How do UK lottery businesses work?

Here are the steps businesses must take to ensure their lottery complies with the Gambling Act 2005.

How do lotteries stand out in the UK gambling industry? Their primary purpose is to raise money for charity. By law, lotteries must give at least 20 per cent of their revenue to good causes and according to the Gambling Commission, the lottery sector generated £1.9 billion for this purpose in 2015-16. The National Lottery alone donates around £30 million a week to its charitable projects. So how are UK lottery businesses actually regulated and run?

How are UK lottery businesses regulated?

The Gambling Commission regulates the lottery industry in the UK, working with legislation in the Gambling Act 2005. Here are the steps businesses must take to ensure their lottery complies with the Act.

Check whether they need a licence.

There are various types of lotteries in the UK, some need licences and others don’t, but all must be non-commercial in nature with the aim of giving back to society. The following types of lotteries either need a licence or must be registered with a local authority:

Small society lotteries – must make a maximum of £20,000 in ticket sales per lottery, or £250,000 per year, and give at least 20 percent of their revenue to good causes. These lotteries need to be registered with their local authority.

Large society lotteries – need a licence from the Gambling Commission and must raise over £20,000 per lottery or over £250,000 per year, awarding 20 percent to good causes. The Health Lottery, for instance, gives at least 20p from every £1 ticket sale to health-related charities across Britain. Large society lotteries also need a remote operating licence if the lottery can be played remotely, via the internet or telephone for example.

Local authority lotteries – generate over £20,000 per draw or £250,000 per year and can use the net proceeds of their lottery to help cover their running costs. These lotteries require a Gambling Commission licence as well as a remote operating licence if they can be played remotely.

If a lottery hires an external lottery manager to run or oversee the business, they also need to hold a lottery manager’s operating licence.

Lotteries exempt from licencing include private society lotteries that raise money to support their work and work and residents’ lotteries that are for charitable causes and played by colleagues or residents on that specific premise. Businesses are able to run customer lotteries without a licence as long as they take place on the premises and prizes have a £50 limit. Another category exempt from licencing is incidental lotteries, they take place at events like fetes to raise funds for charitable causes.

Sell tickets responsibly

Society and local authority lotteries must make sure they sell lottery tickets in compliance with the Gambling Act. This means all players must be aged 16 or over and tickets cannot be sold in the streets. All tickets must include the name of the society, date of the draw, ticket price and name and address of the lottery organiser.

Follow financial regulations

As well as allocating 20 percent of revenue to good causes, lottery businesses need to follow prize limit guidelines. The maximum prize limit for a small society lottery is £25,000 per draw, while the limit for large society and local authority lotteries is £200,000.

Submit lottery reports

Under the Gambling Act, lotteries must make a ‘lottery submission’ within three months of each draw. This report must declare the total proceeds of the lottery, broken down between non-remote and remote sales. It must also include the individual ticket cost and amounts given to good causes and distributed between expenses and prizes.

Lottery businesses in the UK have the power to make money and give back to society, provided they follow UK regulations. You can find out more about running a lottery business in this guide from the Gambling Commission.

Ben Lobel

Delphine Hintz

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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