How to start a competition business in the UK

How a competition business makes money

You sell entries into a competition. Each entry costs a set amount. When entries close, you run a draw and award the prize. Your profit is ticket revenue minus the prize, payment fees, advertising, platform costs and tax.

The operators who do well choose prizes people want, market them at a sensible cost and earn trust. Customers hand over money for a chance to win, so a single unfair draw or late prize can end a brand.

Before you start a competition business, know that it is not a guaranteed income. A competition that does not sell enough entries still has to pay for the prize you promised. Plan for that before you start.

Understand the law first

Section 14 of the Gambling Act 2005 treats an arrangement as a lottery when people pay to take part and the prize is allocated by a process relying wholly on chance. Under section 14(5), a process that requires skill, judgement or knowledge is not treated as relying wholly on chance, as long as the requirement would reasonably stop a significant proportion of people from taking part or winning.

In practice, UK operators run prize competitions with a real skill question, often with a free postal entry route as well. The Gambling Commission says multiple choice questions, and questions that give a second chance after a wrong answer, rarely meet the test. It also says it does not approve these competitions or help you design them, so compliance is your responsibility.

Read are online prize competitions legal in the UK? and the guides on skill questions and the free entry route before you do anything else.

This is general information, not legal advice. Take advice from a solicitor before you launch.

Set up the business

1. Pick your structure. Sole trader or limited company. Many competition operators use a company so personal assets are separate from the business. An accountant can advise.
2. Open a business bank account. You will need it for payment provider settlement.
3. Pay the ICO fee. The ICO says organisations that use personal information must pay a data protection fee unless exempt. You will collect names, addresses and dates of birth.
4. Write your terms. Cover the question, entry route, closing date, how winners are selected, prize delivery and refunds.
5. Sort insurance. Ask a broker about cover for your activity and for high-value prizes.

Keep your records tidy from day one. You will need to show ticket sales, prize purchases and winner details to your accountant and, if asked, your payment provider.

Pick a niche and a brand

Generic competition sites compete on the same prizes. A clear niche helps you stand out and lowers your advertising cost. You might focus on a prize type, an audience or a region.

Choose a name and domain you can own. Check the name is not already used by another operator or protected by a trade mark. Put your own domain and branding on the site. Niche supports this, so customers see your business and not the platform behind it. See white-label competition platform.

Choose prizes and set prices

Start with prizes you can buy outright and describe accurately. Rule 8.15.1 of the ASA's CAP Code says prizes must be awarded as described, normally within 30 days.

Work out your numbers before launch:

• prize cost, including delivery and any tax
• payment fees on every ticket
• your platform fee
• advertising spend per entry sold
• the number of entries you must sell to break even

Then decide what you will do if you fall short of break-even. If the answer is "hope", reduce the prize value or the entry cap. Niche has a prize-proof gate, so a competition cannot go live until you upload proof that the prize is bought. A go-live check also blocks competitions priced below a stamp or with too short an entry window. More in choosing prizes and ticket prices.

Get payments and checks in place

Many payment providers will not take competition businesses. Apply to providers that say they support them, and expect questions about your legal model, your prizes and your refunds. Niche works with UK acquirers Acquired, Cashflows and DNA Payments, and includes refund, chargeback and reconciliation tools. See payment providers for competition websites.

Plan the safeguards too:

• an age and identity check before prizes are released (see KYC and age checks)
• UK-only sales, using geo-blocking
• spend limits and self-exclusion for customers
• a consent log and a way to handle erasure requests (see GDPR for competition websites)

These are built into Niche. If you build your own site, each one is extra development.

Launch, run fair draws and grow

Run your draws in the open. Niche uses a commit-reveal process with random.org, and a live draw console lets you show the result as it happens. Publish the draw date in advance and announce winners promptly. Our guide on how to run a fair draw explains the method.

For growth, use email, SMS and push to bring customers back, and paid social ads to reach new ones. Niche includes the email, SMS and push tools, and the Done-for-you plan includes Meta and TikTok ad tooling. See how to market a competition website.

Read the full step-by-step in our guide to starting a competition website, and the pricing page for platform costs.

Risks to plan for

• Legal risk. If your skill test is too easy or your free route is not genuine, the competition may be treated as an illegal lottery.
• Cash flow. You pay for prizes before you know the sales.
• Chargebacks and fraud. Disputes cost money and can threaten your payment account.
• Reputation. Complaints about delays or draws spread fast.
• Vulnerable customers. Spending controls matter, and you should take them seriously.

Frequently asked questions