With the looming possibility that the tax on UK gambling could increase, there has been a question of how it will affect in-person and online casinos.
If you’ve been living under a rock, many Labour MPs signed a letter back in September campaigning to raise the gambling tax.
The proposed tax would raise Machine Games Duty on cash-prize slot machines would rise from 20% to 50%, and Remote Gambling Duty on online slots, poker, and bingo from 21% to 50%.
Gambling chains have already warned of the damaging effects that raising the taxes could have on UK betting shops. Ladbrokes boss Entain warned of potential store closures, while William Hill’s parent company Evoke warned that up to 200 of their betting shops could close.
The decision will be left up to Chancellor of the Exchequer Rachel Reeves, who will reveal her plans in the Autumn Budget announcement on November 26.
With the threat of rising taxes, we want to explore: How could the increase affect the online casino industry in the UK?
Decreased Profit For Gambling Operators
Evidently, the tax increases in online casinos will affect casinos by reducing their profit margins.
In turn, this would affect huge UK casino operators, because even online casinos would have to pay half of their profits back in tax if the increase to 50% becomes law.
While the online casino sector continues to grow, paying such a high level of tax will eat into profits, even if the casino is doing well. For customers at online casinos, this does not directly affect them, as it is the operator’s responsibility to pay the tax.
Smaller Online Casinos Suffering
Independent casinos or those with smaller customer bases will be hit hard by tax increases. They may struggle to stay afloat against bigger and more established brands that can afford to take the tax hit. This may result in the closure of smaller and independent casinos because they don’t have the funds to pay taxes on their games.
Since the potential changes specifically target slots and live casino games, some of the most popular categories in online casinos, the chances of smaller casinos surviving are significantly lower if the tax increase occurs.
Reduction In Bonuses and Cuts To Services
When taxes rise, businesses make cuts to services so they can afford to pay. In the case of online casinos, they will likely make cuts to services and products, such as bonuses.
With the potential tax cuts eating into profits, online casinos will be forced to cut costs, and one quick way to do this is by reducing bonuses. Welcome bonuses help gain new customers, but can be costly. As all new customers are eligible for them, it is likely to save money that casinos will cut back on bonuses or reduce bonus values.
This may especially affect new players and those who like to try out new casino sites, as they may find themselves with fewer bonus options than before, or bonuses with stricter requirements that exclude player groups.
Possible Changes To RTP In Games
Instead of such drastic changes, some casinos may start making changes to the taxed games.
Since the tax targets specific game types, some casinos may request to change the RTP level of games in their catalogue. To do that, they would consult the game provider and ask for a lower RTP version of the game.
Games with a lower RTP would mean that the casino keeps more of the money wagered on the game than before, which could help cushion the blow of large tax payments. However, overall, it would not stop the long-lasting implications of the rise in taxes.
Closures Of Game-Specific Casinos
Unfortunately, one of the scary possibilities of such a large tax hike is the closure of online casinos. However, the casinos likely to be hit are the casinos that specialise in one type of game.
For example, some casinos that mainly have slot games or live dealer and table games could be hit harder, because they will be paying a large tax on the majority of their games.
Compare them to casinos with a dynamic range of games, which will not be hit as hard, because their games will not all be targeted, so less of their profits will be taxed.
Overall, there could be closures of online casinos, but these will be worse off than casinos with broader game catalogues.
Small Casinos Being Acquired By Big Ones
One possible positive outcome of a tax increase could be smaller casinos merging with larger operators. If independent casinos struggle to meet higher tax obligations, bigger brands may step in to acquire them. This could be beneficial in some respects, as it would enable smaller businesses to survive by gaining access to larger budgets, better resources, and a broader customer base.
However, for the market as a whole, this may result in less variety. With fewer independent casinos remaining, the industry could become increasingly dominated by major brands, reducing diversity and competition in online casinos.
The Big Question: Will UK Casinos Survive?
A tax increase would undoubtedly reshape the finances of UK online casinos. Higher taxes on popular games would reduce profits across the board, regardless of a casino’s size or market share.
The largest operators with established customer bases are likely to withstand the impact. They will adapt by adjusting product spending, refining promotional strategies, and finding ways to minimise losses.
Looking at the market as a whole, it is likely to contract. Not all casinos or betting operators will be able to survive, and that is the reality of the situation. Still, the full extent of the effect will remain uncertain until we know whether the proposed changes will go ahead, and whether Reeves intends to implement the tax increase at the suggested rate.
