The Social Market Foundation (SMF) has called on the government to increase the Machine Games Duty (MGD) on higher-risk Category B electronic gaming machines (EGMs) in the upcoming budget. In a report released on Tuesday, the think tank indicated that the existing tax structure fails to account for the societal harm inflicted by these machines, unfairly placing the economic burden of problem gambling onto taxpayers.
Gideon Salutin, SMF’s chief economist, and senior researcher Richard Hyde have recommended creating a new MGD band specifically for Category B machines, which would see a duty rise beyond the current 20% rate. Category C machines would maintain the 20% tax, while lower-stake Category D machines would remain at 5%.
According to SMF models, increasing the MGD rate on Category B machines from 20% to 40% could yield between £275 million and £458 million annually. The higher figure assumes no change in gambling behavior, while the lower estimate presumes a slight reduction in play. Additionally, every five percentage point increase beyond 20% could generate an additional £51 million to £114 million.
The current UK tax rate was announced late last year and has been in effect since April. The SMF pointed to Gambling Commission data showing that casino-based machine games have significantly higher rates of problem gambling than other forms of gambling. For example, 26.5% of casino machine users and 16.9% of fruit and slot players have problematic scores on the Problem Gambling Severity Index, compared to an average of 4.5% across all gambling activities.
Adult gaming centres, which represent 42% of EGMs in Great Britain, reported an 11% year-on-year increase in revenues, totaling around £623 million for 2023-24. The SMF noted that many of these centres and betting shops tend to be located in deprived areas, with nearly half of licensed adult gaming centres situated in the bottom 20% of such areas, and their numbers are on the rise.
The SMF estimated that the economic loss tied to machine-related issues amounts to £2.33 billion annually. This figure encompasses £669 million in direct costs linked to welfare, housing, healthcare, and crime services. Since its introduction in 2013, MGD has replaced the amusement-machine licence duty and the VAT on gaming machine income, but the Foundation believes the uniform 20% rate cannot serve both as an excise tax and a measure responsive to the harms caused by gambling.
The report advocates for aligning tax policy with public health objectives by extending the Treasury’s recent logic applied to land-based gaming machines, which raised Remote Gaming Duty from 21% to 40% in 2025 based on harm criteria.
The SMF anticipated three possible responses from operators to an increased MGD: absorbing the tax by reducing profits, cutting costs in areas like marketing and executive pay, or passing costs to consumers through worse odds or higher prices. The think tank argued that a decrease in gambling spending would likely redirect funds to sectors like retail and hospitality, potentially generating net job creation and a gross value added (GVA) increase of around £311 million. They calculated that even a 10% reduction in gambling expenditures could lead to the creation of approximately 24,000 net jobs, while increasing overall Treasury revenues since non-gambling sectors typically yield higher tax on turnover.
Polls conducted in April 2026 indicated strong public support for stricter tax measures on gambling machines. Approximately 43% of respondents favored hiking the tax on slot machines in high street betting shops, while only 11% called for a reduction. General surveys further suggested widespread public backing for increased gambling taxes as a revenue strategy.
Despite this, the Betting and Gaming Council (BGC) strongly opposed the SMF report, arguing that such an increase could have dire consequences for high-street gambling venues and lead to significant job losses. A BGC spokesperson stated, “We fundamentally oppose any increase in Machine Games Duty, and nothing in this report justifies such a damaging policy.” They highlighted the importance of various venues in local communities and warned that higher duty rates would result in closures, job losses, and diminished vitality for high streets. The spokesperson criticized the report for neglecting to estimate the potential venue closures and job losses resulting from its proposals, adding that initial tax increases could cost the economy as much as £3.1 billion and lead to 40,000 job losses.
Concerns over the implications of these changes were echoed by Regulus Partners, a global advisory firm. They warned the proposed reforms could have far-reaching effects on the retail gambling sector, anticipating that about 70% of betting shops might close, equating to around 4,000 of the UK's 5,500 venues. They also projected a 90% loss in adult gaming centres, with a resulting significant drop in Category B gaming machine revenue. Regulus predicted that betting shop revenue could fall from £1.2 billion to £600 million, while AGC revenue might decline from £550 million to £115 million. This decline could keep overall tax receipts similar or slightly lower than current levels as the proposed 40% MGD rate would apply to a smaller revenue base.
The consultancy further estimated that up to 43,000 jobs might be lost directly in the industry, while betting shop closures could cut media rights payments and levy income for British horseracing by approximately £100 million. They worried that half of the lost gaming machine revenue may end up in the black market.
In response, the SMF challenged claims of a mass shift to illegal gambling, asserting that in-person illegal operations are more challenging to conceal and citing international data that do not establish a definitive link between remote gaming tax rates and black market activity.
