UK gambling businesses and advisers have warned that raising machine games duty (MGD) to 25% could intensify pressure on licensed operators and encourage customers to use unregulated alternatives.
Chancellor John Healey announced the five-percentage-point increase in the autumn budget. Although lower than the 40% rate proposed during the summer, industry figures argue that the measure adds to a difficult combination of tax increases and regulatory costs.
Smaller Than Feared Tax Increase Still Adds Pressure To Operator Margins
Regulus partner Dan Waugh rejected the suggestion that avoiding a larger increase made the announcement positive. “If your income tax went up by a quarter overnight, you wouldn’t see that as a positive,” he told iGB.
Waugh warned of further venue closures and job losses. Repeated changes to fiscal policy, he argued, could also undermine the UK’s appeal to investors seeking a predictable business environment.
“The industry is already very squeezed. A 5% increase in an industry that has very squashed margins is not ideal,” said Bethan Lloyd, a partner at law firm Wiggin.
Lloyd highlighted potential consequences for horse racing revenues because many customers continue to use retail betting shops. She expects consolidation and cost reductions, although technological developments and new entrants could ease some pressures.
Illegal Market Estimates Prompt Calls For Stronger Consumer Protection
Gaming Compliance International president Ismail Vali described the increase as part of a “perfect storm” encouraging migration towards unlicensed gambling.
He cited estimates putting the unregulated share of UK online gross gaming revenue at 9% by the end of 2025, compared with 0.43% in 2020. “We are knocking on the door of 10% illegal black market share,” he warned.
According to Vali, reduced profitability can lead licensed businesses to cut marketing, leaving customers exposed to competing brands offering attractive odds and bonuses without checking their authorisation. “Consumers cannot differentiate between this stuff,” he said.
Vali also pointed to “plug-and-play” offshore websites reportedly costing as little as £25,000 to establish. His concern is that operators can enter the unregulated market quickly while licensed businesses face increasing financial constraints.
MGD Rise Follows Higher Duties Across Remote Gambling Products
Earlier proposals for a 40% MGD rate came from the Social Market Foundation rather than an official Treasury plan. Some observers therefore cautioned against treating that figure as the government’s intended starting point.
Nevertheless, advisers stressed the cumulative effect of successive changes. Last year’s budget, delivered by Rachel Reeves, announced an increase in remote gaming duty from 21% to 40%.
Remote betting general duty is also due to rise from 15% to 25% next year. Together with the MGD increase, these measures affect businesses across retail and online gambling. “The industry needs to work out how it breaks this cycle of tax increases and regulatory tightening, because otherwise it’s heading to a pretty dark place,” Waugh said.
Retail Businesses Face Closures While Larger Groups Have More Flexibility
Lloyd believes diversified groups such as Flutter and Entain are better positioned to absorb additional costs. Smaller businesses and operators dependent entirely on retail activity face greater exposure.
Waugh expects closures and employment losses, but did not predict a merger wave resulting solely from tax increases.
Vali anticipates broader structural changes. “I expect to see retail consolidate. I expect some operators to fail, and I expect more migration to online platforms.”
His proposed response centres on stronger enforcement and coordination between regulators, platforms, payment providers and advertising channels. He called for renewed attention to monitoring, policing and directing customers towards licensed businesses across the overall gambling market.
Waugh Questions Government Attitude And Warns Of Further Tax Changes
Waugh also contrasted Healey’s approach to gambling with his comments about banks. While announcing an additional 3% banking surcharge, the chancellor said he was “grateful” for their contribution.
No comparable praise accompanied the gambling announcement. “It was not surprising, but I think the other thing is the sense that actually the government looks down its nose on this industry, and the sense it’s prepared to be vindictive even.
“We’ll be back here in a year’s time because it’s again not even apologising for raising taxes. I think that’s striking.”
The policy challenge is balancing tax receipts with the continued viability of licensed gambling. Claims about illegal market expansion need clear attribution and consistent measurement, particularly when used to predict the consequences of a new duty rate.
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