HMRC Is Writing to Competition Sites About VAT — What It Means for Your Ticket Price

If you run a UK competition site, there may already be a letter from HMRC on your desk. If you only enter them, you will feel it later — in ticket prices, in pool sizes, or in both. HMRC has opened a “One to Many” letter campaign aimed at the whole prize draw sector, telling operators that paid entries are subject to VAT at the standard rate of 20%.

What HMRC Has Actually Said

The position was set out in Parliament on 17 February 2026, when Exchequer Secretary to the Treasury Dan Tomlinson confirmed that prize draws offering both paid and free entry routes are not eligible for VAT exemption, and that paid entries attract VAT at the standard rate. The letters now going out put that in writing and ask recipients to review their records and, if necessary, register and pay.

The reasoning matters, because the free entry route is the very thing that keeps these sites out of Gambling Commission territory in the first place. A licensed lottery gets a VAT exemption. A prize draw with a free entry route is deliberately not a lottery — that is the whole point of the structure, as we set out in how UK prize draw law works. HMRC's view is that the same structure also stops it being an exempt lottery for VAT purposes. The thing that keeps operators unlicensed is the thing that makes them taxable.

Why This Lands on Entrants

An operator facing 20% VAT on ticket sales has three levers, and two of them come straight out of your pocket.

• Raise the ticket price. On a £1 ticket, VAT leaves the operator with 83p. Restoring the old take means charging about £1.20.
• Grow the pool. Keep the price, sell 20% more tickets against the same prize. Your odds get 20% longer.
• Shrink the prize. Same money in, less value out.

All three do the same thing to the number we track. Across roughly 900 live draws from around 80 operators, the median Value Ratio sits at 2.40 — the market collects about £2.40 for every £1 of prize value. A straight 20% pass-through pushes that median to roughly 2.88. In plain terms, the median 99p ticket becomes about £1.19, or the pool you are entering quietly gets a fifth bigger.

What to Watch For

Price rises are visible. Pool increases are not — a comp that ran at 5,000 tickets last month and 6,000 this month looks identical on the page, and most people never check. That is the change worth watching over the next few months, and it is why we log the pool, not just the price.

Two things worth keeping in perspective. First, this is HMRC's stated view, not settled law — it has not been tested in court, and the sector is arguing about it. Second, none of it changes your own tax position if you win: prize wins stay tax-free for the entrant, as covered in our UK competition tax guide.

The Practical Takeaway

If ticket prices creep up across the market, the honest response is not to stop entering — it is to compare harder. The gap between the best and worst value on any given day is far wider than 20%, so which comp you pick still matters more than what VAT does to the market average. Check the live rankings on our best odds league table, and run the numbers on anything you are about to buy with the odds calculator before you spend.