The UK gambling industry has warned that a proposed increase in Machine Games Duty (MGD) on higher-stakes gaming machines could put pressure on betting shops, casinos, and adult gaming centres, following a Social Market Foundation (SMF) proposal to double the tax rate from 20% to 40% on Category B machines, including fixed-odds betting terminals.
The SMF proposal, referenced across multiple policy briefings and industry coverage, suggests the change could raise between £275 million and £458 million annually for the Treasury. The think tank argues the reform would align land-based machine taxation more closely with recent changes in remote gambling duties, which are scheduled to rise to 40% in 2026 for online casino products, while leaving lower-stakes machines in pubs and leisure venues unchanged.
Industry groups have opposed the proposal, warning it could have implications for employment and the viability of retail gambling estates. The Betting and Gaming Council said any increase in Machine Games Duty would cost jobs and added that betting shops “keep high streets alive and provide valued community spaces.” The organisation has consistently argued that further tax increases could accelerate closures across retail betting locations.
Bacta, the trade association representing amusement arcades and adult gaming centres, also rejected the SMF proposal. It stated: “A 40% rate would devastate high streets and seaside towns, close responsible family-run businesses and risk pushing customers away from safe, regulated environments towards the illegal market.” The association warned that independent operators would be particularly exposed to higher taxation due to tighter margins in the sector.
SMF argues tax change could raise up to £458 million
The Social Market Foundation estimates that raising Machine Games Duty to 40% could generate up to £458 million in additional annual revenue, depending on market response and machine activity levels. The proposal focuses primarily on Category B gaming machines, which include higher-stakes terminals typically found in betting shops and adult gaming centres, rather than lower-stakes Category C and D machines used in pubs and family entertainment venues.
Across the UK land-based gambling sector, Machine Games Duty is levied on gross profits generated by gaming machines operating in licensed betting offices, casinos, and adult gaming centres. Industry data referenced in policy discussions indicates that these machines already contribute several hundred million pounds annually in tax revenue under the current 20% rate.
The SMF has also pointed to public opinion research suggesting that a higher share of respondents support increasing gambling taxes than oppose such measures, framing the proposal as part of a broader debate over how different forms of gambling should be taxed relative to perceived risk profiles.
The think tank’s recommendation comes amid wider reforms to UK gambling taxation. The government has already confirmed an increase in Remote Gaming Duty from 21% to 40% for online casino products from April 2026, alongside adjustments to other remote betting duties. These changes form part of a broader fiscal strategy expected to raise more than £1 billion annually across the gambling sector.
Political and regulatory debate over land-based gambling
The proposal has intensified an ongoing policy debate over whether land-based and online gambling products should be taxed under a more unified framework. Policymakers and industry stakeholders have increasingly discussed the relative tax treatment of different gambling verticals, particularly in light of reforms targeting higher-risk online casino products.
The SMF’s model has been referenced in wider policy discussions alongside other think tank proposals advocating higher taxation on what are defined as more harmful gambling products. Industry bodies, however, continue to argue that raising taxes on land-based operations risks reducing investment in regulated venues and increasing reliance on unlicensed operators.
Machine Games Duty remains subject to government control, and no formal proposal to implement the SMF’s recommendation has been announced by HM Treasury. The debate forms part of a wider review of gambling taxation and regulation in the UK, which has already seen significant changes to online gambling duties and continues to evolve ahead of future fiscal statements.
