Social Market Foundation calls for higher tax on high-risk gambling machines

The Social Market Foundation (SMF) has called on the UK government to increase taxes on higher-risk gambling machines. It has argued that the current system fails to show the wider social costs associated with problem gambling.

In a new report published ahead of the next Budget, the think tank recommends creating a separate Machine Games Duty (MGD) rate for Category B electronic gaming machines (EGMs). It wants to keep keeping existing rates for lower-risk machines unchanged.

Industry representatives have strongly rejected the proposal. They have warned that higher taxes would threaten thousands of jobs, force widespread venue closures and potentially drive more players towards the illegal gambling market.

SMF proposes new tax band for Category B machines

The  SMF argues that the current 20% MGD rate treats all gaming machines too similarly. This is despite their significant differences in gambling-related harm.

Under its proposal:

The report models the impact of doubling the duty on Category B machines from 20% to 40%. It matches this to the Remote Gaming Duty rate introduced earlier this year.

According to the SMF, such a move could generate between £275 million and £458 million in additional annual tax revenue. This depends, though, on how much gambling behaviour changes following the increase.

For every additional five percentage points added above the current rate, the Foundation estimates a further £51 million to £114 million could be raised.

"The current tax structure underprices the societal harm caused by higher-risk gaming machines while leaving taxpayers to bear much of the economic cost."

Report highlights higher rates of gambling harm

The Foundation based much of its argument on Gambling Commission data. This showed that machine-based gambling carries some of the highest rates of problem gambling.

According to the report:

• 26.5% of casino machine players have problematic PGSI scores.
• 16.9% of fruit and slot machine players fall into the problematic category.
• Across all gambling activities, the average is 4.5%.

The SMF also mentioned the concentration of adult gaming centres in more deprived communities.

It noted that almost half of licensed AGCs are located within the most deprived 20% of neighbourhoods in Great Britain. The sector now accounts for around 42% of all electronic gaming machines and generated approximately £623 million in revenue during 2023-24. This represented an annual growth of 11%.

The report estimates machine-related gambling harm costs the UK economy around £2.33 billion each year. This includes £669 million in direct public spending on health services, housing, welfare and crime.

SMF argues wider economy could benefit

Alongside increased tax receipts, the Foundation argues that reduced gambling spending would be redirected into sectors such as retail, leisure and hospitality.

Its modelling suggests a 10% reduction in gambling expenditure could:

• Create around 24,000 net jobs.
• Increase UK gross value added (GVA) by approximately £311 million.
• Generate higher overall tax receipts because other sectors return more tax per £1 million of turnover than gambling.

Polling commissioned by the SMF in April 2026 also found public backing for higher taxes on high-street slot machines, with 43% supporting an increase compared with 11% favouring lower taxes.

Industry warns of closures and black market growth

The proposals have drawn an immediate backlash from the betting industry.

The Betting and Gaming Council (BGC) said it "fundamentally oppose[s] any increase in Machine Games Duty." It argues that the report fails to account for the impact on retail gambling businesses and local communities.

The trade body warned higher taxes could lead to closures affecting betting shops, casinos, bingo clubs and community venues while placing thousands of jobs at risk.

Advisory firm Regulus Partners also challenged the SMF's assumptions.

Its modelling predicts that around:

• 70% of UK betting shops could close.
• 90% of adult gaming centres could disappear.
• Up to 43,000 industry jobs could be lost.

Regulus estimates that although the remaining venues would generate higher average revenues, overall machine income would fall significantly. This would leave total tax receipts broadly unchanged or potentially lower than today.

The consultancy also warned betting shop closures could reduce payments to British horseracing by around £100 million. It also suggested that around half of displaced gaming machine revenue could migrate to the black market.

The SMF disputes those conclusions, arguing there is little international evidence linking higher gambling taxes directly to significant growth in illegal gambling. This is particularly true within land-based gambling where unlicensed operations are considerably more difficult to conceal.