The UK government is considering a huge shift in its approach to taxing online gambling. A gambling tax debate is caused by the proposal to merge the existing three-tax structure into a single framework has sparked widespread debate within the industry. While the aim is to simplify the tax system and ensure fairness, critics warn the move could have far-reaching consequences.
Currently, online gambling in the UK is taxed under three separate regimes:
The plan is to replace all three with one flat tax rate for all online gambling, regardless of type.
The government argues this approach would modernise and streamline the tax system. It would eliminate unnecessary complexity and create a more level playing field among operators. It would also aim to reduce tax avoidance and ensure all types of gambling pay the same amount of tax.
The Betting & Gaming Council (BGC) has voiced strong opposition to the proposal, calling it “catastrophic” for the sector. They argue that raising the effective tax burden on sports betting to align it with remote gaming could result in job losses. It would also cause less investment and support for sports like horse racing, which rely heavily on gambling revenues.
The BGC warns that a one-size-fits-all tax fails to recognise the unique economics of different gambling products. Sports betting, in particular, operates on slimmer margins than casino games on online casinos. If everything is taxed the same, sports betting companies might struggle to stay in business. They also worry that players could turn to illegal websites if legal ones become less attractive, jeopardising consumer protections.
On the other side of the debate, the UK public appears to favour higher gambling taxes. Recent surveys show more than half of Britons support increased taxation on online gambling to fund public services. Some research groups, such as the Social Market Foundation and the Institute for Public Policy Research, have backed this stance, suggesting the new tax could raise up to £3 billion for the government.
This comes at a time when the UK faces a substantial budget deficit, adding pressure on policymakers to identify new sources of funding. For many in government, gambling appears to be an obvious area to focus on.
Even though the goal is to simplify taxes, experts warn that the reality could be far more complex.
Raising taxes on betting might make it harder for new companies to enter the market or for smaller ones to survive. It could also reduce the competitiveness of UK-licensed operators.
There are also fears that increased costs could affect the players in the form of fewer promotions, welcome offers, and reduced odds. And with fewer legal options offering value, players may turn to offshore or black-market sites with little to no regulatory oversight.
Other countries have tried similar changes. For example, the Netherlands raised gambling taxes and soon saw an increase in unregulated activity. A delicate balance must be made between taxation and market sustainability.
Switching to a single tax for online gambling is a major move for the UK industry. It could make things easier and fairer, but it could also hurt legal businesses, encourage black market gambling, reduce funding for sports, and a decline in funding for key sectors like horse racing.
A collaborative approach that involves all stakeholders is essential in designing a system that supports both the economy and industry health. Whether this proposal makes things better or worse remains to be seen.
