Social Market Foundation Wants Machine Games Duty Rate of 40%

Cross-party think tank the Social Market Foundation (SMF) has called for machine games duty (MGD) on Category B machines in the UK to be raised to 40% of net takings, which would be significantly higher than rates which are currently at a maximum of 25%.

The SMF wants a tax rate to encompass all Category B machines, arguing the government needs to raise revenue, and that more harmful types of gambling should lead to higher rates of tax.

The SMF’s basis for this is that one in four (27%) casino game users on machines gambles at risky or harmful levels - the highest of any major category – and that 17% of fruit and slot machine users class as risky, compared to the gambling average of 4.5%.

Those numbers were outlined in the Gambling Survey for Great Britain, published by regulator the Gambling Commission and covering data from 2023.

According to the SMF’s modelling, the harms associated with machine gaming has led to economic losses worth £2.33 billion, including fiscal costs worth £669 million through welfare, housing, crime and health payments.

The SMF estimates that raising the MGD rate to 40% could increase revenue for the government between £275 million and £458 million.

How the current system works

In the current system, the duty operators pay on gaming machines varies dependent on the cost of play. For dutiable machine games with a maximum cost of play of 20p and a maximum prize of £10, the tax rate in the 2026/27 year is set at 5%.

The rate goes up to 20% for machines which are not Type 1 machines but where the cost to play cannot exceed £5. When the cost of play can exceed £5, the rate goes up to 25%.

There are also different variations of Category B machines. Category B1 machines cover games with a maximum stake of £2 and a maximum prize of £4,000, while Category B2 machines cover machines with a maximum stake of £100 and a maximum prize of £500. Meanwhile, Category B3 machines have a maximum stake of £2 and a maximum prize of £500, and the split for Category B4 machines is £1 and £500.

The SMF has history here

This follows the SMF’s recommendation of higher online gambling and betting tax prior to last year’s November Budget. The SMF recommended an increase in remote gaming duty (RGD), paid on online casino bets, from 21% of gross gambling yield (GGY) to 50%, and for general betting duty (GBD), paid on online sports bets, to be raised from 15% of GGY to 25%.

The latter of those is set to come to fruition, with GBD going up to 25% of GGY in April 2027; bets on horseracing will be exempt from the increase. RGD was hiked in April this year, but the new rate was set at 40% of GGY. The Horserace Betting Levy remained at 10% of annual gross profit generated by bookmakers, despite the SMF calling for this to be doubled to 20%.

Unclear political picture

The UK is going through a period of political turbulence, with Sir Keir Starmer set to step down as Prime Minister in September. Starmer is likely to be replaced by Labour MP Andy Burnham.

It is unclear if this is likely to have any impact on gambling regulation specifically, but Burnham is expected to change Chancellor from Rachel Reeves, who oversaw last year’s Budget, when the RGD and GBD increases were announced.