Social Market Foundation calls for 50% online casino tax in the UK

The Social Market Foundation (SMF) has proposed increasing the UK’s remote gaming duty to 50% as part of its submission to the Treasury’s consultation on a unified gambling tax rate.

The submission was revealed in a report published today, 29 July, in which the think tank laid out its latest proposals to fundamentally alter the tax system for the sector.

The report was written by SMF senior fellow Dr James Noyes, with the foreword written by MP and All-Party Parliamentary Group for Gambling Reform member Alex Ballinger. 

In the report, Noyes claims that remote gaming in the UK is under-taxed when compared to other jurisdictions across Europe and the US, where online casino tax rates sit closer to 40% and 50% respectively. 

Currently, online casino is taxed at 21% in the UK, with sports betting subject to a 15% tax rate. 

Noyes’ report also suggests greater consumer risk is associated with online slots.

As online slots “cause far more harm” than other gambling products, Labour MP Ballinger said the UK’s tax system should reflect this.

He wrote: “It is not right that more harmful, low-employment sectors pay less tax than less harmful ones that bring greater social and economic value, like horseracing.” 

In addition to increasing the online gaming tax rate, the report also proposes reducing the betting duty on horseracing to 5%, down from the current rate of 15%.  

Another boost to the horseracing industry recommended in the report would be increasing the Horserace Betting Levy from 10% to 20%.

Those measures, the SMF said, would generate around £140m in additional revenue for British horseracing each year.

These changes would maintain the effective 25% rate on the sport. The SMF noted it would “ensure fiscal neutrality for the betting industry, while fundamentally reorienting the distribution of revenue in favour of the sport”.

However, the decline from 15% to 5% in betting duty would result in a £100m hit to the Treasury. The think tank said this would be covered by hiking online casino tax rates.

The report reads: “In addition to the economic pressures specific to horseracing, the current framework governing British horseracing’s funding is inadequate, further jeopardising the long-term viability of the sector.

“At the heart of this framework is the question of funds returning to the sport through prize money, the majority of which is raised by payments made to the sport from betting operators – first through media rights deals agreed on a small percentage of turnover, and second through the 10% of gross profits secured via the Horserace Betting Levy.  

“To keep pace with the other two major European horse racing jurisdictions, Ireland and France, it is clear that British prize money would need to be at least doubled from its current £190m per annum.” 

The report details the low percentage of betting turnover returned to horseracing when compared to other countries.  

The percentage in the UK stands at 0.6% compared to 1.5% in Ireland, 3.9% in Australia, 14.5% in the US and 16.6% in Japan.  

Noyes also highlights “leakage” within revenue streams of British horseracing and significant regulatory challenges as issues affecting the sector.  

Another report recommendation is to increase the sports betting tax rate to 25% across all products – up from 15%

Noyes claims that all the proposed changes would lead to an additional £2bn in tax revenue for the government. 

The report adds: “As well as raising additional revenue for the Treasury, our proposal would disincentive harm, it would provide the funds needed for British horseracing to remain sustainable, at the same time as protecting small and independent business.” 

This is the second time that the SMF has pushed for drastic increases to the UK’s online gaming tax rate.  

In October 2024, the think tank proposed raising the remote betting duty to 42%, again citing the higher tax rates of other countries.  

Reports at the time suggested the Treasury had engaged with the SMF on the topic, resulting in operator share prices plummeting.

There were fears that the Chancellor Rachel Reeves would hike taxes in the Autumn Budget. Instead, she followed her predecessor Jeremy Hunt’s path and opted for a consultation on a unified model.

The Treasury recently concluded its consultation into gaming tax in the UK, exploring the creation of a unified Remote Betting and Gaming Duty.  

A unified rate would either see sports betting taxed alongside igaming at 21%, or the creation of a new tax rate for all verticals above 21% across the board. 

The proposals have been met with staunch opposition by both the British Horseracing Authority (BHA) and the Betting and Gaming Council (BGC).  

Both organisations claim the single tax rate would be detrimental to the UK’s horseracing industry, with the BGC sharing fears that more players would be driven towards the black market.

The BHA has called for a carve out for horseracing, arguing it faces specific challenges unlike other sports in the UK, stating a hike could see the sport impacted to the tune of £66m a year and thousands of job losses.

The authority has launched its ‘Axe the Racing Tax’ campaign and launched a petition to help spread awareness of its fight.

EGR has contacted the BGC for comment.