DCMS Warned the Treasury of “Unrealistic” Tax Rise Forecasts

A Freedom of Information (FOI) request reportedly shows the Department for Culture, Media and Sport (DCMS) warned the Treasury the increased revenue estimates from online gambling tax hikes were “unrealistic” and would lead to a loss of jobs.

In the November Budget, Chancellor Rachel Reeves announced remote gaming duty (RGD), paid on online casino bets, will rise from 21% of gross gambling yield (GGY) to 40% in April 2026.

In addition, general betting duty (GBD), paid on online sports bets, will increase from 15% of GGY to 25% in April 2027; bets on horseracing will be exempt from this increase.

“Unrealistic estimates”

The DCMS’ reply to the FOI request shows the department had concerns about the forecasts for additional tax revenue being put forward by the Social Market Foundation (SMF), a cross-party public policy think tank.

The SMF had called for RGD to increase to 50%, and for GBD to go up to 25%; only the latter of these recommendations came to fruition. However, the DCMS told the Treasury it did not foresee this as being productive.

The DCMS wrote:

"It [the SMF] estimates these proposals could raise £2 billion annually. Their estimates are unrealistic. They calculate the increase in tax based on gross gambling yield remaining the same following the tax changes.

"They fail to make adjustments for the behavioural impact of a tax increase by operators and customers. There would also be other potential tax losses related to job losses in the sector that have not been incorporated."

What the increase could actually be

Earlier this week, the Office for Budget Responsibility (OBR) forecast betting and gaming receipts will rise to £6 billion by 2030-31; up from £3.8 billion for 2025-26.

According to the OBR, about two thirds of this increase will be driven by the increased taxes. This would indicate the tax increases will in fact drive annual tax growth of about £300 million; far less than the £2 billion the SMF had forecast.

While the government did not fully agree with the SMF’s recommendation, current estimates will only reflect the difference of 10 percentage points in RGD (40% vs 50%).

The DCMS conceded that overall tax revenue would increase as a result of the proposed changes, but that it will not be as high as what was claimed by the SMF. The DCMS wrote:

"Their estimates for the amount of tax revenue that will be raised under the proposal are, in my view, absolute maximums. They calculate the increase in tax revenue if GGY remained the same following the tax increase.”

Horseracing not necessarily less risky

The DCMS also questioned the SMF’s argument that bets on horseracing should be subject to a lower tax rate, as will be the case from April, due to betting on the sport being less risky than betting on casino or slots.

The DCMS said:

"We do not have the evidence to suggest horserace betting is significantly less harmful than other or similar products, as suggested by the SMF and other commentators.

“The only data that could be used to justify this comes from the 2021 Health Survey for England, which only provided breakdown by sport for land-based betting.

"While this data does show a difference between horserace betting and other sports betting, it is based on very small sample sizes during Covid and should be treated with a lot of caution. It is also not significant evidence of this trend across all horserace betting."