The Social Market Foundation (SMF) has recommended that the United Kingdom government increase the Machine Games Duty (MGD) on higher-risk Category B electronic gaming machines in its upcoming budget. The think tank’s report, released on Tuesday, argues that the current tax framework does not adequately account for the societal costs associated with these machines, resulting in taxpayers shouldering the financial burden of problem gambling. The proposal suggests introducing a new tax band for Category B machines, potentially raising the duty beyond the existing 20% rate. This move is intended to better align tax policy with the public health objectives and economic realities posed by high-risk gambling activities.
The SMF’s proposal, detailed by Chief Economist Gideon Salutin and Senior Researcher Richard Hyde, suggests that doubling the current MGD rate on Category B machines to 40% could generate between £275 million and £458 million annually. This range reflects varying assumptions about whether gambling behavior would change in response to the tax increase. Every additional five-percentage-point increase above the current rate is projected to yield an extra £51 million to £114 million.
The call for higher taxes comes after the UK government increased the Remote Gaming Duty from 21% to 40% in 2025, a move justified by the need to address gambling-related harms. The SMF’s recommendation follows similar logic, aiming to extend such regulatory measures to land-based gaming machines.
Data from the Gambling Commission underscores the urgency of addressing problem gambling among machine users. The SMF report points out that 26.5% of casino machine users and 16.9% of fruit/slot players have Problem Gambling Severity Index scores that categorize them as problematic gamblers, compared to an overall gambling activity average of 4.5%. Additionally, adult gaming centres, which house a significant portion of electronic gaming machines in the UK, are increasingly situated in economically deprived areas, raising concerns about the broader social impacts of gambling.
Economically, the SMF estimates that machine-related gambling harms cost the UK economy approximately £2.33 billion annually, including direct fiscal costs of £669 million related to welfare, housing, crime, and health services. Introduced in 2013, the MGD replaced the amusement-machine licence duty and effectively the VAT on gaming machine income, but the SMF argues that the current 20% rate fails to function effectively as an excise tax intended to mitigate harm.
The report models several potential responses from gambling operators to an increased MGD, including absorbing the tax through reduced profits, cutting costs, or passing costs onto consumers via less favorable odds or higher prices. The think tank suggests that a reduction in gambling expenditure could redirect consumer spending to other sectors, such as retail and hospitality, potentially creating 24,000 net jobs and increasing gross value added by about £311 million. Given that non-gambling sectors generate higher tax revenue per £1 million turnover than gambling, the Treasury could see an increase in overall revenue.
Public sentiment appears to support stricter tax treatment of gambling machines, with a poll commissioned by the SMF in April 2026 indicating 43% of respondents favoring higher taxes on slot machines in high street betting shops, compared to 11% in favor of reducing them.
However, the Betting and Gaming Council (BGC) has strongly opposed the SMF’s recommendations, arguing that increasing MGD could devastate high-street gambling venues and result in significant job losses. A BGC spokesperson emphasized the importance of bingo clubs, betting shops, casinos, and related venues to local communities, warning that higher duty rates could lead to closures and weaken high streets without adequately considering the impact on employment.
Regulus Partners, a global advisory firm, echoed the BGC’s concerns, predicting that the proposed tax reforms could force approximately 70% of betting shops and 90% of adult gaming centres to close. This would equate to the closure of around 4,000 betting shops and 1,300 gaming centres, drastically reducing revenue from Category B machines and potentially leaving overall tax receipts unchanged or lower.
The consultancy further suggested that a significant portion of the displaced gaming machine revenue could migrate to the black market. However, the SMF contested these industry warnings, arguing that in-person illegal gambling is difficult to sustain and that international data do not support a strong correlation between gambling tax rates and the prevalence of the black market.
As discussions around this proposal continue, the next steps involve a thorough review by the government of the potential regulatory and economic impacts of such a tax increase. The outcome will likely shape the future landscape of the gambling industry in the UK, balancing public health concerns with the economic realities facing gambling operators and their communities.
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