A Nation of Punters, a Treasury of Revenues
Gambling has always played a distinctive role in British life. From the grandeur of Royal Ascot to the buzz of the high street betting shop, from seaside arcades to smartphone apps, wagering is part of the nation’s cultural fabric. But alongside the thrill of risk and reward, successive governments have long viewed gambling through a fiscal lens: a sector to be taxed, regulated, and harnessed for the public purse.
Nearly a century of policy decisions, reforms, and controversies reveal an ongoing tug-of-war between raising revenue, protecting consumers, and preserving heritage industries like racing. With Chancellor Rachel Reeves now weighing sweeping reforms to the tax system, the debate has never been more intense.
To understand where we are today, we must trace the journey back to Winston Churchill’s first foray into taxing the betting public in the 1920s, then follow the story through the deregulation of the 1960s, the rise of the high street, the arrival of online gambling, and the successive tax shifts that have shaped the modern market.
Churchill’s Experiment: The 1926 Betting Duty
In 1926, Winston Churchill, then Chancellor of the Exchequer, introduced Britain’s first formal betting duty. It was a turnover tax, applied at 2.5% on bets. At first glance, it seemed straightforward: every wager would contribute a small slice to the Exchequer. But the policy quickly proved unpopular.
Punters resented seeing deductions from their stakes, bookmakers complained of lost business, and illegal street bookmakers flourished by offering untaxed odds. By 1930, the duty was abandoned.
Yet the experiment mattered. It set the precedent that gambling could be taxed as a revenue source, even if the initial model was flawed. The Treasury had laid its marker: betting was no longer just a pastime, it was a taxable activity.
Mid-Century Shifts: Betting Shops and Early Levies
The next great milestone came in 1960 with the Betting and Gaming Act, a landmark piece of legislation that legalised betting shops from 1961 onwards. Overnight, gambling moved from shady street corners into licensed premises.
This shift created a new tax base. Punters in betting shops were charged up to 9% on their stakes or winnings. It was a clumsy system players often chose to pay on winnings rather than stakes but it nonetheless became a regular contributor to Treasury revenues.
For racing, the 1961 Betting Levy introduced a mechanism for bookmakers to contribute to the sport itself, recognising the interdependence between betting and the turf. The principle was simple: if bookmakers profited from racing, a share should flow back to fund prize money, regulation, and integrity.
The 2001 Revolution: From Turnover to Gross Profits
By the turn of the millennium, the betting tax system looked increasingly outdated. With the internet taking hold and offshore operators emerging, punters had new ways to avoid UK taxes.
In 2001, Chancellor Gordon Brown unveiled a structural overhaul. The old turnover model was scrapped, replaced by a 15% Gross Profits Tax (GPT) on bookmakers. For punters, the immediate benefit was clear: no more deductions from stakes or winnings. For operators, the system aligned with profitability rather than turnover, making the UK a more attractive base.
The reform worked. Offshore drift slowed, the Treasury maintained its revenue stream, and betting shops flourished in the early 2000s. For a time, the balance between consumer value, operator profitability, and government revenue seemed well struck.
The Digital Disruption: Remote Gambling and the 2014 Point-of-Consumption Tax
The next shock came not from Whitehall but from technology. By the late 2000s, remote gambling online sportsbooks, poker, and especially casino slots was booming. Many operators shifted headquarters to offshore jurisdictions like Gibraltar or Malta to benefit from lower tax rates, while still advertising to British consumers.
The government’s response was decisive. The Gambling (Licensing and Advertising) Act 2014 introduced the Point-of-Consumption Tax (POCT). From December that year, all operators taking bets from UK customers, regardless of location, had to obtain a UK licence and pay 15% of gross profits to HMRC.
The reform closed a costly loophole. It also marked a philosophical shift: tax was now levied based on where the consumer sat, not where the operator was based. This aligned Britain with a digital-first economy and reasserted control over an increasingly globalised gambling market.
By 2019, the rate on remote gaming rose to 21%, reflecting the Treasury’s appetite for greater returns and concerns about the rapid growth of online slots.
Modern Contributions: Billions to the Exchequer
Today, gambling duties deliver around £3.8 billion annually to the Treasury roughly £130 per household. Betting, gaming, lotteries, and machine duties form a diverse portfolio, with online gaming now the largest contributor.
Yet the sector is under pressure. Compliance costs are soaring, safer gambling measures have reduced high-spending behaviour, and racing faces competition from global entertainment alternatives. Against this backdrop, Rachel Reeves has signalled reform, seeking both simplification and higher revenues.
Rachel Reeves’ Proposals: Consolidation and Escalation
The current consultation centres on two interlinked ideas:
- Consolidation: merging existing duties (General Betting Duty, Pool Betting Duty, and Remote Gaming Duty) into a single Remote Betting and Gaming Duty (RBGD). This would streamline compliance and reflect the reality that most gambling today occurs remotely.
- Escalation: raising rates significantly. Think tanks such as the IPPR and the Social Market Foundation have advocated duty rates as high as 50% on remote gaming and 25% on general betting. They argue this would raise up to £3.2 billion annually, funding social priorities such as child poverty reduction.
For the Treasury, the allure is obvious: simplicity plus significant revenue growth. But for racing and licensed operators, alarm bells are ringing.
Risks for the Racing Industry
British horseracing is uniquely dependent on betting. Levy payments, media rights deals, and sponsorship all flow from bookmakers. If duty rises from 15% to 21% or higher, bookmakers may scale back their racing commitments.
Analysts warn of annual losses between £66 million and £160 million to the sport. More than 2,700 jobs could be lost across training, racecourses, and support services. Owners, already squeezed by poor prize money, could shift investment to Ireland, France, or the Middle East, where returns are stronger.
The result could be fewer runners, weaker fields, and diminished international standing for a sport that remains a British cultural export. The strike of 10 September 2025, which saw all fixtures cancelled, underscored the seriousness of the threat.
Pressure on Licensed Onshore Bookmakers
Licensed UK operators already juggle compliance costs, safer gambling duties, and levy payments. An increase in duty would squeeze margins further.
The likely outcomes include:
- Worse odds for punters, as operators adjust pricing to absorb higher tax.
- Reduced investment in technology, slowing innovation in a sector competing with entertainment giants.
- Accelerated retail decline, as betting shops already vulnerable struggle to remain viable.
For consumers, the licensed industry could feel less competitive, less appealing, and less innovative.
Offshore Black Market and Crypto Threat
Perhaps the gravest unintended consequence is the potential resurgence of offshore bookmakers.
When the 2014 POCT closed the offshore loophole, the UK succeeded in bringing gambling revenue onshore. But if tax rates rise too high, unlicensed operators could tempt punters away with:
- Better odds, free from UK tax burdens.
- Generous bonuses and promotions, unconstrained by UK regulation.
- Crypto payments, offering anonymity, instant settlement, and an appeal to tech-savvy users frustrated by affordability checks.
Unlicensed operators pose obvious dangers. Customers lack the protections of GAMSTOP, self-exclusion, or ADR (alternative dispute resolution). Winnings are not guaranteed. Data protection is weak. And yet, for price-sensitive bettors, especially in racing and football, the appeal of higher returns and anonymous play could outweigh the risks.
This would undercut Treasury revenue, weaken consumer protection, and destabilise the licensed industry all the opposite of what the reforms intend.
Balancing Efficiency, Fairness and Sustainability
The challenge for policymakers is finding the sweet spot. A consolidated Remote Betting and Gaming Duty could simplify compliance and increase transparency. But set the rate too high, and the downsides multiply: harm to racing, pressure on bookmakers, and leakage to the black market.
One potential solution could be tiered duty rates based on product risk. High-risk products such as online slots could face higher rates, while horseracing betting remains at lower levels to preserve its ecosystem. This approach would align taxation with social harm while protecting cultural industries.
Conclusion: A Full Circle with New Stakes
From Churchill’s abandoned turnover tax in 1926, through the rise of betting shops in the 1960s, the gross profits revolution in 2001, and the digital POCT of 2014, the UK gambling tax system has constantly evolved to match economic, social, and technological realities.
Now, in 2025, Rachel Reeves faces the same conundrum that confronted her predecessors: how to balance revenue needs with fairness, sustainability, and protection. The stakes are enormous not just for the Treasury’s books, but for racing, for the licensed betting industry, and for millions of punters.
The coming months will decide whether the UK maintains its reputation as a world leader in regulated gambling, or risks pushing players and operators back into the shadows of the offshore black market.