Tom Wallace featured in the Daily Express on Luke Littler

ISTA member Tom Wallace was interviewed by the Daily Express on the tax implications of dart sensation, Luke Littler.

The 17 year old has taken the sport by storm in the UK; having success in the Premier League alongside his run in the World Championship. The Daily Express reached out to ISTA to help understand the tax implications of Luke’s winnings in the UK.

Tom discusses the badges of trade that distinguish a hobby from a trade in the UK,  “a sportsperson such as Littler who is entering into national and international tournaments regularly, that are televised, and offer significant fees and prizes to participants, is very likely to be trading rather than undertaking a hobby,” Wallace told Express Sport.

“Therefore prize money received as a result of their participation will be considered taxable income. This differs from prize money received from lottery and gambling wins, which are not taxable, as there is not the presence of a sufficient degree of organisation, or skill, to indicate a trade is taking place.”

Tom then discussed the difference that a UK limited company can have for an athlete earning income in the UK:

“Luke Littler appears to have opened a limited company on 6 January 2024 (Luke Littler Darts Ltd), and it is fair to assume that from this date he supplies his personal services through this company,” Wallace explained. “The tax liability on his prize money pre and post this date is therefore slightly different.

“Prior to starting the company, and his big break at Alexander Palace, Littler will have been partaking in tournaments in his personal capacity. This means that any winnings are his personal income, as well as any sponsorship and endorsements received, and he would be taxed on them personally at the income tax and National Insurance rates applicable to a sole trader.

“Post the World Championships, the new limited company is almost certainly being used to receive income from sponsorships, endorsements, and the rights to use his image. This would all be income of the company and taxed at the Corporate Tax rate of 25 per cent. As Littler is a shareholder in the company, he could extract the profit by way of dividend and pay the appropriate tax rate on those at that time.”

“The exact tax position is difficult to get to because whilst we know his winnings, we do not know what else he received in sponsorship and endorsement which would also need to be added to his taxable income,” Wallace added.

“What we can say is that in his capacity as a ‘sole trader’ (pre-incorporation), his prize money at the World Championships alone made him an additional rate taxpayer of 45 per cent. However, his effective tax rate is slightly higher as people who earn over £100,000 lose their tax-free allowance of £12,570.

“We also don’t know the amount of expenses that he would have claimed which reduces his taxable profit. If a company’s profits are over £250,000, which Littler’s surely will be, they are all taxed at 25 per cent.”

Quotes originally from Luke Littler to have over £100k prize money taken away but avoids bigger bill – EXCLUSIVE written by Jack McEachen published by the Daily Express on Sun, Apr 7, 2024.

Read the full article here: https://www.express.co.uk/sport/othersport/1885705/Luke-Littler-darts-prize-money-tax