UK Government's Gambling Tax Policy Risks Unintended Consequences for Racing and Regulation

The UK Government has increasingly shifted its approach to influencing consumer behaviour, moving away from strategies based on persuasion and toward direct taxation. Nowhere is this more evident than in the gambling sector, which has become a key target of new fiscal measures.

A pivotal moment came in 2014 with the introduction of the Point of Consumption model. This framework fundamentally changed how gambling was taxed, focusing on the player’s location rather than where the operator was based. Its main goal was to eliminate tax avoidance by offshore operators, ensuring that all remote gaming activity linked to UK consumers would be subject to taxation. Under this model, remote gambling was brought under the scope of a 15% Remote Gaming Duty.

Further changes followed in 2019 when the tax rate for online casino games was raised significantly to 21%. Sports betting, however, remained subject to the lower 15% General Betting Duty. The rationale behind this dual approach included a desire to support British horse racing, which relies heavily on levy payments from the betting industry.

Now, the Government is preparing to roll out a new measure—the Remote Betting & Gaming Duty (RBGD). This proposal aims to consolidate multiple existing gambling tax regimes into a single framework. Although full details remain pending, it is widely anticipated that the Betting Duty rate will rise as a result. The Treasury has justified this move by pointing to a supposed 208% increase in Gross Gambling Yield (GGY) since 2014. However, critics argue this figure is misleading, as it fails to take into account the tax base expansion created by the Point of Consumption model. When properly adjusted, the true growth in GGY over the same period is closer to 36%.

This discrepancy has raised alarm across the gambling and racing sectors. Industry stakeholders warn that rising taxes, combined with other regulatory interventions such as affordability checks, could inflict serious harm. These checks have already dissuaded a significant number of punters from betting, leading to decreased turnover and, by extension, reduced tax revenue. In fact, the government is now seeking to plug a £3 billion fiscal shortfall, partially caused by its own policies, through the introduction of the RBGD.

The effects are being felt acutely in British horse racing, a sector intricately tied to gambling revenues. As profit margins narrow, betting operators are contributing less to the sport’s levy system, jeopardising the financial health of smaller racecourses and placing the broader racing ecosystem at risk. This loss of funding threatens not just sporting tradition, but also the rural jobs and communities that depend on it.

There are also fears that continued tax hikes and restrictive regulation will drive both consumers and businesses into the arms of unregulated offshore operators. These sites often offer more competitive odds and fewer restrictions, posing a major threat to the integrity of the UK’s regulated market. Should this trend continue, the consequences could include reduced Corporation Tax receipts, job losses in the legal gambling industry, and a weakened regulatory framework.

Ironically, the Government's escalating tax strategy may end up undermining the very revenues it seeks to protect. Long-term damage to gambling-linked industries, including British racing, seems increasingly likely unless the current course is reconsidered.

By fLEXI tEAM