The impact of tax increases on gambling in the United Kingdom
A recent study by consultancy Ernst & Young (EY), commissioned by the Betting and Gaming Council (BGC), raises warning signs for the betting and gaming sector in the United Kingdom if the government decides to proceed with large tax increases. The report, called Impacts of Changes to Betting and Gaming Taxation, was delivered to His Majesty’s Treasury before the Autumn Budget of 2025 and analysed different scenarios of tax reform for the sector.
The main point was: align online gaming rates with those of land-based establishments and raise tax rates for the sector. EY modelled, for example, the scenario of taking the “General Betting Duty” (GBD) and “Remote Gaming Duty” (RGD) rates to 21%. In this more moderate scenario, there would be an initial gain for the British Treasury of around £250 million. However, the consultancy warns that this net gain could be fully offset by negative side effects: a drop in betting, lower margins for operators, and the closure of physical units (which could reduce the sector’s Gross Value Added (GVA) by around £240 million, as well as impacting 3,000 jobs).
Escalating risks from higher tax rates
Even more extreme are the scenarios of larger increases, defended by two British think tanks: the Social Market Foundation (SMF) and the Institute for Public Policy Research (IPPR). These studies suggest rates of up to 50% for remote games. EY projected that, under these conditions, GVA losses could exceed £2 billion, with a major reduction in jobs across the supply chain. EY also warns that if taxes rise too much, up to 8% of the sector’s activity could migrate to unlicensed operators, which means less consumer protection, lower revenue, and greater social risks.
The horse racing sector even held a one-day strike in August, protesting against tax harmonisation proposals that, according to participants, threatened its financial base. Some elements help to understand the importance of the discussion:
- The betting and gaming sector already generates an important share of the British economy. According to a report by The Guardian, betting companies would pay around £3.6 billion in taxes this year, of which £1.2 billion corresponds to the “Remote Gaming Duty”, applied to online games.
- The regulatory environment is becoming more demanding. The 2023 White Paper review on gambling in the United Kingdom imposed new player protection rules, which, according to EY, may reduce revenues and make the sector more sensitive to tax changes.
- Competition from unregulated operators is a real threat. When taxes or regulatory costs rise, there is a risk that users migrate to offshore or unlicensed sites, with less protection and no tax contribution to the country.
There is still pressure for the sector to “pay more” and be recognised as an additional source of revenue.
What are the possible scenarios and their effects?
We can summarise in three lines of action, according to EY’s study:
Moderate adjustment: align rates, increase to 21%. Result: revenue gain, but moderate negative impact on the sector, loss of a few thousand jobs, and some drop in GVA.
Significant increase: high rates (e.g., 50% for remote). Result: much greater losses for the economy, strong risk of activity shifting to the illegal market, major impact on jobs and on the regulated ecosystem.
Chain impacts: beyond betting operators, there are indirect effects. Suppliers, support sectors, retail, and sports that depend on sponsorships.
To illustrate, in the scenario aligned at 21%, EY estimates an initial gain of £250 million, but with a risk of £240 million loss in GVA and 3,000 jobs. In the more aggressive scenario (50% rate), the GVA loss exceeds £2 billion.
Risks for the regulated economy and consumers
Operators have already warned that, with higher costs or lower margins, they may close some of their units. This means less presence in retail, fewer jobs, and possibly even greater concentration in online. Part of the activity may also go to sites outside national regulation, with less control over responsible gaming, money laundering, etc. This represents a social and fiscal cost.
As companies face higher burdens or lower profitability, part of the resources that today go to sports, sponsorships, and marketing may fall. There could be an impact on sports that depend on betting as sponsorship. If regulated activity decreases, the unregulated market share grows – this segment tends to have less governance and lower protection. But despite an increase in the tax rate, the gain may be small compared to expectations. EY points out that, with job losses, lower income tax, lower social security contributions, etc., the net gain may be much lower.
What to look for in the next steps?
For those following the sector, especially those in the iGaming market or assessing regulatory impacts, some points need to be analysed carefully:
- What will be the government’s final proposal in the next budget (expected in November 2025)?
- How will the different channels be treated: land-based betting, remote (online), gaming machines, etc.?
- How does the new regulation (White Paper, player protections) interact with taxation?
- What will be the impact on operators, investment, and the ecosystem of sponsorships and partnerships (for example, sports)?
- In markets outside the United Kingdom, what lessons exist? Although the focus here is the UK, looking at how other regulated markets have handled tax increases may help predict risks.
This article was first published in Portuguese on 27 October 2025.
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