Healey Raises Machine Games Duty to 25% to Fund High Street Relief
Chancellor John Healey has confirmed it. Machine Games Duty on Category B gaming machines goes from 20% to 25% in the 2026 budget, a jump of five percentage points. The money, he told the Commons, funds a package of high street support that includes a higher threshold for small business rate relief.
For retail, hospitality and leisure businesses, that threshold moves from £12,000 to £18,000. Around 70,000 businesses drop out of the system altogether. The change extends the 20% business rates cut brought in when Prime Minister Andy Burnham took office. Healey called the budget one of "stability and economic sense" and said the gambling tax rise pays for the relief. His words: "To pay for this support for our high streets, I'm raising taxes on gambling by increasing Machine Games Duty from 20% to 25% for higher stakes machines, whilst protecting pubs and seaside arcades."
Adult gaming centres and vape shops were singled out in the speech for carve-outs from business rates reliefs. Betting shops got no mention at all. Whether retail betting benefits from the rate relief cut is a question the budget left hanging. And that ambiguity matters. The MGD rise hits betting shop finances either way, whichever way the relief question lands.
Two more things from the statement. The business rates transitional relief supplement gets another two years. And rules for online marketplaces will be tightened so sellers can't dodge VAT on online sales.
Now the fine print, which is where this kind of change always lives. The MGD increase applies to the standard rate paid on revenue from Category B machines, the workhorse slot found in betting shops, amusement arcades and AGCs. Four of the five Category B types (B4, B3A, B3 and B2) have stakes capped at £2 and sit on the standard rate, now 25%. B1 is different. That machine carries a £5 maximum stake and venue caps of 150 in large casinos, plus a 5:1 ratio against other categories elsewhere, and it's taxed at the higher MGD rate, which stays at 25%. Category A machines remain unpermitted in any venue. Categories C and D, the low-stake penny slots in seaside towns and the pub fruit machines with a £1 maximum stake, hold at the lower 15% rate. Healey was explicit that pubs and seaside arcades are not the target.
The hike had been widely expected across the British gambling industry. It still falls well short of the doubling the Social Market Foundation think tank and former Prime Minister Gordon Brown had called for. Pressure on omnichannel operators such as Paddy Power, Betfred and William Hill doesn't let up, though. Those firms are already absorbing previously announced rises in Remote Gaming Duty, up from 21% to 40% in April 2026, and General Betting Duty, due to go from 15% to 25% next April with retail betting excluded.
Headline numbers from the budget: £1.42trn for day-to-day government spending and public infrastructure, defence included. Healey said budget headroom would be "reserved to absorb the impact of the Iran war, to protect the economy and to protect family finances". The National Living Wage rises 3.9%, from £12.71 to £13.20 an hour for over-21s. For 18-to-20-year-olds, the National Minimum Wage moves up 3.9% from £10.72. Betting companies employ large numbers of minimum wage staff across shops and support centres, so that's another line to budget for.
Will operators offset the higher costs by cutting headcount? Concerns about that remain widespread. Caroline Butler, director of recruitment advisory firm TalentThrive, told SBC News she expects any further significant tax increase to accelerate those conversations, particularly among operators with substantial retail exposure. "I anticipate a more selective hiring market, rather than recruitment stopping altogether," she said. Business-critical functions such as compliance, risk, technology, payments and commercial roles will still need people, she added. Healey closed his budget statement with a line about "breathing space now and fresh hope for the future, delivered to the British people by this Labor government".