Online gambling operators hit with steep tax rises
High street betting shops and fruit machines spared from tax raid as bingo industry enjoys a cut
Rachel Reeves hit online gambling operators with steep tax rises but spared high street betting shops and fruit machines, sparking some relief for a sector that was braced for the worst ahead of the Budget.
The chancellor said she had targeted her tax rises at the online sector because it is “associated with the highest levels of harm”.
The Office for Budget Responsibility estimated that the additional gambling taxes would raise £1.1bn by the end of this parliament, even as it acknowledged that some of the expected tax yield would be reduced due to “potential substitution to the illicit market”.
The new measures include increasing remote gaming duty, which applies to online casino and roulette games, from 21 per cent to 40 per cent.
Reeves also announced that the levy for remote betting would be raised to 25 per cent from April 2027, while the rate for betting at bricks-and-mortar shops would be held at the current level of 15 per cent.
The chancellor did not announce any increase in machine games duty, which applies to the flashing machines often found in casinos and bookmakers, defying repeated calls from campaigners, including former prime minister Gordon Brown, to deliver a steep increase.
That move will be a relief to the pub sector. JD Wetherspoon pulled in £73mn — more than 3 per cent of its total revenues — from its fruit machines in the year to July.
The bingo industry, meanwhile, enjoyed a tax cut, as Reeves said the 10 per cent duty paid by operators would be abolished from next April.
Miles Baron, chief executive of the Bingo Association, said the move was “transformative” and reflected a “clear recognition of the unique community value we provide”.
The tax rises on the gambling sector, which were widely expected ahead of Wednesday’s Budget, will not be felt evenly across the market, said Adam Rivers, a managing director at consultancy Alvarez & Marsal.
Companies with larger international revenue streams, or a bigger retail presence, could be in a position to hold their prices lower in order to squeeze the competition.
Pravin Gondhale, an analyst at Barclays, said the new levies had already been partly priced in to stock valuations, paving the way for some market relief on Wednesday.
Shares in Ladbrokes owner Entain closed up 3.4 per cent, Paddy Power owner Flutter rose 2.5 per cent.
Casino operator Rank Group, which owns Mecca Bingo, added 10 per cent, even as it forecast that new taxes and higher staff costs arising from the Budget would cause a £45.5mn hit to profits, despite a £6mn boost from the abolition of bingo duty.
Entain said the new levies would cost an extra £200mn annually, but that it could mitigate about a quarter of the impact by reducing marketing and promotions.
But Evoke, owner of William Hill and 888, was down 18 per cent, with investors wary that the company’s heavy UK exposure and high debt level made it less able to absorb the new measures.
Evoke withdrew its medium-term financial targets as it forecast that, without mitigation, the betting taxes introduced in Reeves’ Budget would increase its costs by around £125mn from 2027.
“We will begin immediately on executing our mitigation plans, which involve a significant reduction in investment into the UK, and, very regrettably, the likely need for thousands of jobs to be cut up and down the country,” said chief executive Per Widerström.
Gambling companies have repeatedly warned that higher taxes will lead to worse odds and push bettors into the illicit market. Grainne Hurst, chief executive of the Betting and Gaming Council, said the tax increases on online gambling were “a massive win for the incredibly harmful, unsafe, unregulated gambling black market”.
Joanne Whittaker, chief executive of bookmaker Betfred, said UK gamblers were “extremely price-sensitive” and would seek “better value with an offshore operator that isn’t paying the same tax and duties”.