The recent announcement from UK Chancellor John Healey revealed a five-percentage-point increase in the Machine Games Duty (MGD). This rise, while smaller than the 40% increase many in the industry feared over the summer, has sparked both cautious relief and significant concern among operators and advisers. They warn that this tax hike could prompt customers to gravitate toward unregulated gambling platforms.
The new duty adds to a series of tax and regulatory changes that have already affected both retail and online gambling businesses. Last year, then-Chancellor Rachel Reeves announced a major uptick in the remote gaming duty (RGD), raising it from 21% to 40%. Starting next year, a new general betting duty for remote operators will also take effect, climbing to 25%, up from its initial rate of 15%.
Dan Waugh, a partner at advisory firm Regulus, expressed skepticism about viewing this tax increase positively, stating, "If your income tax went up by a quarter overnight, you wouldn’t see that as a positive." Waugh cautioned that this rise could lead to further closures of venues and job losses in the gambling sector, noting that fluctuating fiscal policies can make the UK appear unreliable to potential investors.
Legal experts echoed these concerns. Bethan Lloyd, a partner at Wiggin, pointed out that the industry is already under severe financial strain, and a 5% increase is problematic for an industry with thin margins. She highlighted the potential risk to horse racing revenues, emphasizing how many bettors still depend on retail betting shops instead of online options. While she sees continued consolidation and cost-cutting as likely, she also noted that advancements in technology and the emergence of new market entrants could alleviate some pressures in the future.
Ismail Vali, president of Gaming Compliance International, sounded the loudest alarm, describing the MGD hike as part of a "perfect storm" that could push consumers toward an expanding illegal gambling market. Data indicates that the unregulated share of online gross gaming revenue in the UK has jumped from 0.43% in 2020 to an estimated 9% by the close of 2025, effectively doubling annually.
Vali warned, "We are knocking on the door of 10% illegal black market share," attributing this shift to legal operators reducing their marketing budgets amid declining profitability. He noted that consumers often struggle to discern which sites are licensed, leading them to gravitate toward offshore brands that may offer more appealing odds or bonus structures, often without recognizing the risks involved.
The rising tide of gambling taxes in the UK is compounded by proposals that circulated ahead of recent elections. Notably, the discussions around a potential 40% MGD increase stemmed from a report by the Social Market Foundation think tank, rather than from official Treasury specifications. Yet, industry consensus suggests that the cumulative tax burden, particularly when combining the hikes in RGD with the new MGD, presents increasing challenges for operators.
Waugh asserted, "The industry needs to work out how it breaks this cycle of tax increases and regulatory tightening, because otherwise it’s heading to a pretty dark place."
Moving forward, Lloyd believes larger, diversified companies like Flutter and Entain are better positioned to absorb these cost increases compared to smaller operators, especially those reliant solely on retail business. Waugh anticipates closures and job losses but refrained from predicting widespread mergers driven by tax increases alone.
Vali envisions a more drastic restructuring within the sector, expecting retail consolidation and some operators to fall by the wayside, while migration to online platforms continues. His principal worry remains the unchecked growth of illegal gambling, which he believes can only be curtailed through enhanced enforcement and better collaboration among regulators, platforms, payment providers, and advertising channels.
Vali also brought attention to a broader public policy issue. Although the UK maintains a respected licensing process, excessive financial and regulatory burdens could lead licensed operators to surrender market share to illegal competitors. He called for renewed efforts around strategies that ensure thorough monitoring and enforcement within the gambling marketplace.
As for the future, Waugh indicated that further tax increases might be on the horizon. He noted that Chancellor Healey’s comments about banks contrasted sharply with the lack of acknowledgment for the gambling sector, stating, "It was not surprising, but I think the other thing is the sense that actually the government looks down its nose on this industry." Waugh anticipated revisiting this tax issue anew in a year, highlighting the government's apparent indifference to the industry's plight.
