HMRC Sets Out 25% Machine Games Duty Plan for Higher-Stake Machines

HM Revenue & Customs has published a policy paper setting out how Machine Games Duty on machine games with stakes over £1 or prizes over £100 will rise from 20% to 25% from April 1, 2027. The paper, published on October 29, 2026, details certified exchequer forecasts, the businesses affected and the legislative changes that will implement the increase.

The rate increase was announced at Budget 2026, published by HM Treasury on October 28, 2026. The Budget states that the rate of Machine Games Duty for higher risk machines will increase to help pay for the real-terms freeze in business rates for retail, hospitality and leisure properties. The wider business-rates package increases relief for pubs, social clubs and live music venues by 20 percentage points to 35%, and raises Small Business Rate Relief thresholds so that a further 70,000 retail, hospitality and leisure businesses pay no business rates.

The policy costings document published alongside the Budget also lists two further gambling-sector measures: a separate Machine Games Duty measure moving duty liability to the machine supplier from April 1, 2028, and a business-rates measure removing reliefs for vape shops and Adult Gaming Centres from April 1, 2027.

The duty increase affects businesses that provide dutiable machine games on higher stake gaming machines, particularly adult gaming centres, bingo premises, betting shops and casinos. HMRC said the objective is to ensure that higher stake and higher prize machines, which are more associated with gambling harm, face the higher duty rate, while lower stake machines keep their existing treatment. The paper states the measure “supports a fair and sustainable gambling tax system by better aligning MGD rates with the characteristics of different gaming machines.”

Exchequer Impact and OBR Certification

The exchequer impact figures set out in the policy paper are as follows:

The figures are set out in Table 6.1 of Budget 2026 and have been certified by the Office for Budget Responsibility. The paper states the measure is not expected to have any significant macroeconomic impacts.

The costings document states that all costings were submitted to the independent OBR for certification and are presented on a National Accounts basis. Measures certified by the OBR as below the negligible threshold of £10 million per annum in every year of the forecast period are not considered in the document.

Thresholds and Legislation

Machine Games Duty is charged on the net takings from dutiable machine games. The current regime has three rates: a 5% lower rate, a 20% standard rate and a 25% higher rate, with the applicable rate depending on whether a machine is classified as Type 1, Type 2 or Type 3. A machine is Type 1 where the highest charge to play does not exceed 20 pence and the maximum prize does not exceed £10, and Type 1 machines pay the lower rate. A machine is Type 2 where the highest charge to play does not exceed £5 and it is not a Type 1 machine, and Type 2 machines pay the standard rate. All other machines are Type 3 and pay the higher rate.

Legislation in Finance Bill 2026-27 will amend the machine-type definitions in Schedule 24 to the Finance Act 2012, which contains the current law for the duty, so that a machine is Type 2 only where the highest charge to play does not exceed £1 and the maximum prize does not exceed £100. Machines with a stake exceeding £1, a prize exceeding £100, or both will fall within Type 3, making their takings subject to the 25% higher rate. The existing Type 1 definition and the residual Type 3 definition are otherwise preserved. The Treasury’s order-making power will also be amended to allow the stake and prize limits to be varied up or down.

Impact on Businesses and Individuals

Around 5,100 MGD operators offering these types of machines are estimated to be affected, across approximately 12,400 active premises. HMRC said these businesses will see an increase in their duty bills, with one-off costs including familiarisation with the changes, updating systems to reflect the revised rates and ensuring machines are correctly categorised under the revised Type 2 and Type 3 limits. No ongoing administrative costs are expected.

MGD is paid by businesses rather than individuals, and the paper says individuals would be impacted only if the duty increase is passed on through changes in returns to players. In response, some individuals could choose to gamble less or switch to alternative gambling activities, with the extent of any pass-through uncertain and dependent on business decisions and behavioural responses. The measure is not expected to have a direct impact on family formation, stability or breakdown, and is expected overall to have no impact on individuals’ experience of dealing with HMRC.

Businesses will continue to register, submit quarterly returns and make payments through the existing MGD service. Because the existing return refers to the lower, standard and higher rates rather than displaying the underlying percentages, no substantive changes to the return process are currently expected. HMRC said it will need to make minor changes to its IT systems, with associated costs expected to be minimal although estimates are still being refined, and that it will provide clear guidance and communication of the change.

On equalities, HMRC said it does not hold data it can use to assess whether there are disproportionate impacts on protected groups. It estimates that males are slightly more likely to use machine games, and that the age group estimated to be most likely to use them is 18 to 24.

HMRC said consideration will be given to monitoring or evaluating the expected exchequer impacts of the policy after two years of monitoring data have been collected and analysed. The revised stake and prize thresholds take effect for Machine Games Duty from April 1, 2027.