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 its upcoming budget. A report released on Tuesday warns that the current tax framework undervalues the societal damage caused by these machines, leaving taxpayers to shoulder the financial repercussions associated with problem gambling.
Gideon Salutin, SMF’s chief economist, and senior researcher Richard Hyde suggest establishing a new MGD category focused on Category B machines, which would see their duty rise from the existing rate of 20%. In contrast, Category C machines would continue to be taxed at 20%, while lower-stake Category D machines would maintain a 5% tax rate.
SMF modeling indicates that increasing the current 20% MGD for Category B machines to 40%—matching the rate set for remote gaming in 2025—could generate between £275 million and £458 million annually. The higher figure assumes stable gambling behavior, while a more conservative estimate accounts for expected declines in play. The report also notes that for every additional five percentage point rise above 20%, the yield could increase by £51 million to £114 million.
The recently announced UK tax rate became effective as of April. The SMF highlighted research from the Gambling Commission showing that machine-based casino games have significantly higher problem gambling rates compared to the overall gambling demographic. For instance, 26.5% of users of casino machines and 16.9% of fruit/slot players exhibit problematic gambling behaviors, in stark contrast to an average of 4.5% across all gambling activities.
Adult gaming centers (AGCs), which account for 42% of EGMs in Great Britain, reported an 11% year-on-year revenue increase, reaching approximately £623 million for the 2023-24 period. The report pointed out that these centers and betting shops often cluster in deprived areas, with nearly half of licensed AGCs located within the bottom 20% of economically disadvantaged neighborhoods. The SMF quantifies the total economic loss from machine-related harms at £2.33 billion each year, which includes £669 million in direct fiscal costs linked to welfare, housing, crime, and health services.
The MGD was introduced in 2013, replacing the amusement-machine license duty and operational VAT on gaming machine income. The Foundation asserts that the current uniform rate of 20% fails to effectively serve its dual role as an excise tax. The report recommends that the Treasury’s recent rationale for adjusting land-based gaming machine taxes should apply similarly to physical gaming machines, aligning tax law more closely with public health objectives following the remote gaming duty increase from 21% to 40% planned for 2025.
The report also examined potential operator reactions to an increased MGD, projecting three possible outcomes: operators may absorb the tax by lowering profits, cut operational costs such as marketing and executive salaries, or pass the costs onto consumers through worse odds or higher prices. The SMF pointed out that a drop in gambling expenditures is likely to shift toward other sectors like retail and hospitality, potentially creating net job growth and increasing overall gross value added (GVA). A predicted 10% decline in gambling outlays is estimated to generate around 24,000 net jobs and boost GVA by about £311 million. Additionally, since non-gambling sectors typically yield higher tax revenue per £1 million in turnover than the gambling industry, this shift could lead to increased overall tax income for the Treasury.
Polling conducted by the Foundation in April 2026 revealed substantial public backing for stricter taxation of gambling machines. Approximately 43% of respondents supported raising taxes on “slot machines in high street betting shops,” while only 11% favored a tax reduction. Wider surveys reaffirmed this trend, indicating general support for higher gambling taxes as a means of revenue generation.
Despite this, the Betting and Gaming Council (BGC) expressed strong opposition to the SMF report, warning that such a tax increase could severely impact high-street gambling venues and result in tens of thousands of 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 emphasized the importance of local venues like bingo clubs and betting shops, cautioning that higher duty rates would lead to closures, job losses, and weaker high street economies. The spokesperson noted that the report fails to assess the potential closures and job losses their recommendations would lead to.
The BGC further warned that the original gambling tax hike could result in a loss of up to £3.1 billion ($4.1 billion) from the economy, alongside the potential for 40,000 job losses across the sector. Regulus Partners, an advisory firm, also voiced concerns about the implications of the SMF's report.
Regulus estimated that around 70% of betting shops might have to shut down, which translates to roughly 4,000 of the UK's 5,500 venues. The firm further speculated that nearly 90% of AGCs could disappear, reducing their numbers from approximately 1,450 to 150 locations. Although the remaining venues might be able to double their revenues, overall revenue from Category B gaming machines would likely fall significantly. Betting shop revenues are projected to decline from £1.2 billion to £600 million, while AGC revenues may shrink from £550 million to £115 million. As a result, Regulus contended that implementing the proposed 40% MGD on a smaller revenue base would likely leave total tax receipts unchanged or even lower than current figures.
The consultancy also predicted that up to 43,000 direct jobs in the industry could be lost, noting that the closures of betting shops would diminish media rights payments and levy income for British horseracing by an estimated £100 million. Regulus also estimated that half of the revenue lost from gaming machines could end up in the black market.
In contrast, the SMF dismissed industry claims of a significant shift to illegal gambling. They argued that in-person illegal operations are difficult to conceal and cited international studies showing no direct correlation between remote gaming tax rates and the prevalence of black market gambling.
