Lottery win times two: Less tax, more prize money this Christmas

Not Christmas – none of us need to schedule that in our diaries – but the El Gordo draw, Spain's most famous, most popular and the one you have the greatest chance of winning.

Gordo is the adjective for 'fat', in the masculine, and for most of those who get a return on their tickets, it's a good analogy for what their wallets will look like; although this annual draw, which takes place every December 22, will not make multi-millionaires of anyone. Or even millionaires, except in pesetas. Unless they're prepared to shell out a fortune on trying, that is.

A full ticket costs €200, which is why most people, and syndicates, buy tenths of a ticket, known as a décimo, at €20 each. For a full ticket, the top prize is typically around four million, but as most jackpot winners will only have a décimo, they will take home around €400,000.

Prizes to fifth place, of which there are several, mean the chances of taking home a few hundred or even a few thousand are very high, compared with the usual weekly lotteries – such as the EuroMillions, where your chances of drawing the top ticket are in region of one in 114 million, or much slimmer than being on board a passenger aircraft which crashes.

This is why it's so popular – winnings are about enough to change a life short-term, even if it's just paying for a decent holiday, and winners themselves are many.

Tradition dictates that the El Gordo numbers that will earn prizes are 'sung' by the choir of children at Madrid's San Ildefonso primary school on live TV as the balls come out of the pool. Notaries are always open on December 23, even if it's a Sunday, so the lucky ticket-holders can sign for their earnings.

If you miss the El Gordo, even bigger prizes – but slimmer chances – are on the table for the El Niño draw on January 6.

This coincides with the national holiday for the Three Kings, said to be when the Three Wise Men travelled from the East to bring gifts to the Baby Jesus and, the night before, in Spain, is when children receive the bulk of their festive presents.

Niño means 'child', in the masculine or where the sex is not known, so the name of this second-chance lottery needs no explanation.

Tax office wins less in lotteries

Six years ago, at the end of the first full calendar year of the former right-wing PP-led government, lottery winners had to pay tax on their prizes for the first time ever.

Anyone who netted a million would, in practice, only pocket €800,000, although by December 2017, the first €2,500 were exempt from the 20% tax – admittedly, small fry if your winnings reach seven figures.

But under pressure from the opposition once in a minority, the PP government agreed to up the stakes: the first €10,000 are now tax-exempt, so if you hit the jackpot with the El Gordo, you'll only have to pay the State on the €390,000 out of your €400,000.

In total, your winning décimo will be worth €322,000 after tax.

Second prize for a full ticket is €1.25 million, or €125,000 for a décimo, and with the new tax régime, if your décimo is drawn second, you'll only be handing over cash to the Treasury on €115,000 of this, so your total net winnings will come to €102,000.

Third prize on the El Gordo is €500,000 for a full ticket or €50,000 for a décimo, so if you hold the latter, you'll have to hand over 20% of €40,000, meaning your take-home pay will be €42,000.

Two fourth prizes of €200,000 for a full ticket or €20,000 for a décimo mean your net winnings will be €18,000 for the latter.

And if you get one of the eight fifth prizes, valued at €60,000 for a full ticket or €6,000 for a décimo, you won't have to pay tax at all on the latter.

But you might wish you'd waited a year to have a winning ticket drawn, since from January 1, 2019, the tax-exempt threshold goes up to €20,000, meaning for the El Niño draw, only any winnings over this amount will attract a 20% retention.

And from January 1, 2020, the allowance doubles again, to €40,000 – so, by Christmas, the 2020 El Gordo means net third-prize winnings of €48,000 out of the gross €50,000 per décimo, whilst second-prize winners who scoop up €125,000 will take home €108,000 and jackpot décimo-holders will, out of their €400,000, be left with €328,000.

The more generous lottery tax régime in 2020 does not make a huge difference, on paper, to those snaffling the biggest prizes, but anyone who comes fourth or fifth in the El Gordo will be able to enjoy their winnings in full.

In fact, the State lottery board says nearly 60% of prizes in all the draws carried out in Spain year-round will be tax-exempt from this coming January 1 – a figure that is likely to grow in another 12 months.

The philosophy behind the higher tax thresholds is that, if someone wins the lottery – be it €6,000 or four million – they will surely spend it, meaning retailers, the property market and service providers will benefit and the State earns more in tax from them, or they will invest it, meaning the government will earn tax on the interest.

Your number's up

Lightning doesn't strike twice in the same place – so we're told, although in practice that's a fallacy and there's a greater chance of this happening than of the same El Gordo numbers coming up in two different years, but those who are superstitious or able to devise a mathematical formula to predict the order in which the balls fall out of the wheel may be interested in previous jackpot combinations.

Predictably, the most popular combinations have not attracted any winnings: in 2017, the most sought-after number was 00.155, due to the government's having triggered Article 155 of the Spanish Constitution to strip Catalunya of its regional ruling powers after its Parliament held a disputed independence referendum on October 1, but 155 turned out not to be any luckier for El Gordo players than for Catalunya.

El Gordo jackpot numbers worth €400,000 a décimo include 76.058 (in 2012), 62.246 (in 2013), 13.437 (in 2014), 79.140 (in 2015), 66.513 (in 2016) and 71.198 (in 2017).

Although El Gordo and, to a lesser extent, El Niño are Spain's most-played lotteries, a long list of national draws take place weekly or, in some cases, daily, and you can grab tickets from any branch of the Loterías y Apuestos de Estado (State lotteries and bets) on the high street, and from licensed sellers in the case of the ONCE lottery for the blind.

Spain has so many draws with such varied features that they can seem difficult to follow – but we've produced a handy little guide to national lotteries here to help you wade through them all.

Good luck for next Saturday's El Gordo draw – and if you hit the top prize and decide to invest it in a new home in the sun, check out the huge choice on our site to suit any taste or budget.