UK Gambling Shrugs Off 40% Tax Hike, But the Quiet Before the Storm Has a Deadline

Key Points

• Six operators covering 66% of UK market revenue posted Q2 growth, yet Regulus says the 40% RGD impact remains “not remotely discernible” for reasons that will not hold through H2.
• Operators are shielding bonusing levels while cutting costs elsewhere; Regulus calls this unsustainable and warns it leads directly to negative revenue outcomes.
• Regulus forecasts a 12% gaming decline in 2027, while H2 Gambling Capital projects the licensed market’s share will fall from 92% to 85% by 2031 as the black market grows.

The Numbers Look Fine – That Is Exactly What Has Analysts Worried

Remote Gaming Duty nearly doubled on 1 April 2026, rising from 21% to 40%. So when Entain, Evoke and Super Group posted UK growth across Q2 and H1, many assumed the industry had absorbed the blow and moved on. Regulus Partners looked at the same results and arrived at a very different conclusion.

The firm’s analysis of six major online gambling operators, covering roughly 66% of UK market revenue, found that online gaming grew by around 12% in Q2 while online betting sat broadly flat. The tax increase was “not remotely discernible” in those figures, Regulus said, and yet the analysts were not surprised. They were not relieved, either. They were watching a fuse burn.

What the headline numbers do not show is why those results held up, and once the reasons are laid out, Q2 looks less like strength and more like borrowed time.

Why Has the April Tax Rise Not Bitten Yet?

Regulus identified six distinct reasons the impact has stayed hidden, and each carries an expiry date.

Player behaviour in Q2 was still running on habits formed in earlier quarters. Deposits were already in accounts, bonuses collected, and routines set long before 1 April. Since the tax does not land on players directly, there was no visible trigger to change spending mid-quarter. Three successive weak bookmaker quarters also left consumers with roughly £100m in unspent betting funds that recycled into gaming; Regulus estimates that injection alone could account for up to 7% of Q2 gaming growth.

Most operators held bonus levels steady rather than pass costs onto players, cutting other expenses instead. Regulus is direct about where that leads: it is “not sustainable” as bonus costs climb and savings elsewhere run dry. The World Cup helped betting-led brands, though only Entain and Super Group benefited meaningfully. Critically, the largest operators carry stronger brands and proportionately lower bonus costs, meaning the 40% rate cuts deepest at smaller operators who account for roughly 33% of UK market revenue.

Margins Are Already Taking the Hit

The revenue figures look stable; the profit figures do not. Entain said the higher UK tax cost it £56m in EBITDA in H1 2026. Evoke reported a £46m year-on-year rise in gaming duties over the same period, with adjusted EBITDA dropping £15.7m to £150.2m even after absorbing more than half the gross headwind through cost reductions.

Flutter’s Q2 2026 results showed International adjusted EBITDA falling 19% to $476m, with UK duty the primary cause. Flutter projects the new rate will reduce adjusted EBITDA by around $320m between April and December 2026 before mitigation, rising to a gross hit of $540m in 2027 when remote sports betting duty also increases from 15% to 25%.

Kevin Harrington, Flutter’s UK and Ireland chief executive, put the wider risk plainly: “These changes will hand a big win to illegal, unlicensed gambling operators who will become more competitive overnight.”

The Part of the Market Not Making Headlines

Every major operator reporting Q2 growth represents the upper tier of a much larger market. The 33% of UK revenue outside those results belongs to smaller operators, and Regulus says that is precisely where the tax is landing hardest.

As a result of the new tax increase, two operators, namely Lottomatrix and Small Screen Casinos, have already left the market. As for Betfred, they made a decision to close 132 outlets which put more than 600 jobs at risk due to high taxes. The British Gambling Commission reported more than 540 betting shops closed on the high street since the 2025 Autumn Budget.

BGC chief executive Grainne Hurst was unambiguous: “The unprecedented doubling of online gaming duty is already hammering betting businesses. The Treasury may pretend these tax rises only hit online gambling, but that is simply not how the industry works. Betting companies run their shops and online businesses together.”

‘Nothing Much Will Happen Until Everything Does’

Regulus expects the impact to come into focus in H2 2026, with the clearest consequences arriving in H1 2027. The firm said it would likely revise its 2026 UK forecast upward, but largely at the cost of betting, while holding a bearish position on 2027 that includes a forecasted 12% decline in gaming.

“We readily admit, however, that there is not yet any clear data to back this up,” Regulus acknowledged. “The problem for forecasting, and more importantly for operating in the UK online gambling market, is that nothing much will happen until everything does.”

That sentence deserves to be read carefully. The adjustment is not arriving in one quarter. Slot machines will pay back less, bonuses will shrink, promotions will tighten, and players will gradually notice the licensed market offers them less. That process takes months to register in data, but it is already underway in margins.

The Black Market Is Not Sitting Still

As the licensed players gobble up everything they can, there is a trend towards the expansion of the unlicensed market. The data collected by H2 Gambling Capital reveals that offshore gross gambling yield in the UK has increased from £200m in 2019 to £685m in 2025. At the same time, the proportion of the licensed market in terms of online gambling fell from 97% to 92%, and H2 predicts that the figure will drop to 85% by 2031.

Regulus partner Dan Waugh raised a consequence missing from almost all results coverage: the statutory levy that funds gambling harm treatment. “If spending in the licensed market is reduced as a result of these tax changes, funding for treatment services in this country will fall,” Waugh said. “That’s a straight mathematical equation.” Around 80% of levy funding flows from online gaming and betting, meaning a sustained shift offshore would hollow out the infrastructure the tax was partly designed to protect.

The Office for Budget Responsibility had already projected operators would pass through around 90% of the duty increase via lower payouts and higher prices, reducing the measure’s yield by an estimated £0.5bn by 2029-30.

Expert Analysis

What makes the Regulus analysis worth reading is not the Q2 data; it is the timing question buried inside it. Bonuses are still up, habits are still set, and the World Cup buffer is now gone. None of those conditions holds in Q4 2026 or Q1 2027. Smaller operators are already leaving. Margins at the listed players are visibly compressed. At 40% Remote Gaming Duty, with sports betting rising to 25% in April 2027, the UK is running the same policy the Netherlands tried first, and the Netherlands did not get the outcome its Treasury expected.