HM Treasury believes that it can secure a total of £655m from a five-year cycle generated by new tax rise on Machine Games Duty (MGD), yet UK gambling remains exposed to further taxes on its activities.
This morning, the government published the key considerations applied to its decision to increase Machine duties by 5% to 25% rate. The increase was announced by John Healey, Chancellor of the Exchequer, when he delivered the Autumn budget on Wednesday 28 October.
On Wednesday, Healey declared that the 5% MGD tax hike was needed to pay for a “package of relief measures for highstreet businesses” including raising business rates threshold from £12,000 to £18,000 for retail, hospitality and leisure venues.
The changes form part of PM Andy Burnham “revival plan of Britain’s highstreets,” in which the Treasury seeks to lower operating costs for 70,000 small businesses, but will exclude arcades, betting and vape shops from exemptions.
Unifying machine duties
Yet on paper, the Treasury points to the three policy principles of applying a “lower targeted risk on gambling”, unifying gaming machines under a common tax threshold and processing an effective tax via an established system.
From 1 April 2027, machines allowing stakes above £1 or prizes above £100 will be subject to the 25% MGD. The increase will principally impact Machine Category B types that have a maximum wager above £1 and reward a prize above £100.
Category C-and-D Machines will retain the lower tax duty of 20%, offering £1 stakes and prizes below £100.
Tax on gambling risks
Policy analysis views that “higher stakes and prizes carry greater gambling harms”. The assessment does not specify that a tax increase on MGD would lead to any “quantified reduction in harm expected from the measure”.
“This measure will make sure that higher stake and higher prize gaming machines, which are more associated with gambling harm, are subject to a higher rate of MGD, while maintaining the existing duty treatment for lower stake gaming machines.”
Policy consultation acknowledges uncertainty over customer behaviour.
Businesses could adjust returns to players, prompting some customers to gamble less or move to other gambling products.
£655m is the target
The Treasury forecasts additional receipts of £135m in 2027/28, followed by £130m annually for the next four financial years. The figures, certified by the Office for Budget Responsibility (OBR), produce a five-year total of £655m.
Business exposure is substantial. HMRC estimates that approximately “5,100 operators across 12,400 active premises will be affected.”
“These businesses will see an increase in their duty bills,” the assessment states.
For machines moving from 20% to 25%, the change represents a 25% increase in duty liability on unchanged net takings.
Nevertheless, the government concludes: “This measure is not expected to have any significant macroeconomic impacts.”
That judgement concerns the wider economy and does not rule out substantial consequences for individual businesses or local employment.
The industry disputes the government’s assessment of the consequences.
Responding to the Budget, the Betting and Gaming Council (BGC) said modelling by auditor EY indicated that almost “9,000 jobs could be lost and nearly 1,000 betting shops and casinos could close or face serious risk of closure at a 25% rate.”
The trade body also warned that higher duty could undermine casino investment and strengthen the appeal of illegal gambling operators.
BGC projections are forecasts over outcomes, but they challenge the Treasury’s confidence in the economic consequences of the increase. CEO Grainne Hurst maintains the view that tax increases would be “a deeply damaging decision and a blow to the thousands of workers, businesses and local communities”.
A simple application
Administrative simplicity is another consideration. Businesses will continue using existing MGD registration, quarterly returns and payment arrangements.
HMRC expects a negligible administrative impact, with one-off work to update systems, understand the rules and correctly categorise machines. No ongoing administrative costs are expected.
That distinction matters: the assessment concerns the cost of complying with the tax system, rather than the additional duty businesses must pay. The measure changes machine tax classifications within an existing service, rather than introducing a new charge on gambling licences.
Gambling taxes remain an alternative
Evaluation of the tax increase could trigger conditional elements.
HMRC will consider assessing the expected revenue effects after two years of monitoring data have been collected and analysed. This does not amount to a commitment to a comprehensive review of employment or business impacts caused by tax changes.
Feedback underscores that a monitoring period provides protection against further tax increases. As such the Treasury preserves the “flexibility to move machine stake and prize thresholds up or down, while offering no commitment to freeze gambling duties.”
Following a decade of seismic regulatory changes, brought under the Gambling Review and successive tax increases, UK gambling licences have no guarantee of a period of stability for business adjustments.
The final determination is that neither the Treasury nor the government has offered assurances that this will be the sector’s final tax rise… 2027 could be open to a further tax judgement.