The UK government is preparing to raise taxes on online casinos and betting sites in an upcoming budget review, while leaving the horse racing industry untouched. The move sets up a stark divide within Britain’s gambling sector.
Chancellor Rachel Reeves is expected to announce the changes as part of a wider effort to boost government revenue without touching income tax, national insurance or VAT. Online wagers, particularly remote gaming products such as slots and digital casino games, are viewed by the Treasury as under taxed and rapidly expanding.
According to HMRC’s 2023–24 Gambling Duties Bulletin, remote gaming sites generated over £3.4 billion last year, a figure that has grown for five consecutive years. Horse racing, by contrast, has been excluded from the tax increase and is being treated as a protected industry with deep cultural and economic ties to the people of the UK.
A targeted tax rise
Online sports betting currently faces a 15 percent duty, while online casino products are taxed at 21 percent. Under the new system, both of these will rise, with online betting sites moving towards the 20% mark, while online casinos may be closer to 25%, although the exact figures have not yet been disclosed.
Treasury officials involved in the duty review referenced the 2023 Remote Gambling Taxation Consultation Paper, which noted that an increase of even two percentage points could raise several hundred million pounds annually.
Crucially, horse racing avoids any increase. Bets placed on course will keep their longstanding exemption, and online racing wagers will remain under the existing regime. High Street bookmaker shops will also retain their 15 percent rate, which insulates them from the rise applied to offshore digital operators.
Treasury officials argue the split is justified and have described racing as a pillar of national heritage that supports jobs and infrastructure across rural Britain. According to the British Horse racing Authority’s 2023 Economic Impact Report, the sport contributes £4.1 billion annually and supports more than 20,000 full-time jobs.
BHA’s lobbying pays off
Racing’s exemption follows months of intense pressure on the government. The British Horse racing Authority warned that higher taxes on racing bets would threaten the available prize money, shrink field sizes and damage the sport’s international competitiveness. Racecourses even staged an unprecedented one-day strike this autumn to demonstrate the seriousness of the threat.
These efforts appear to have secured the outcome the industry wanted. Government sources now say the carve out is fixed for this Budget, although Treasury documentation notes that horse racing’s exemption will remain “subject to periodic review based on industry sustainability metrics.”
Online operators fear the knock-on effects
Other gambling operators are far less pleased. Betting firms argue that raising online duties risks driving customers toward unlicensed offshore websites that pay no UK taxes and offer none of the consumer safeguards required in the regulated market.
A report commissioned by the Betting and Gaming Council, based on modeling conducted by PwC using Gambling Commission market data, warned that higher online taxation could put tens of thousands of jobs at risk and push a significant share of players toward unlicensed sites.
Operators say the added burden will likely reduce promotions, hurt odds competitiveness and potentially lead to the closure of some of the most popular betting sites. The Treasury has indicated that it does not fully accept these warnings.
Officials note that major operators continue to perform well in markets with higher tax rates than the UK, and that the Gambling Commission’s 2023 market assessment still identifies strong revenue resilience within the licensed online sector.
Politics, revenue and timing
The timing of this announcement reflects the struggle the government is facing in its economic reforms. With limited room to raise headline taxes, the government is turning to sectors where public resistance is low. Online gambling, which is profitable, highly digital and attracting increased regulatory scrutiny, fits that profile.
The changes also follow a formal consultation earlier this year on simplifying the UK’s complex gambling duty framework, a move that suggests further reforms could follow. Treasury documents related to that consultation emphasized the need for “duty structures that are proportionate to risk and sustainability,” a phrase some officials say hints at future differentiation between low-risk and high-risk gambling products.
Racing benefits now, but risks remain
Although racing escapes a direct tax increase, it is not entirely insulated. The sport relies on the wider betting ecosystem for sponsorship, levy income and visibility. The Horserace Betting Levy Board’s 2023–24 annual report states that 91% of Levy income comes from the online betting industry’s profitability.
If the broader industry contracts because of higher duties, racing may still feel indirect financial pressure. For now, however, racing emerges as the clearest winner. It is protected while other digital gambling products face higher taxation.
The road ahead
Reeves is expected to finalize the numbers in the coming Budget Report, but industry debate is already in full swing. The online sector is preparing for tighter margins. Racing is celebrating a political victory it feared might not come.
Policymakers are betting that the split system will deliver revenue without destabilizing the regulated market. The Treasury’s own risk assessment notes that “market displacement will be monitored quarterly” following implementation. But whether that gamble pays off will become clearer in the months after the new rates take effect.
Sources:
- HMRC: https://www.gov.uk/government/statistics/uk-betting-and-gaming-statistics/uk-betting-and-gaming-statistics-background-and-references
- Office for Budget Responsibility (OBR): https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/betting-gaming-duties/
- HM Treasury consultation page: https://www.gov.uk/government/consultations/tax-treatment-of-remote-gambling
- Gambling Commission statistics: https://www.gamblingcommission.gov.uk/statistics-and-research/publication/industry-statistics-november-2024-official-statistics
