In a recent announcement, UK Chancellor John Healey confirmed a five-percentage-point increase in the MGD (Machine Gaming Duty), a modification that many industry figures view as a relief compared to earlier calls for a steep 40% hike over the summer. However, this adjustment has provoked significant concern that it may lead to a shift of bettors toward unregulated gambling operators.
The gaming industry is already reeling from multiple tax and regulatory changes. Last year, former Chancellor Rachel Reeves revealed plans to raise the remote gaming duty (RGD) from 21% to 40%. A new betting tax for remote operators will also be implemented at 25%, an increase from 15% set to take effect next year.
Dan Waugh, a partner at the advisory firm Regulus, expressed skepticism about viewing the tax increase as positive, comparing it to a sudden rise in income tax. He warned that such an increase could result in more venue closures and job losses, and cautioned that frequent shifts in fiscal policy could deter potential investors from the UK market.
Legal experts supported these concerns. Bethan Lloyd, a partner at Wiggin, pointed out that the industry is already under considerable financial strain. The 5% increase in MGD will adversely affect sectors with thin profit margins, particularly horse racing, which relies heavily on retail betting shops. Although she anticipates further consolidation and cost reductions within the industry, technological advancements and new market entrants could potentially alleviate some of these difficulties over time.
The potential rise of the illegal gambling market poses another serious risk. Ismail Vali, president of Gaming Compliance International, labeled the MGD increase as part of a “perfect storm” that could drive consumers further into the growing illicit market. Vali noted that the share of unregulated online gross gaming revenue in the UK jumped from 0.43% in 2020 to an estimated 9% expected by the end of 2025, effectively doubling annually.
“Consumers cannot differentiate between this stuff,” he explained, stressing that as legitimate operators reduce their marketing budgets, customers are likely to flock to unregulated brands offering more attractive odds and bonuses. Vali highlighted the proliferation of “plug-and-play” offshore sites that can be launched with minimal investment, making it easier for the illegal market to grow.
Amidst discussions of tax proposals circulating prior to the recent election, observers reiterated that the rumored 40% MGD raise originated from a report by the Social Market Foundation rather than from Treasury officials. Nevertheless, the rising costs for operators, driven by both the increase in RGD and the new MGD, create significant cumulative pressure.
Waugh pointed out that the industry needs to find a way to break the cycle of escalating taxes and regulations or risk heading toward serious decline. Lloyd suggested that larger, diversified companies like Flutter and Entain possess better capabilities to manage these cost increases compared to smaller operators who are at a higher risk.
Looking ahead, Waugh indicated more venue closures and job losses may loom, but he believes a wave of mergers driven solely by taxes is unlikely. On the contrary, Ismail Vali predicts an impending structural shift with retail operations consolidating and more consumers migrating to online betting platforms.
In light of the broader public policy issues, Vali warned that although the UK is renowned for its strict licensing regime, excessive fiscal and regulatory measures could compel legitimate operators to lose ground to illegal competitors. He advocates for strengthened coordination among regulators, platforms, and payment providers to address these challenges effectively.
Waugh noted that additional tax burdens may arise in the future, especially given the Chancellor's contrasting tone when addressing the banking sector. While Healey indicated banks would incur a 3% increase on surcharges, he refrained from expressing any gratitude towards the gambling industry, which Waugh suggested reflects a broader negative sentiment from the government.
"I think it’s striking that the government seems prepared to be vindictive,” Waugh commented, suggesting that the industry may face another round of tax increases in the coming year.
