for CGT purposes will normally be the price you paid for the asset (the amount invested). If the asset increases in value and you later sell it, you may have a taxable capital gain subject to the annual CGT allowance and the relevant rates.

Takeaway: Receiving the prize is CGT-free; subsequent asset sales can generate CGT liabilities.

7. Income Tax and earnings derived from winnings (rent, salaries, business)

Although the prize itself is not taxed as income, future earnings generated by the capital are:

• Employment income you earn while holding the winnings is taxable as usual.
• Business profits from ventures launched with the winnings are taxable after business allowances and deductions.
• Rental income from property purchased with the prize is taxed as property income.
• Pensions and state benefits may be affected by changes to your income profile — high household income can affect means-tested benefits or contribution entitlements.

Important note: Simply receiving a large capital sum does not automatically trigger an income-tax filing obligation, but if the prize generates taxable income (interest, dividends, rental, trading profits) you will likely need to report those via Self Assessment and pay the appropriate tax. HMRC’s guidance on foreign income and reporting clarifies when Self Assessment is required.

8. Gifting, trusts and Inheritance Tax — seven-year rule and planning

Large lottery wins raise immediate estate planning questions. If you gift part of your winnings, or die after winning, tax rules on gifts and inheritance apply:

Inheritance Tax (IHT) basics

• Gifts and the seven-year rule: If you give away money and then die within seven years, the gift can be treated as part of your estate for IHT purposes and may be subject to tax depending on the estate’s value and allowances. HMRC’s guidance explains the seven-year taper and exemptions.
• IHT rates: The standard IHT rate is 40% on the value of the estate above the available nil-rate band (the threshold may change over time; check current HMRC figures).
• Exemptions: gifts to spouses/civil partners, charities, and certain small, regular gifts may be exempt, and the ‘normal expenditure out of income’ exemption can apply if you can demonstrate the gifts come from surplus income and are regular. Recent reporting indicates increased attention to IHT compliance and the value of careful planning.

Using trusts and other vehicles

• Discretionary trusts and other arrangements can be used to protect wealth, manage distribution, and potentially reduce IHT exposure, but they carry their own tax and reporting rules (trust taxation, possible charges). Trust setup must be handled with specialist legal and tax advice.
• Gifts with reservation of benefit: beware—if you gift money but continue to benefit from the assets (e.g., you give away a property but continue to live there), HMRC can treat it as part of your estate.

Practical planning steps:

1. Speak to an experienced estate-planning solicitor and tax adviser immediately after a major win.
2. Keep precise records of all gifts and transfers.
3. If you intend to make large gifts, consider timing (gifts made more than seven years before death are generally exempt) and use annual gift allowances and exemptions where possible.

9. Non-UK residents, cross-border winners and tax at source

If you are not UK tax resident or you purchased or claimed the ticket abroad, special rules can apply:

• Tax at source in the paying country: Some Euromillions partner countries may withhold tax on winnings before payment. If so, you may receive a net amount after local withholding. Whether the UK taxes such foreign lottery income depends on your UK tax residency and domicile status; typically, the UK does not tax the lottery prize itself even if it was paid from abroad, but you may have to file or claim relief for any foreign tax paid.
• UK residents with foreign winnings: If you are UK resident and win a foreign lottery (for instance, you purchased a ticket in another participating country), HMRC’s typical stance remains that the prize itself is not taxable in the UK; however, foreign tax withheld at source may not be recoverable automatically and other reporting obligations for foreign income could apply.
• Non-residents receiving UK-sourced income from the winnings: If the winner lives abroad but the money passes to the UK (e.g., placed in UK accounts), UK tax on subsequent returns (interest, property income) will depend on residence and statutory rules.

Recommendation: If you are a cross-border winner, obtain country-by-country advice: local tax rules differ significantly across Euromillions participating nations.

10. Structuring, trusts, companies — legal vehicles and tax consequences

Many winners consider legal structures to hold or distribute a large prize: trusts, family investment companies (FICs), or charitable foundations. Each has pros and cons.

Trusts

• Pros: privacy, controlled distribution, estate planning benefits, creditor protection (in some cases).
• Cons: trusts have their own tax regime — chargeable events, periodic charges, and exit charges can apply; trustees must report and may face complex compliance. Specialist trust advice is essential.

Family Investment Companies (FICs)

• An FIC is a private company used to hold investments for family members. As a limited company, it pays Corporation Tax on profits but offers flexible control and potential succession planning benefits. Advantages include potential control over distribution, but drawbacks include double taxation (company pays Corporation Tax; shareholders taxed on dividends) and compliance complexity.

Direct ownership or personal investment

• Pros: simplicity, full control.

• Cons: direct exposure to IHT and potential loss of privacy.

11. Practical steps after you win: registration, advice, privacy, banking

If you hold a winning Euromillions ticket or are otherwise notified of a big prize, follow this practical playbook:

Immediate (days 0–7)

1. Secure the ticket — sign the back, store it in a safe deposit box or secure location.
2. Avoid public disclosure — many winners regret early publicity. Consider anonymity options; the National Lottery has limited anonymity options and many winners use a solicitor.
3. Assemble a team: solicitor (estate & trusts), independent tax adviser, chartered accountant, investment advisor, and a trusted family representative. Do not rely solely on the lottery promoter for tax advice.
4. Open segregated bank accounts at reputable banks (consider short-term secure deposits while planning). Prepare for banks to undertake AML (anti-money-laundering) checks.
5. Get a temporary spending plan — do not rush into large purchases or investments before advice is taken.

Short term (weeks 1–12)

6. Meet advisers to discuss tax, estate planning, and structures (trusts, FICs).
7. Create a written financial plan that addresses debt, liquidity needs, investment objectives, tax planning and philanthropic goals.
8. Consider confidentiality agreements for advisers and household members.

Ongoing 9. Record keeping — keep detailed records of transfers, gifts, trust deeds, and investment activity. These are essential for future IHT and reporting purposes. 10. Tax compliance — ensure Self Assessment filings reflect any taxable income generated by the funds (interest, dividends, rental, etc.). 11. Periodic review — revisit the plan annually or after life events (marriage, births, deaths).

Why this matters: Many legal, tax, and family disputes arise from rushed decisions. A disciplined approach preserves wealth and reduces tax surprises.

12. Example scenarios and calculations

Below are illustrative worked examples to demonstrate how tax interacts with Euromillions proceeds. All example numbers are hypothetical and simplified; consult a tax adviser for precise computations.

Example A — Bank interest taxation

• Prize received: £5,000,000 (received tax-free).

• Deposit: £5,000,000 into a savings account paying 2% gross interest = £100,000 interest per year.

• Personal Savings Allowance (PSA): depends on marginal rate (basic-rate taxpayers have £1,000 PSA; higher rate £500; additional rate nil). In this example assume higher rate taxpayer — PSA £500.

• Taxable interest: £100,000 − PSA ≈ £99,500. If the taxpayer is a higher-rate taxpayer at 40%, tax due ≈ £39,800.

• Net after tax interest: ≈ £60,200 per year.

Point: The initial prize is tax-free, but interest flows are highly taxable and materially reduce effective yield.

Example B — Gifts and IHT risk

Prize: £10,000,000. Winner gifts £3,000,000 outright to adult children and dies within 2 years. Under the seven-year rule, the gift may be considered part of the estate and liable to IHT (taper relief may apply but initial charge is at 40%). This can create a significant tax bill. Proper planning (gifting earlier, using trusts correctly) can alter the outcome.

Example C — Purchasing buy-to-let

Prize: £2,000,000. Winner buys two flats for £800,000 total and rents them for £48,000 per year gross. After allowable deductions, taxable rental profit is £36,000. That rental profit is subject to Income Tax at the owner’s marginal rate — again a recurring liability driven by the use of the prize.

These examples illustrate the principle: the prize is tax-free at receipt, but subsequent economic activity produces taxable events.

13. Common Euromillions mistakes & pitfalls (and how to avoid them)

1. Assuming the prize is entirely tax-free forever. Mistake: depositing the windfall and ignoring tax on future earnings. Fix: model expected taxable income from interest, dividends, and rental streams.
2. Rushing into big purchases before professional advice. Big purchases (property, businesses) can generate immediate regulatory obligations and long-term tax exposure.
3. Poor record-keeping for gifts. If you make gifts, document them meticulously — provenance and timing matter if IHT questions arise.
4. Misunderstanding cross-border tax effects. If you bought the ticket abroad or are non-resident, local withholding taxes and double taxation issues can complicate matters. Get specialist cross-border advice.
5. Using unqualified advisers. Use regulated solicitors and chartered tax professionals. Some winners fall victim to poor or predatory advice just after winning.*
6. Ignoring AML and bank reporting obligations. Large transfers will trigger compliance checks — preempt these by preparing documents and trusted advisers to liaise with banks.

14. Frequently asked questions (FAQ)

Q1 — Do I have to tell HMRC I won Euromillions?

A1 — You do not normally need to report the winning prize itself as taxable income. However, you must report any subsequent taxable income (interest, dividends, rental income) in a Self Assessment return if required. For large or unusual circumstances, seek professional confirmation.

Q2 — Will the lottery operator report my win to HMRC?

A2 — Operators report ticket sales and pay applicable duties; they are not typically required to treat the prize as income and withhold tax. HMRC receives data about regulated operators, but the responsibility to report taxable income arising later is with the taxpayer.

Q3 — If I give money away, is it safe from Inheritance Tax?

A3 — Not necessarily. Gifts may become part of your estate for IHT if you die within seven years of gifting. Some gifts are immediately exempt (to spouses, charities), but major gifts require careful planning.

Q4 — If I invest abroad, will I pay UK tax?

A4 — UK residents normally pay UK tax on foreign income and gains (subject to reliefs and treaties). Your specific status and the countries involved determine obligations. See HMRC guidance on tax on foreign income.

Q5 — Are there any lottery taxes in other Euromillions countries I should know about?

A5 — Yes — tax on winnings varies by Euromillions participating country. For example, some countries tax lottery prizes at source while others do not. If you purchased or claimed a ticket abroad, local withholding may apply; check country rules and seek cross-border tax advice.

15. Checklist: what to do in the first 90 days after a Euromillions win

Immediate (day 0–7):

• Sign and secure the ticket; make certified copies.

• Get independent legal, tax, and financial advisers (preferably recommended by trusted sources).

• Limit public statements; consider anonymity/legal structures for privacy.

• Open segregated accounts; anticipate AML checks.

Next 30 days:

• Meet advisers and draft a short-term plan (liquidity needs, immediate liabilities, short-term secure investments).

• Avoid large irreversible purchases for at least 90 days.

• Create a records folder for all transfers, gifts and advice.

30–90 days:

• Finalize estate planning (wills, trusts, power of attorney) with legal counsel.

• Model taxes on expected investment returns and structure to minimise avoidable exposure legally.

• If non-UK issues exist, secure cross-border tax opinion.

Ongoing:

• Annual tax compliance for returns relating to any taxable income generated by the prize.

• Periodic wealth reporting and trustee compliance if a trust is established.

16. Conclusion on Euromillions: summary and recommended next steps

Summary: Under UK law Euromillions prizes are paid to winners without Income Tax or Capital Gains Tax applied at receipt. The UK collects revenue on the gambling industry via Lottery Duty and operator levies. The crucial issue for winners is the taxable income generated by the prize after receipt (interest, dividends, rental income, business profits), and inheritance/gift tax planning for large transfers. Cross-border winners face additional complexity.

Recommended immediate actions:

• Secure the physical ticket and do not announce the win publicly without counsel.

• Assemble a professional team: solicitor, chartered tax adviser, independent wealth manager.

• Establish a short-term plan to protect capital, and a medium-term plan for investments and estate planning.

• Maintain meticulous records for gifts, transfers and investments to support future IHT and tax filings if required.