The Social Market Foundation (SMF) is calling on the government to increase the Machine Games Duty (MGD) imposed on higher-risk Category B electronic gaming machines (EGMs) in the upcoming budget. In a report released on Tuesday, the think tank argued that the current tax framework fails to adequately reflect the societal damage caused by these machines, shifting the economic burden of problem gambling onto taxpayers.
Gideon Salutin, the SMF’s chief economist, along with senior researcher Richard Hyde, suggested that a new MGD band should be introduced to specifically target Category B machines. This category would be taxed at a higher rate than the existing 20%. Meanwhile, Category C machines would continue to face the 20% tax, and lower-stake Category D machines would remain at 5%.
According to the SMF’s analysis, raising the MGD rate on Category B machines from 20% to 40%—matching the rate set for remote gaming in 2025—could generate annual revenue ranging from £275 million to £458 million. The £458 million estimate assumes no change in gambling behavior, whereas the more conservative prediction takes into account potential declines in play. For every additional five percentage point increase above the current 20% rate, the report anticipates an additional yield of £51 million to £114 million.
The UK’s tax framework was announced late last year and came into effect at the beginning of April. The SMF's report underscored data from the Gambling Commission, which indicates that machine-based casino games have significantly higher rates of problem gambling compared to other gambling types. Specifically, 26.5% of casino machine users and 16.9% of fruit/slot players have Problem Gambling Severity Index (PGSI) scores indicating problematic gambling, compared to an average of just 4.5% across all gambling types.
Adult gaming centres, which account for 42% of EGMs in Great Britain, saw an 11% increase in revenues year-on-year, totaling approximately £623 million for 2023-24. The SMF noted that these establishments and betting shops are frequently concentrated in the country’s most deprived areas. Nearly half of licensed adult gaming centres are located in the bottom 20% of deprived neighborhoods, and the number of these centres is growing steadily.
The think tank calculated the total economic impact of machine-related harms at £2.33 billion annually, which includes £669 million in direct fiscal costs related to welfare, crime, health services, and housing. MGD was introduced in 2013 to replace the amusement-machine licence duty and act as VAT on gaming machine income. The SMF argues that the flat 20% rate is inadequate as an excise tax to meet its intended purpose.
The report proposed extending the Treasury’s recent logic applied to land-based gaming machines, which saw Remote Gaming Duty increase from 21% to 40% in 2025 based on harm criteria. This change would align tax policy with public health objectives more effectively.
The SMF explored three potential responses from operators to an increased MGD: absorbing the tax by reducing profits, cutting costs such as marketing and executive pay, or passing the tax on to consumers through worse odds or higher prices. The report suggests that a decline in gambling spending could shift towards retail and hospitality sectors, potentially leading to net job creation and increased gross value added (GVA).
A projected 10% decrease in gambling expenditures could create approximately 24,000 new jobs and increase GVA by around £311 million. Additionally, since non-gambling sectors produce higher tax revenue per £1 million turnover compared to gambling, the Treasury could see an overall revenue increase.
Polling carried out by the SMF in April 2026 indicated strong public support for stricter taxation of gambling machines. About 43% of those surveyed favored raising taxes on “slot machines in high street betting shops,” while only 11% were in favor of lowering the tax. Broader surveys aligned with this sentiment, showing general public approval for raising taxes on gambling as a potential revenue source.
In contrast, the Betting and Gaming Council (BGC) issued a vigorous counter to the SMF report, claiming such a tax increase could severely impact high-street gambling venues and result in substantial job losses. A BGC representative 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 establishments like bingo clubs, betting shops, casinos, and community clubs, cautioning that increased duty rates could lead to venue closures and significant job losses that would weaken high streets.
The BGC further expressed concerns about previous gambling tax increases, claiming they could result in a £3.1 billion loss to the economy and as many as 40,000 job losses in the sector.
Regulus Partners, a global advisory firm, echoed these worries, warning that the SMF’s predictions about operators absorbing or passing on the tax increase could lead to major disruptions in the retail gambling market. Their estimates indicate that around 70% of betting shops might have to close, equating to approximately 4,000 of the UK’s 5,500 venues. Likewise, 90% of adult gaming centres could vanish, with around 1,300 of 1,450 sites potentially shutting down.
Regulus anticipated that while remaining venues may see their average revenues double, overall revenue from Category B gaming machines would still decline significantly. Betting shop revenue could drop from £1.2 billion to £600 million, and adult gaming centre revenue might fall from £550 million to £115 million. Consequently, imposing the proposed 40% MGD on a reduced revenue base might keep overall tax receipts relatively unchanged or even lower than current levels.
Regulus also projected that up to 43,000 direct jobs could be lost, and betting shop closures could cut media rights payments and levy income for British horse racing by an estimated £100 million. They suggested that half of the lost gaming machine revenue would likely move to the black market.
In response to concerns regarding illegal gambling, the SMF contended that the transition to illicit operations would be less likely, citing that in-person illegal gambling is more difficult to conceal and referencing international data that do not support clear links between remote gaming tax rates and black market activity.
