UKGC license vs free-entry route
The two legal structures every UK raffle operator picks between, demystified. When you need a Gambling Commission license, when you don't, and the practical implications either way.
TL;DR
- · UKGC license is required if you run a paid-only lottery, a society lottery above small thresholds, or a remote gambling product. It costs money, time (3-6 months KYC) and ongoing compliance work.
- · Free-entry route means your competition isn't legally a lottery; anyone can enter for free by post, so payment doesn't confer entry. No UKGC license needed. This is what nearly every commercial UK raffle site you've seen actually runs.
- · Pick the license only if you're raising for a registered charity (society lottery) or operating a true gambling product. Otherwise the free-entry route is faster, cheaper, and gives you more product flexibility.
- · Either way, you owe corporation tax + VAT on revenue. The license question is about gambling regulation, not tax.
The two paths in one paragraph
The UK Gambling Act 2005 defines a lottery as a scheme where (1) people pay to participate, (2) prizes are awarded, and (3) winners are determined wholly by chance. Hit all three and you need a license. Break any one and you don't. That's why the free-entry route works. It removes the "pay to participate" condition by guaranteeing free entry too.
Both structures can run the same consumer-facing experience: a customer picks a prize they want, "buys" entries, and watches a draw. The legal plumbing underneath is what differs.
When you actually need a UKGC license
You need a UK Gambling Commission license if you're operating a lottery: paid-only entries, prizes by pure chance, no skill, no free route. The two practical scenarios this happens in are society lotteries (raising for a registered charity or non-commercial society) and commercial remote gambling (online casino, instant-win-as-product, etc.).
Society lottery licenses come in two tiers: small (up to £20,000 in ticket sales per draw, registered with your local council) and large (above that, regulated directly by the Gambling Commission). Both require at least 20% of proceeds to go to the named good cause. Set-up fee, annual fee, ongoing reporting, and audit obligations apply.
Remote gambling operator licenses are required for commercial online gambling (casinos, sports betting, true-lottery raffle products without a free route). Application is 3-6 months, requires extensive KYC, anti-money-laundering systems, age verification, and ongoing reporting. Fees scale with turnover.
If you're a for-profit business running a free-entry raffle, neither license applies to you. The free-entry route puts you outside the Gambling Act entirely; you're a competition operator, not a gambling operator.
When the free-entry route is enough
If your raffle business is for-profit, sells "entries" to a prize draw, and offers a genuine free entry method alongside the paid one, you don't need a UKGC license. You're running a competition with a payment-optional entry path, which legally isn't a lottery.
The Gambling Commission's own guidance on prize competitions and free draws sets out the rules. The critical compliance points are: the free entry method must be genuinely available (a real postal address, not a hidden P.O. Box), free entries must have the same chance of winning as paid entries, and the free option must be advertised prominently, not hidden in 8pt grey text at the bottom of the page.
The cost of this route is minimal: a real postal address, an admin process to log free entries into the same draw pool, and an audit trail. The legal review costs around £500-£2,000 one-off for a solicitor to sign off on your T&Cs and free-entry process.
Side-by-side: license vs free-entry
| Aspect | UKGC License | Free-entry route |
|---|---|---|
| Setup time | 3-6 months KYC | 1-2 weeks (legal review) |
| Setup cost | £1,000s in fees | £500-£2,000 legal review |
| Ongoing compliance | Annual fees, audits, reports | Audit trail of free entries |
| Can be for-profit | Only for commercial gambling tier | Yes, fully |
| % required to charity | 20% (society lottery) | 0% |
| Advertising allowed | With operator-license terms | Yes, subject to ASA rules |
| Product flexibility | Constrained by license terms | High |
Swipe to see the full table →
Tax implications of each
Both structures attract normal UK corporation tax. The license vs free-entry choice doesn't change your tax position, but it does change which extra taxes apply.
Licensed gambling operators pay Gambling Duty on top of corporation tax, typically Remote Gaming Duty (21%) on the gross gambling yield. Society lotteries get a different, lighter regime.
Free-entry route operators are not gambling operators, so no Gambling Duty applies. You pay normal corporation tax (currently 25%) on profits, and VAT (20%) on revenue if your turnover exceeds the registration threshold. Ticket sales for prize draws are typically VATable. Confirm with an accountant.
In rough terms: the free-entry route is materially more tax-efficient than holding a remote gambling license for the same revenue.
Advertising implications of each
The advertising rules differ meaningfully. Free-entry route operators have more freedom; licensed gambling operators face stricter Advertising Standards Authority (ASA) and Committee of Advertising Practice (CAP) constraints.
Licensed gambling ads must follow CAP's gambling-specific rules: no targeting under-18s, responsible-play messaging, no urgency tactics, no exploiting vulnerable groups. The watershed (9pm) applies to TV. Influencer partnerships have specific disclosure rules.
Free-entry route ads still follow standard ASA rules but escape gambling-specific constraints. You can advertise freely to adult audiences, run influencer campaigns with normal sponcon disclosure, and aren't bound by gambling-specific tone restrictions. The free entry route itself must be prominently disclosed in the ad; this is the one place the ASA has rapped operators repeatedly.
How to choose for your business
- · Pick the free-entry route if you're a for-profit business, want to launch fast, want product/marketing flexibility, and don't need to raise money for a registered charity. This is 95%+ of commercial UK raffle businesses.
- · Pick a society lottery license if you're a registered charity, sports club, or non-commercial society raising funds. The 20%-to-good-cause requirement is structurally aligned with that mission.
- · Pick a remote gambling operator license only if you're building a true gambling product (casino, sportsbook, paid-only lottery). For raffle/competition use cases, this is the wrong tool.
FAQ
Is the free-entry route a loophole?
No, it's an explicit, intended structure under the Gambling Act 2005. The legislation literally defines a lottery as requiring paid entry; making entry optionally free puts your competition outside the definition. It's not a loophole, it's the design.
Can I switch from free-entry to licensed later?
Yes, but it's rare. Most operators run free-entry indefinitely. If you grow to scale where a remote gambling license makes commercial sense (rare for a raffle business), you'd apply separately and run them as different products.
What if I run a skill-based competition instead?
Skill-based competitions (the "tiebreaker question" model) are a third option that also avoids the lottery definition, but the skill must be genuine, not trivial. Most operators combine skill + free entry to be doubly safe. We cover this in detail in the launch guide.
Do I need to register the business separately for the free-entry route?
No specific registration: you operate as a normal UK limited company. The "free-entry route" describes how you structure entries to your competitions, not a separate legal entity.
Has the Gambling Commission ever challenged a free-entry operator?
Yes: when the free entry route was inadequate (hidden, hard to use, or paying entries had a higher win probability than free ones). When the route is genuine and prominent, operators have not been successfully challenged. Get the route right and you have a defensible structure.
Continue reading
The free-entry route explained
ASA-compliant copy, postal handling, draw-pool logistics, the audit trail you need.
How to start a UK raffle business
Legal structure, tech stack, costs, marketing, common mistakes: the full launch playbook.
Raffle platform comparison
Template SaaS vs traditional agency vs licensed multi-tenant (an 11-point matrix).
Pricing
Launch from £99/mo, Growth Partner revenue-share, or Enterprise bespoke.
Ready to launch?
Turbo IT's Launch tier ships every tenant with the free-entry admin tools, postal-address handling, and audit trail, so the compliance plumbing is built in. £99/mo + 19p per paid order, live in ~90 seconds.