Luke Littler has taken the darts world by storm in recent months, with the 17-year-old winning over £300,000 in prize money since his World Championship final appearance
Darts prodigy Luke Littler is set to lose over £100,000 of his prize money due to tax and national insurance deductions.
The 17-year-old, who is already worth more than £600,00, has been making waves in the sporting world with his impressive performances in the Premier League and at the World Championship. Littler has accumulated a whopping £310,000 in prize money over the past few months.
His journey began with the World Championship runners-up prize at Alexandra Palace, which earned him a cool £200,000. He has added another £20,000 to his earnings with two Premier League wins and bagged an additional £60,000 from the UK Open, Players Championship and Belgian Darts Open.
The young star also pocketed £30,000 at two invitational events, the Bahrain and Dutch Masters. However, he can’t avoid having a chunk of his earnings taken away through national insurance and tax.
Tom Wallace, director of tax investigations at WTT Group and a member of the International Sports Tax Association, has shed light on the amount Littler is set to lose and how he has managed to avoid further hefty payouts, reports the Express.
In a stark contrast to the tax-free winnings of lottery victors and casual gamblers, the courts have clarified that ‘Badges of Trade’ apply to individuals like Littler, who are deemed to be trading due to their involvement in organised, competitive events. This means they’re liable for tax on their earnings.
The criteria determining whether one is trading include the nature and frequency of events participated in, the organisation of these competitions, the number of contests entered within a specific timeframe, the participant’s ranking, prizes won, funding from sports or other bodies, appearance fees, sponsorship deals, income from related activities such as TV spots, agreements with agents, and the extent and type of expenses incurred.
“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,” said Wallace.
“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.”
Littler, who operated in a personal capacity at the World Championship, would have been hit with a tax bill of nearly £83,000 (£76,200 in tax and £7,300 in national insurance). However, after setting up a limited company following his triumph, his income situation has significantly changed.
Wallace added: “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. 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. As Littler is a shareholder in the company, he could extract the profit by way of dividends and pay the appropriate tax rate on those at that time.”
While the tax details for Littler, who has partnerships from boohooMAN and the Sidemen’s Best Cereal brand, and his company are hazy due to various brand deals and expenses, it’s a safe bet that he’s looking at a bill of more than £100,000, putting a sizeable dent in his net worth.