The UK raised machine games duty (MGD) by 5% to 25%. Regulators and operators now warn the increase will push customers toward an illegal market that could reach 10% of UK online gross gaming revenue.
UK MGD rises 5% to 25%, down from the 40% some had demanded. Gaming Compliance International expects the unregulated share of UK online GGR to hit 10% by 2026, up from an estimated 9% at the end of 2025.
- A Smaller Duty Than the 40% Demanded
- The 10% Illegal Market Warning
- What the Combined Tax Burden Means
- Who Absorbs the Cost and Where Next
The Chancellor announced the 5% increase in machine games duty to 25% in Wednesday’s autumn budget. It is below the 40% rate that advisers had been campaigning for throughout the summer. The move was smaller than expected, and the industry’s response was divided.
Dan Waugh of UK advisory firm Regulus said the increase is better than feared, but it is still a significant hit to an industry already running thin margins. He said a steep tax rise would be unwelcome news for venue operators and staff, and warned that changing policy every year makes the UK an unattractive place for new investment.
A Smaller Duty Than the 40% Demanded
The 40% figure was never a government proposal. It came from a Social Market Foundation report earlier this year and was widely quoted as though it were official. Bethan Lloyd of Wiggin said the duty increase is painful for an industry with squeezed margins, and she highlighted the risk to horse racing revenue because many punters still use retail betting shops.
Legal and industry figures expect more consolidation and UK cost-cutting. Lloyd pointed to larger groups as the best positioned to absorb the increase, with smaller retailers and purely retail-focused operators exposed to the worst of it. She expects technology and new market entrants to ease some pressure over time.
The 10% Illegal Market Warning
Ismail Vali of Gaming Compliance International says the duty increase is just one element of a wider squeeze that is pushing players toward unlicensed operators. The unregulated share of UK online GGR grew from 0.43% in 2020 to an estimated 9% by the end of 2025, roughly doubling every year from a tiny base. He warned the market could reach 10%.
As legal operators reduce marketing spend to protect margins, players increasingly encounter unlicensed brands offering better odds and welcome bonuses. Vali said many of these sites are plug-and-play offshore operators with startup costs of around £25,000. He argued consumers cannot tell the difference and warned that stronger enforcement, platform cooperation and better channelisation are the only ways to reverse the trend.
What the Combined Tax Burden Means
The picture for online operators is worse than the MGD increase alone suggests. Remote gaming duty rose from 21% to 40% last year, and a new remote betting UK duty of 25% will apply from next year, up from 15%. Legal experts said the combined burden is difficult for the industry to sustain.
Waugh said the industry must find a way to break the cycle of tax increases and tightening rules, or it risks losing ground. He also noted a political edge to the Chancellor’s approach, saying the government does not seem interested in apologising for raising taxes and could expect another visit in a year’s time.
Who Absorbs the Cost and Where Next
Lloyd expects Flutter and Entain to absorb the cost better than smaller retailers or retail-only operators. Waugh’s outlook is less reassuring: venue closures and job losses are likely, although he does not predict a merger wave driven purely by tax rises. Vali expects retail to consolidate further and some operators to fail as players migrate to online platforms.
AGBrief tracks the UK market as operators and advisers react to the new duty.
Frequently Asked Questions
What did the Chancellor announce?
John Healey raised machine games duty by 5% to 25% in the autumn budget. The increase was lower than the 40% rate that some advisers had been pushing for. It sits alongside a rise in remote gaming duty to 40% and a new 25% remote betting duty next year.
How big is the illegal market?
The unregulated share of UK online GGR was 0.43% in 2020 and is estimated at 9% by the end of 2025. Ismail Vali of Gaming Compliance International warned it could reach 10% as legal operators cut marketing budgets and players switch to unlicensed brands.
Who will be hit hardest?
Smaller retail operators and retail-only businesses are the most exposed, according to Bethan Lloyd of Wiggin. Flutter and Entain are better positioned to absorb the increase. Waugh expects venue closures and job losses, while Ismail Vali forecasts retail consolidation and further migration online.
Why is 40% in the headlines?
The 40% machine games duty was based on a Social Market Foundation report, not a Treasury plan. Critics had been campaigning for it for months. The government instead chose a 25% rate, still an increase on the previous level.
What happens next for remote betting?
A new general remote betting duty of 25% comes into force next year, up from 15%. Combined with remote gaming duty at 40% and the 25% machine games increase, the overall burden on operators is expected to keep rising.
This article has been thoroughly researched and reviewed by the CasinoBait editorial team to ensure accuracy and relevance for Asian casino players.
