The UK government is sitting on a potential goldmine, and it’s coming from an industry that operates largely offshore, pays minimal corporation tax, and profits overwhelmingly from people losing money. The question isn’t whether online gambling should be taxed more heavily. It’s why we’ve waited this long.
Britain’s gambling sector is expected to add £3.8 billion in taxes this year, reports the Office for Budget Responsibility. This figure seems large – yet pales next to the industry’s total take of £15.6 billion yearly; notably, online betting accounts for £6.9 billion by itself. The effective tax rate tells a different story than the one the industry wants you to hear.
The Offshore Loophole
Here’s what makes this particularly galling. Many of the biggest online gambling operators are based offshore in Gibraltar or Malta. They avoid UK corporation tax almost entirely while hoovering up billions from British punters. In 2021, two of the largest operators paid effective tax rates of just 3% and 4%. Compare that to the small businesses struggling under the current tax burden, and you start to see why think tanks are calling for reform.
The industry also benefits from a complete VAT exemption. You read that right. Almost every consumer-facing business in Britain pays VAT, but online casinos get a free pass. This isn’t an accident. It’s a legacy of outdated policy that treats gambling as somehow different from other entertainment sectors.
The Tax Debate Heating Up
The government has launched a consultation running until July 2025 on merging existing gambling taxes into a single Remote Betting & Gaming Duty (RBGD). Currently, different types of online gambling face different rates. Remote Gaming Duty sits at 21%, while General Betting Duty is 15%. The justification for this split has always been murky at best.
But the real fight isn’t about consolidation. It’s about rates. The Institute for Public Policy Research (IPPR) has proposed hiking the tax on online casinos to 50%. The Social Market Foundation suggests 42%. Even Gordon Brown has weighed in, arguing the revenue should lift the two-child benefit cap.
The numbers are striking. IPPR’s proposals could raise £3.4 billion annually by 2030, enough to lift 500,000 children out of poverty. That’s not ideological posturing. That’s basic arithmetic about where revenue comes from and where it could do the most good.
Industry Pushback and Black Market Fears
The Betting and Gaming Council, which speaks for the sector, says steeper levies might drive users to illegal online platforms. It funded studies highlighting possible employment cuts. Ernst & Young estimates that aggressive tax increases could cost up to 30,000 jobs.
This argument deserves scrutiny. The UK Gambling Commission maintains strict oversight of all regulated UK live casino sites, ensuring consumer protection standards that black market operators simply don’t offer. Are we really meant to believe British gamblers will abandon licensed, secure platforms because of a tax increase they’ll barely notice?
Countries like France and Austria already charge higher gambling taxes without seeing mass migration to illegal sites. The industry’s warnings sound less like economic analysis and more like lobbying dressed up as concern for consumers.
The Human Cost
This discussion goes beyond money. About 2.5% of UK adults face issues tied to gambling, reports the Gambling Commission. These range from financial troubles and emotional strain to broken relationships – sometimes even leading to self-harm. Online gambling shows a particularly strong link to problem behaviour. The fact remains: nearly two-thirds of earnings stem from a tiny group, only one in twenty players.
The fact remains: nearly two-thirds of earnings stem from a tiny group, only one in twenty players. The industry profits disproportionately from addiction, then argues against paying a fair share toward addressing the damage.
The suggested tax system based on harm appears logical. Where products are more addictive, apply greater taxes. Lower-risk options such as bingo or the national lottery should remain mostly unaffected. This follows the idea that those causing risk bear the cost – similar to policies used for alcohol and cigarettes.
What Comes Next
Rachel Reeves faces a choice. She can cave to industry lobbying and maintain a tax system that hasn’t caught up with the digital age. Or she can look at the evidence and ask why an industry generating £15.6 billion annually should pay proportionally less than almost any other sector.
The consultation closes in July. By October 2027, we could have a new tax structure. The question is whether it will be the timid consolidation the industry wants or the fundamental reform the evidence supports.
UK economic policy depends on fair taxation. An industry that operates offshore, avoids corporation tax, and profits from addiction shouldn’t get special treatment. The £3.8 billion we collect now is just a starting point. The question is whether we have the political will to demand more.
Gambling Tax Revenue Growth (£ billions)
2020/21: £2.9bn
2021/22: £3.1bn
2022/23: £3.3bn
2023/24: £3.4bn
2024/25: £3.6bn (projected)
2025/26: £3.8bn (projected)
Proposed with reform: £5-7bn potential by 2030
The numbers tell their own story. The only question is whether Labour’s economic agenda has the courage to act on them.
Disclaimer: This article is for informational and entertainment purposes only. It does not constitute legal, financial, or gambling advice. Online gambling carries risks, and statistically players stand a higher chance of losing their stake. You should only gamble what you can afford to lose, and participate if you are over the legal age in your jurisdiction. Always gamble responsibly and within your means. If you or someone you know is experiencing problems with gambling, seek help from a professional support service such as GamCare or BeGambleAware.