Social Market Foundation calls for higher tax on high-risk gambling machines

The Social Market Foundation (SMF) has urged the government to raise Machine Games Duty (MGD) on higher-risk Category B electronic gaming machines (EGMs) in the forthcoming budget. 

In a report on Tuesday the think tank warned that the current tax structure underpriced the societal harm caused by these machines and unfairly leaves taxpayers to bear the economic burden related to problem gambling.

The SMF’s chief economist, Gideon Salutin, and senior researcher Richard Hyde proposed the introduction of a new MGD band specifically targeting Category B machines. 

These machines would face a duty increase beyond the existing 20% rate. Category C machines would remain taxed at 20% and lower-stake Category D machines would be held at 5%.

According to SMF modelling, doubling the current 20% MGD rate on Category B machines to 40% – equivalent to the recently applied rate for remote gaming in 2025 – could generate between £275 million and £458 million annually. 

The £458 million figure assumed no change in gambling behaviour, while the more conservative estimate presumed some reduction in play. For every additional five percentage point increase above 20%, the report estimated an extra £51 million-£114 million yield.

The UK tax rate was announced late last year and was officially in practice from the start of April. 

Category B machines and deprived area concentration 

The SMF highlighted Gambling Commission data showing machine-based casino games have disproportionately high rates of problem gambling relative to the overall gambling population. For instance, 26.5% of casino machine users and 16.9% of fruit/slot players have Problem Gambling Severity Index (PGSI) scores categorised as problematic. This is compared with a 4.5% average across all gambling activities.

Adult gaming centres, accounting for 42% of EGMs in Great Britain, have seen revenues grow 11% year-on-year to approximately £623 million in 2023-24. The SMF report noted that these centres and betting shops tend to cluster in the most deprived neighbourhoods. Almost half of licensed AGCs are in the bottom 20% of deprived areas, with the number of centres steadily increasing. 

The SMF calculated the total economic loss from machine-related harms at £2.33 billion annually. This included £669 million in direct fiscal costs associated with welfare, housing, crime and health services.

Introduced in 2013, MGD replaced the amusement-machine licence duty and effectively VAT on gaming machine income. The Foundation argued that the current 20% uniform rate cannot fulfil its dual role as an excise tax.

The report advocated extending the Treasury’s recent logic to land-based gaming machines. This saw Remote Gaming Duty rise from 21% to 40% in 2025 based on harm criteria. It was suggested that this would align tax policy more closely with public health objectives.

SMF predicts a response

The report modelled three possible operator responses to increased MGD: absorbing the tax through reduced profits, cutting costs such as marketing and executive pay, or passing the cost to consumers via worse odds or higher prices. The SMF argued that a decline in gambling expenditure would likely be redirected to other sectors such as retail and hospitality, stimulating net job creation and gross value added (GVA).

An estimated 10% fall in gambling outlays could create 24,000 net jobs and boost GVA by about £311 million. Moreover, since non-gambling sectors generate higher tax revenue per £1 million turnover than gambling, the Treasury could see increased overall revenue.

Polling commissioned by the Foundation in April 2026 indicated robust public support for stricter tax treatment of gambling machines. Some 43% of respondents favoured raising the tax on “slot machines in high street betting shops”, while only 11% supported lowering it. Broader surveys reaffirmed general public endorsement of higher gambling taxes as a revenue option.

‘Fundamentally oppose any increase’

Despite this, the Betting and Gaming Council (BGC) issued a strong rejection to the SMF report, warning that the move could devastate high-street gambling venues and lead to tens of thousands of job losses.

Responding, a BGC spokesperson said: “We fundamentally oppose any increase in Machine Games Duty, and nothing in this report justifies such a damaging policy.” 

The spokesperson highlighted the role of bingo clubs, betting shops, casinos, working men’s clubs and miners’ welfare clubs in local communities, warning that higher duty rates would lead to venue closures, significant job losses and weakened high streets.

“The report makes no attempt to quantify the venue closures or job losses its own proposals would cause,” the spokesperson added.

BGC also warned that the original gambling tax hike could lead to up to £3.1 billion ($4.1 billion) being lost from the economy and as many as 40,000 job losses across the industry. 

Betting shop closure and revenue streams to black market 

The BGC were not alone with their concerns. Regulus Partners, a global advisory business, expressed their own warnings.

Regulus forecasted that, contrary to the SMF’s assumptions that operators would absorb or pass on the tax increase without major changes, the proposed reforms would have significant consequences across the retail gambling sector. 

The consultancy estimated that around 70% of betting shops would be forced to close. This equated to approximately 4,000 of the UK’s 5,500 venues. Beyond that, 90% of AGCs would likely disappear – around 1,300 of 1,450 sites. 

While the remaining venues could potentially double their average revenues, overall Category B gaming machine revenue would still decline substantially. Betting shop revenue would fall from £1.2 billion to £600 million and AGC revenue would shrink from £550 million to £115 million. 

As a result, Regulus argued that applying the proposed 40% MGD rate to a much smaller revenue base would leave overall tax receipts broadly unchanged or slightly lower than current levels. 

The consultancy also estimated that up to 43,000 direct industry jobs could be lost, while betting shop closures would reduce media rights payments and levy income for British horseracing by an estimated £100 million. 

Regulus also estimated that half of the displaced gaming machine revenue would find its way to the black market. 

The SMF contested industry warnings of wholesale migration to illegal gambling. They reasoned that in-person illegal operations are harder to conceal and pointed to international data that do not support clear links between remote gaming tax rates and black market prevalence.