Key Points
- Treasury officials are actively modelling MGD increases ahead of the 28 October Budget, with the standard rate potentially jumping from 20% to 40%.
- Regulus Partners warns the hike could force 70% of betting shops and 90% of adult gaming centres to close, slashing revenue rather than raising it.
- The proposed tax follows an already damaging Remote Gaming Duty rise in April 2026 and Burnham’s scrapping of “aim to permit” licensing, placing land-based gambling under its most coordinated regulatory pressure in years.
A Tax That Might Raise Nothing
What occurs when the government finds itself in such a dire need for revenue, turning to a tax which, theoretically, could yield absolutely no revenue at all? This is the question that lurks behind the recent press releases concerning Chancellor John Healey’s contemplation of raising Machine Games Duty before the Budget on 28 October.
The Treasury is currently examining just how much could be collected through various levels of MGD taxation hikes, in the process of discussion considering an increase of each of the three rates to double their current value from 5% to 10% for the lower rate, from 20% to 40% for the standard rate, and from 25% to 50% for the higher rate. Gambling, again, is in the frame.
A government source told The Times: “Increases in gambling taxes are definitely on the table again.” The same source added: “Andy hates adult gaming centres. But, like all politicians, he loves bingo halls and pubs. They would probably need carve-outs if they do go after machine games duty.” That last line matters more than it reads at face value, and we will come back to it.
The SMF’s Proposal and Its Shaky Maths
The conversation did not start in Healey’s office. Back in June, the Social Market Foundation called for Machine Games Duty to double on Category B machines, the higher-risk slot machines found in betting shops and adult gaming centres, which carry a £2 maximum stake every 2.5 seconds and a £500 top prize. The think tank claimed the move could raise between £275m and £458m annually for the Treasury.
The top figure, however, has a condition most headlines skipped: it assumes zero impact on supply or consumer behaviour. No venues close. No customers leave. Every machine keeps spinning at the same rate. The case was put across with great conviction by Gideon Salutin, chief economist for the SMF, who stated, “It can be shown mathematically that increasing Machine Games Duty is one of the very few increases in taxation which will improve the nation’s finances not just once but twice because of the increase in tax and employment in areas that produce tax.”
Regulus Partners analyst Dan Waugh read those projections and delivered a blunter verdict. “The SMF’s approach to tax policy is haphazard,” he said. “They appear to be making things up on the hoof.”
What the Closure Modelling Actually Shows?
Regulus Partners ran its own numbers on what a doubled MGD would do to the sector, and the conclusions are severe. Around 70% of betting shops would be forced to close, roughly 4,000 of the UK’s 5,500 venues. Approximately 90% of adult gaming centres would disappear, around 1,300 of the existing 1,450 sites. Betting shop revenue would fall from £1.2bn to £600m; AGC revenue would shrink from £550m to £115m. Regulus also estimated that half of the lost machine revenue would shift directly to illegal gambling operators.
Waugh had previously warned that the picture for land-based businesses was already dire before any MGD change. “These businesses are already struggling with significant inflationary cost pressures,” he told NEXT.io. “Energy costs have gone through the roof, labour costs are higher than ever. They’re already facing massive inflation day-to-day, and the SMF now wants to double the amount of duty they pay. It’s just not survivable for the vast majority of businesses.”
The BGC sharpened that into a specific warning for Healey. A spokesperson told NEXT.io: “By the end of 2026, more than 600 betting shops will have closed and 5,000 jobs will have been lost since last year’s Budget following increases in Remote Gaming Duty. Doubling tax on a land-based product would lead to more closures, further job losses and damage to the wider ecosystem that supports British racing.”
The Online Hike Already Did Real Damage
This is not the first time that a chancellor has looked at gambling taxes. The previous chancellor Rachel Reeves opened up the door back in November 2025 when a document released by the Office for Budget Responsibility (OBR) showed that Remote Gaming Duty would increase from 21% to 40% in April 2026. This rate increase is estimated to collect £1.1bn by 2029, but behavioural responses would lower the take by one third.
The consequences for land-based retail followed almost immediately. Flutter warned the duty rise would carry a $320m earnings impact in 2026 before mitigation. Paddy Power moved to close up to 100 betting shops with 400 jobs at risk, while Betfred cited taxation as the primary driver behind its own closure plans. William Hill owner Evoke shut 270 shops after a strategic review prompted by the Budget. These closures are not abstract industry statistics; each one removes levy and media rights payments from British racing, which still derives around 40% of its income from bookmakers through betting shops.
Burnham’s Campaign Against the High Street
The MGD debate sits inside a wider political campaign that has been building since Burnham took office. In August, his government announced plans to scrap the “aim to permit” rule under the Gambling Act 2005, the provision that had effectively required local councils to approve new gambling premises wherever an operator met basic licensing requirements. New adult gaming centres in England will additionally require planning permission.
Burnham has openly identified AGCs and vape shops as “dodgy businesses” that are making inroads into the UK’s high street. The trade body representing the amusement industry, Bacta, came forward with its dissenting view, with communications director Alistair Gair noting that the number of AGC venues has dropped from 1,610 in 2015 to 1,502 now. Jenningsbet chief executive Greg Knight also raised a concern that deserves attention. “I absolutely believe that number 10 does not appreciate the distinction between a betting shop and an AGC,” he told SBC News. “To them, they are all clumped together as gambling venues.”
Racing Faces a Collateral Hit
British horse racing has been warning about this for months, and the numbers back the concern. Industry modelling suggests a doubled MGD would trigger around 2,912 betting shop closures and reduce the sport’s income from levy and media rights by approximately £70m. Betfred estimated that its own 132-shop closure programme already amounts to roughly £4m lost to racing. Multiply that across the sector under a tax that closes thousands more venues, and the levy damage becomes structural, not temporary.
Expert Analysis
We think this story has a question the mainstream coverage is politely avoiding: is the Treasury actually serious about this, or is it using the modelling process to generate a number it can then publicly reject?
The political logic is real. Burnham dislikes AGCs on record, the SMF has provided political cover with a revenue figure, and a poll commissioned by the same think tank found 43% of UK adults support raising taxes on slot machines. That is a majority-friendly headline. The problem is that the revenue figure only holds if virtually no one closes and no one moves to the black market, two conditions that are contradicted by everything that happened after the Remote Gaming Duty rise in April.
Carve-outs for bingo halls and pubs, which the government source essentially confirmed would be necessary, would shrink the taxable base further. Carve-outs for horse racing, which received protection in the last Budget, would do the same. What remains is a narrower slice of Category B machines in AGCs and standalone betting shops, many of which are already operating on thin margins after the energy cost surge and national insurance rise. The OBR’s own analysis of the online duty rise acknowledged that operators would pass roughly 90% of increases onto consumers, reducing demand and therefore yield. Apply that same logic to machines, where margins are already compressed, and the revenue case becomes very difficult to defend. We are not saying this tax should not happen. We are saying the Treasury should publish its modelling before October, not after, because the gap between the SMF’s optimistic headline and the Regulus closure scenario is too wide to be left to Budget-day surprise.
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