UK Budget Lifts Machine Games Duty to 25% and Strips Arcades of Rates Relief

Chancellor John Healey used the 28 October 2026 Budget to raise Machine Games Duty from 20% to 25% from April 2027 and to remove business-rates support from adult gaming centres in England, using the money to fund a rates freeze for high-street properties.

Machine Games Duty (MGD) is the UK tax on machine games, which HM Treasury says the new rate will apply to where stakes exceed £1 or prizes exceed £100. The Budget describes the target as higher-risk machines "commonly found in venues such as adult gaming centres" (AGCs), which are arcades licensed for machines without casino-style tables.

What the Budget changes for machine operators

The headline change is a five-point rise in MGD, effective April 2027. A second measure takes AGCs in England out of the retail, hospitality and leisure (RHL) business-rates multipliers from the same month. The Budget's costings table sets out the Exchequer impact of each measure.

Healey told the Commons the aim was "raising taxes on gambling to support good growth on every high street". He later said the funding would come from "gaming machines and vape shops".

Where the money goes

The Budget says MGD revenue will help pay for a freeze in business rates for RHL properties. The freeze is in real terms and covers 2027-28 and 2028-29. Vape shops are caught by the same rates change as AGCs and also lose eligibility for Small Business Rate Relief.

The Budget separately raises the Bank Corporation Tax Surcharge from 3% to 6% for a limited period, from 1 January 2027 to 31 March 2028. It will be legislated in Finance Bill 2026-27. Its proceeds support energy-bill measures: a £2.6bn Household Energy Payment and an extension of the VAT cut on electricity to July 2027. The surcharge is unrelated to gambling, but it forms part of the same package of revenue decisions.

Who is protected

The higher rate does not reach lower-stake machines. The Budget says pubs and seaside arcades are protected because the rate on those machines is unchanged. Operators with mixed estates will need to separate machines above the stake and prize thresholds from the rest when they model the extra cost for 2027-28.

The rates change is specific to England. The Budget names AGCs rather than betting shops generally, so operators in other premises types should check how they are classified before assuming they fall inside or outside the withdrawal of RHL multipliers.

Supplier liability moves in April 2028

A second MGD change lands a year after the rate rise. From 1 April 2028, liability for the duty moves to the machine supplier for supplier-owned machines under profit-sharing arrangements. This affects suppliers that place machines in venues and share takings with the venue operator, because they will carry the tax liability instead of the venue.

HM Treasury has launched a 12-week consultation on implementing the shift. It closes on 20 January 2027. Suppliers and venue operators with revenue-share contracts have until then to put contract and cash-flow concerns on the record. The Budget text sets out the MGD measure twice in adjacent paragraphs, but it describes a single policy.

A second gambling tax rise in about a year

The MGD increase follows tax decisions set out in the previous Budget. Remote Gaming Duty rises from April 2026 and General Betting Duty from April 2027, according to KPMG UK. That makes the October 2026 measures the second gambling tax increase in roughly a year, and the first to land on land-based machine venues. Earlier Gamingo coverage tracked the proposal for a unified remote gambling tax, and the government's impact evaluation of the Gambling Act provides the wider policy backdrop.

The UK is not alone in turning to gambling for budget revenue. Gamingo reported last year on Malta's consideration of an indirect gaming tax as part of its own 2026 budget.

The Finance Bill that legislates the MGD change has not yet been published. Until it appears, the rate, the stake and prize thresholds and the commencement date remain as set out in the Budget document.

Status reviewed on 31 October 2026. Figures and dates come from the HM Treasury Budget 2026 document published on 28 October 2026. More regulation news and EMEA coverage.