UK Budget Raises Machine Games Duty to 25%

Chancellor John Healey used his first Budget on October 28 to raise Machine Games Duty from 20% to 25% on higher-stakes gaming machines in the UK. The change starts on April 1, 2027, and the same Budget quietly moved to rewrite how HM Revenue & Customs taxes the free spins that online casinos hand out.

Concurrently, HM Revenue & Customs (HMRC) published legislative draft papers updating the tax treatment of promotional “restricted plays” under Remote Gaming Duty (RGD), the tax on UK online casino profits, closing statutory loopholes highlighted by recent tax tribunal rulings.

Healey told the Commons the money would pay for business rates support on the high street, and said pubs and seaside arcades would be protected. It is the second Budget in a row to hit the sector. The 2025 Budget’s rises are the ones Flutter blamed for up to 1,400 job cuts in the UK and Ireland earlier this month.

A Lower Bar for the Top Rate

Machine Games Duty, originally enacted under Schedule 24 to the Finance Act 2012, operates across three statutory duty bands: 5% (lower rate for Category D machines), 20% (standard rate), and 25% (higher rate). The Budget measure fundamentally alters the threshold at which the maximum 25% duty applies.

Under current rules, Category B2 and B3 gaming machines located in licensed betting offices (LBOs), adult gaming centres (AGCs), bingo halls, and land-based casinos remain subject to the 20% standard rate provided maximum play charges do not exceed £5. Under the HMRC policy change taking effect April 1, 2027, any gaming machine featuring a maximum stake exceeding £1 or offering a top prize payout above £100 will automatically transition to the 25% higher rate band.

HMRC impact assessments estimate that approximately 5,100 registered operating entities managing 12,400 commercial premises will incur increased duty liabilities. To protect high-street hospitality, lower-stake Category C machines operating in public houses and Category D machines in seaside arcades remain sheltered under lower rate classifications.

Suppliers Will Pay From 2028

The Budget introduces a secondary operational shift in MGD administration. From April 1, 2028, machine suppliers will be liable for the duty on machines they own and run under profit-share deals, while venues stay liable on machines they own outright or rent on fixed terms. An HMRC consultation on how that works closes on January 20, 2027, and it does not take views on the rates themselves.

The Free Spins Fix Online Casinos Will Notice

The online story sits in a separate HMRC paper published on Budget day. It covers Remote Gaming Duty, , which already rose to 40% this April. Duty on most online sports bets is also due to climb from 15% to 25% in April 2027.

The duty is charged on what players stake minus what they win, so the question that matters is whether a free spin counts as a stake. HMRC wants to settle that in law. The freeplay paper renames freeplays as “restricted plays”, a term covering offers that waive all or part of a stake and non-withdrawable money the operator provides.

What Changes for Free Spins

In plain words, a free spin won by using another free spin will be left out of an operator’s taxable profits, but only where it’s used for remote gaming and nothing else is offered in its place. Something will also count as a prize only if the published rules of the game require it to be paid. The bill will cover tournaments and refunds after a game is interrupted too.

HMRC says the change has nil Exchequer impact and calls it “an upstream compliance measure intended to reinforce existing policy.” It takes effect on April 1, 2027.

The Jumpman Case Behind It

The rewrite follows a court loss. On September 25 the Upper Tribunal ruled for Jumpman Gaming, which had been assessed for approximately £13.2 million of Remote Gaming Duty covering July 2018 to December 2022. Its games worked like electronic fruit machines, the format behind online Slots, and the fight was over a welcome offer. A qualifying deposit earned a free spin on a “Mega Reel” game that could award further free spins on other games.

HMRC had won the first round at the First-tier Tribunal. Judges Swami Raghavan and Guy Brannan overturned that, holding that the further free spins fell within the statutory exclusion. They said the assessments “fall to be reduced to nil.”

HMRC’s paper doesn’t name the case. It says “different interpretations have arisen” over the tax treatment, and that the new rules will reduce the scope for dispute and “protect future revenues.”

The Industry’s Answer

The Betting and Gaming Council had lobbied against a much bigger rise. On October 14 it said member chief executives had written to Healey, citing EY analysis that doubling the duty on Category B machines to 40% could cost up to 15,900 jobs.

Grainne Hurst, BGC chief executive, called the 25% rate “a deeply damaging decision” and said the Chancellor “has ignored repeated warnings about the consequences.” The council said EY projects almost 9,000 jobs could go at the new rate, and almost 1,000 betting shops and casinos could close or be at serious risk. It also warned that higher taxes make the illegal gambling market more attractive to customers.

Healey’s own speech put the trade plainly. He is raising taxes on gambling, he said, “to support good growth on every high street.”