UK Treasury weighs raising machine games duty on arcades

The UK Treasury is modelling increases to the machine games duty (MGD), the tax on machine takings, which could be announced in the 28 October 2026 budget and targeted specifically at bookmakers and adult gaming centres (AGC). Several outlets, including The Financial Times and The Times, report that Chancellor John Healey is weighing a rise focused on those venues; the decision could follow broader proposals from the Social Market Foundation (SMF).

Scope of the potential tax change

The planned increase would target both bookmakers and AGCs because both pay MGD at the same rates. At present MGD applies to most machines at rates of 20%-25% and raises roughly £600 million a year. The SMF proposes lifting the rate to 40% for casinos, arcades, bookmakers, bingo halls and members' clubs — excluding pubs — and estimates the measure could raise up to £458 million extra; the SMF also calculates an economic cost of machine gambling harm at £2.33 billion.

Former chancellor Rachel Reeves considered raising MGD but shelved it and instead increased the remote gaming duty from 21% to 40%. The Times coverage adds that Prime Minister Andy Burnham “loves bingo halls and pubs”, suggesting possible exemptions. No rate has been confirmed.

How it affects operators and the market

On market share, consultant Dan Waugh, partner at Regulus Partners, says AGCs account for “around 4% of licensed gambling expenditure” according to the latest Gambling Commission figures. For machines, AGCs capture close to a quarter of licensed machine spend, versus slightly under half for bookmakers in 2024/25.

Waugh attributes the structural shift partly to the 2019 reduction when the government capped maximum stakes on fixed-odds terminals at £2, a move he described as the effective abolition of B2 machines that moved spend toward casinos, bingo clubs and AGCs, “particularly as shops have been closing”. A spokesperson for a major UK operator, speaking off the record to iGB, said “I don't think anyone can estimate the revenue impact with much certainty”, and added that the important thing is the money rather than the number of premises: “AGC revenues are rising while bookmakers' are falling”.

Operating costs and product dynamics

Operators say AGCs are cheaper to run. They are “rated as a hospitality premises for business rates”, while bookmakers pay higher rates for being financial service sites. AGCs also pay less to the statutory levy and do not incur rights payments for race broadcasts.

Longer opening hours favour AGCs: betting shops must close by 22:00 at latest, whereas arcades remain open for late-night customers. On product range, a betting shop may have only four higher-stake category B machines; in an AGC those B machines may account for no more than 20% of the total, and operators “fill their venues with C-category iPad-style machines”, where 50 such devices can unlock more than ten category B terminals.

Regulation and local control

The Gambling Commission licences operators, but each premises needs a premises licence from the relevant local council. Under the Gambling Act 2005 local authorities must “aim to permit” applications that comply with the law, which limits their scope to refuse an arcade opening.

A spokesperson for the operator said that “AGCs for a time were not properly considered by the Gambling Commission under the same level of scrutiny”, although they added “that is changing”. The Burnham government has introduced Gambling Impact Assessments and intends to remove the “aim to permit” duty, returning more power to councils. Lord Foster of Bath, chair of Peers for Gambling Reform, told iGB that “the current regulatory framework does not work” and called for more capacity for communities to refuse new AGCs, citing concern about category B machines and alleged breaches of the 80/20 ratio and use of infill machines and tablets.

“The current regulatory framework does not work,” said Lord Foster of Bath on AGC oversight.

Industry reaction and closure risks

Entain, owner of Ladbrokes and Coral, has been the most prominent critic. In a letter to the prime minister on 11 September, CEO Stella David said doubling the standard rate from 20% to 40% would add around £100 million a year to the cost of its UK shops. Entain cited EY modelling for the Betting and Gaming Council that projects up to 1,470 shop closures, 15,900 jobs lost and a net hit to the public purse of about £120 million.

On the third-quarter results call on 15 October, Stella David said about 630 betting shops have closed in the past year before any tax rise and warned that raising the duty “is self-defeating and hollows out the high street further”, adding that “the Treasury’s net receipts would fall because of those impacts”. Entain said it would have “mitigation plans” if a rise occurs.

Bacta, the arcade trade association, responded that “you cannot tax or regulate lawful industries out of existence simply because you don't like them”. A betting-industry spokesperson calls AGCs “mini-casinos on the high street” and urges the government to close loopholes that allow lower taxation.

Frontier Economics, cited by Entain, estimates £1.6 billion a year is already wagered in the illegal land-based market. Dan Waugh expects a large MGD hike would “certainly lead to a large number of AGC closures along with bingo clubs, casinos, seaside arcades and bookmakers”, and warns the illicit market is the primary beneficiary of poorly designed tightening.

Possible operator responses and next steps

It has been reported that Betfred might convert some shops into AGCs, taking advantage of lease arrangements and machines that do not pay broadcast rights, though a Betfred spokesperson told iGB: “We are not looking to convert betting shops into AGCs”. In any case, a sharp MGD increase would reduce the commercial incentive to convert premises.

The Treasury will assess impact when presenting the 28 October 2026 budget. No final rate has been confirmed; political discussions include requests for exemptions for bingo and pubs and calls for greater local regulatory power. For regulatory context see [regulation overview](/regulation) and the Gambling Commission’s role in licensing.

“AGC revenues are rising while bookmakers' are falling,” said a spokesperson for a major operator off the record to iGB.