The Social Market Foundation (SMF) has called on the government to increase the Machine Games Duty (MGD) on high-risk Category B electronic gaming machines in the upcoming budget. In a report released on Tuesday, the think tank highlighted that the current tax framework underestimates the societal harm linked to these machines and shifts the economic burden of problem gambling onto taxpayers.
Gideon Salutin, the SMF’s chief economist, along with senior researcher Richard Hyde, recommended creating a new MGD band aimed specifically at Category B machines, suggesting that these machines should be taxed at a rate higher than the existing 20%. Meanwhile, Category C machines would remain taxed at 20%, and lower-stake Category D machines would retain their 5% rate.
According to SMF modeling, raising the 20% MGD on Category B machines to 40%, similar to the new rate for remote gaming set to take effect in 2025, could generate between £275 million and £458 million annually. The higher figure assumes no changes in gambling behavior, while the lower estimate anticipates a reduction in play. The report notes that for every additional five percentage point increase above 20%, there could be an extra yield of £51 million to £114 million.
The tax rate for remote gaming was announced late last year and took effect at the start of April.
The SMF report points out that data from the Gambling Commission indicates that machine-based casino games have significantly higher rates of problem gambling compared to the general gambling population. For instance, 26.5% of casino machine players and 16.9% of fruit and slot players are considered problematic gamblers, against an average of 4.5% across all gambling activities.
Adult gaming centers, which account for 42% of electronic gaming machines in Great Britain, reported an 11% increase in revenues year-on-year, totaling approximately £623 million in 2023-24. The report noted that these centers often cluster in more deprived areas, with nearly half located in the bottom 20% of the most disadvantaged neighborhoods, a trend that continues to rise.
The SMF estimates that the economic loss from machine-related harms amounts to £2.33 billion annually, comprising £669 million in direct costs related to welfare, housing, crime, and health services.
Since its introduction in 2013, MGD replaced the amusement-machine license duty and VAT on gaming machine income. The Foundation argues that the current flat rate of 20% fails to meet its dual purpose as an excise tax. They suggest that the Treasury’s recent logic applied to remote gaming should similarly extend to land-based gaming machines, raising MGD in alignment with public health priorities.
The report outlines three potential responses from operators to an increased MGD: absorbing the tax by reducing profits, cutting costs such as marketing and executive salaries, or passing on the costs to consumers through lower odds or higher prices. The SMF believes that any decline in gambling spending may be redirected to parts of the economy like retail and hospitality, potentially creating up to 24,000 new jobs and increasing gross value added by approximately £311 million. As non-gambling sectors contribute more tax revenue per £1 million turnover than gambling, the Treasury could also see a rise in overall revenue.
Polling conducted by the Foundation in April 2026 revealed significant public backing for stricter tax measures on gambling machines, with 43% of respondents supporting a tax increase on slot machines in betting shops, while only 11% were in favor of a reduction.
Despite this support, the Betting and Gaming Council (BGC) strongly opposed the SMF’s recommendations, warning that such a move could devastate high-street gambling venues and result in tens of thousands of job losses. A BGC spokesperson asserted, "We fundamentally oppose any increase in Machine Games Duty, and nothing in this report justifies such a damaging policy." They emphasized the critical role of various gambling venues in local communities, arguing that higher duty rates would force closures, lead to significant job losses, and weaken community ties.
The spokesperson also pointed out that the report fails to quantify potential venue closures or job losses arising from the proposed tax raise. The BGC further warned that the original tax increase could cost the economy up to £3.1 billion and risk as many as 40,000 jobs throughout the industry.
Concerns about potential impacts were echoed by Regulus Partners, a global advisory firm, which cautioned that the SMF's assumptions about tax absorption or pass-through might overlook significant repercussions for the retail gambling sector. They estimated that about 70% of betting shops could shut down, translating to approximately 4,000 of the UK's 5,500 venues. Furthermore, 90% of adult gaming centers might vanish, totaling around 1,300 of their 1,450 locations.
While the remaining establishments might see their average revenue double, overall revenue from Category B gaming machines would significantly drop. Betting shop revenue could plummet from £1.2 billion to £600 million, with AGC revenue shrinking from £550 million to £115 million. Consequently, Regulus predicted that the proposed 40% MGD rate applied to a much smaller revenue base would lead to overall tax receipts being either unchanged or lower than present levels.
The consultancy also projected that approximately 43,000 direct jobs could vanish, and closures would reduce media rights payments and levy income for British horseracing by an estimated £100 million. Additionally, Regulus forecasted that half of the revenue lost from gaming machines could migrate to the black market.
The SMF countered industry claims of a shift to illegal gambling, arguing that in-person illegal operations are more difficult to hide and stating that international data does not provide strong evidence linking remote gaming tax rates to black market activity.
