UK gambling industry warns of illegal market risks after MGD increase

UK gambling industry advisers have warned that the government’s decision to increase machine games duty (MGD) could put further pressure on retail venues. They warn it could also encourage customers to use unlicensed operators.

Chancellor John Healey announced the change in the Autumn Budget on 28 October. The rate will increase from 20% to 25% from 1 April 2027. This will be for machine games with stakes above £1 or prizes exceeding £100. The government says the measure targets higher-risk machines while protecting pubs and seaside arcades.

The increase falls below the 40% rate advocated by the Social Market Foundation. However, advisers have cautioned against treating the outcome as a reprieve.

Five percentage points, 25% more duty

The distinction between a five-percentage-point rise and a 5% increase is important for operators who need to assess its financial impact.

For every £100,000 of affected net machine takings, duty would increase from £20,000 to £25,000. This is on the assumption that revenue is unchanged. That is a 25% increase in the tax bill. It leaves operators £5,000 short to cover operating costs.

Regulus partner Dan Waugh warned that further pressure could mean venue closures, job losses and weaker investor confidence.

“If your income tax went up by a quarter overnight, you wouldn’t see that as a positive.” – Dan Waugh, Regulus partner.

Wiggin partner Bethan Lloyd also highlighted squeezed margins, with smaller businesses and operators focused entirely on retail potentially more exposed than diversified groups.

Concerns over unlicensed competition

Gaming Compliance International president Ismail Vali warned that pressure on licensed operators could create opportunities for illegal competitors.

He cited estimates putting the unregulated share of UK online gross gaming revenue at around 9% by the end of 2025. We can compare this with 0.43% in 2020.

These are market estimates cited by Vali. They show that the newly announced MGD increase will cause further migration. His concern is that reduced marketing spending and less competitive offers from licensed businesses could make offshore alternatives more visible and attractive to customers.

Vali wanted closer coordination between regulators, payment providers, advertising channels and platforms to disrupt illegal operators.

Wider tax pressures continue

The MGD announcement follows the increase in remote gaming duty from 21% to 40% in April 2026. A new 25% remote betting rate within general betting duty is scheduled for April 2027.

Together, those changes affect businesses across retail and online gambling. Their exposure depends on their product mix, however.

The immediate challenge for retail operators will be absorbing a larger machine-tax bill while maintaining viable venues. Whether that translates into closures or increased illegal gambling is a clear risk.