How to start a prize competition business in the UK

Most people who want to start a competition site expect the website to be the hard part. It isn't. The places people get stuck are the bank account, the card payment approval and the legal basics, and they take longest because they involve other people. This is the order we would do things in.

1. Make sure it's a prize competition, not a lottery

In Great Britain, the Gambling Act 2005 treats an arrangement as a lottery when people pay to take part and the winner is decided wholly by chance. Running a lottery generally needs a licence, apart from a few narrow exemptions. A prize competition is built so that it isn't a lottery, and most UK operators do two things to get there:

• A genuine skill question. It only counts if it's hard enough to stop a significant proportion of people from entering or winning (section 14 of the Act sets that test). A question everyone can answer is unlikely to meet it.
• A free entry route. Usually a postal entry with the same chance of winning as a paid one. If the route is genuine, properly publicised and no less favourable than paying, people don't have to pay, so the "pay to take part" part of the lottery definition falls away.

Most operators do both, and the government's Voluntary Code for prize draw operators expects free entry routes to be easy to find. This is the single most important thing to get a solicitor to confirm for your model.

2. Start with an audience, not a website

The operators who do well bring buyers with them. That might be a following in a niche (cars, fishing, golf, tech, gaming), a community you already run, or customers of an existing business. A website doesn't create demand. It turns demand you already have into ticket sales.

Pick a lane. Your prizes, your branding and your marketing all get easier once you know exactly who you're for.

3. Set up the business

1. Choose a structure. Most operators trade through a limited company, which keeps the business's obligations, including prizes it has promised, separate from your personal finances. It's also what banks and payment providers expect. You can register one at Companies House the same day. An accountant will tell you whether a sole trader or partnership could suit you instead.
2. Open a business bank account in the business's name. You'll need it for card payment settlements, and a personal account won't be accepted. Be upfront about what you do: some banks are cautious about anything that looks like gambling. Explaining the skill question and the free entry route usually helps. If one bank says no, try another. It's common in this sector.
3. Talk to an accountant early. Ask about VAT on entry fees before you set ticket prices, because the answer affects your margin. Get it in writing.
4. Pay the ICO data protection fee. You'll hold entrants' personal data, so you almost certainly need to. The ICO's online self-assessment tells you which tier applies.
5. Arrange a postal address for free entries. It appears in your terms, so avoid your home address if you can. A PO box or a virtual office are common choices. Someone has to open the post and enter those entries promptly.

4. Get the legal foundations reviewed once

Have a solicitor with consumer or promotions experience review your master terms and conditions before your first competition. It's a one-off cost that covers every competition after it. Ask them about:

• the skill test and free entry route for your model
• section 8 of the CAP Code, which covers prize promotions in UK advertising
• anything specific to your prizes, such as transferring a car or paying out cash
• a written legal opinion for advertising on Facebook and Instagram, if you'll run ads (see step 9)

Read the DCMS Voluntary Code yourself too. It sets out what good practice looks like: findable free entry, clear terms, honest marketing, age checks and limits on credit card use.

5. Insurance: what to ask a broker

We can't tell you what cover you need, but a broker can. Take this list:

• Public liability, if you hold live events or meet winners
• Employers' liability, a legal requirement once you employ anyone
• Cover for the prizes themselves while you own them, store them and deliver them
• Cyber and data cover, because you hold customer data and take payments online

6. Get approved for card payments

This is where many new operators stall. Lots of payment providers won't take prize competitions at all, and the ones that do run thorough checks on you before approving an account.

Have this ready before you apply:

• your company's legal name and Companies House number, plus any trading name
• your website and a plain, accurate description of the business ("prize competitions with a skill question and a free postal entry route")
• your registered address and a named contact
• your business bank account details, in the business's name
• the name, date of birth, nationality, home address and share of every director and every owner of 25% or more

What speeds things up: a site that already looks real, with branding, terms and a draft competition in place, and names that match across Companies House, the bank and the application. What slows things down: mismatched names, a personal bank account, missing owners, or a description that hides what you do.

On Giveawayz, card payments go through Cashflows, who work with UK prize competition operators. Approval is their decision, not ours. You can build your site and draft competitions while you wait, then publish when approval lands.

7. Do the arithmetic before you buy a prize

For a prize costing £P, at ticket price £T with a cap of N tickets, work out what you make at 60% sold, 80% sold and sold out, after card processing and platform fees. If 60% doesn't cover the prize, change the price, the cap or the prize. Our guide to pricing competition tickets walks through a full example.

8. Build the site and run your first competition

• Describe the prize precisely, with photos you have the rights to. Keep the invoice.
• Set the price and cap deliberately. The cap is your maximum exposure.
• Use a scheduled draw, and don't move the closing date once you've launched.
• Write a genuinely skill-based question that relates to the prize.
• Publish the free entry route clearly, with the same odds as a paid entry.
• Read the competition's terms before you publish. You're the one making the promises.
• Test it on your phone. Once live, make one real purchase and refund it, so you've seen exactly what your customers see.

After the draw, contact the winner quickly, keep records of every competition for at least six years, and share your winners. Real winners are the best marketing you have.

9. Advertising on Facebook and Instagram

If you plan to run ads on Meta, expect to need advance written permission under its gambling and gaming advertising policy, which it applies to prize competitions too. Operators often call this "the RMG licence", but it isn't a licence. For a UK prize competition, Meta usually wants a written legal opinion from a solicitor confirming your competitions are lawful, so ask for it at the same time as your terms review. Apply before you spend, because approval can take weeks. Google and TikTok have their own policies, so check each before running ads there.

The short checklist

• Business set up, with a business bank account in its name
• Accountant engaged and VAT confirmed in writing
• ICO fee paid, and a postal address for free entries arranged
• Master terms reviewed by a solicitor
• Insurance discussed with a broker
• Card payment application submitted with matching details
• Prize, price and cap checked at 60% sold
• Skill question, free entry route and terms in place
• Test purchase made and refunded

Then go and sell some tickets.