Chancellor’s tax hike on online gambling raises concern for Gibraltar economy 

Chancellor Rachel Reeves announced a steep increase in online gambling tax on Wednesday, targeting a sector she said was associated with the “highest levels of harm” to consumers. 

In a Budget statement, Ms Reeves said she was reforming gambling taxes in response to the rise in online gambling, announcing an increase in remote gaming duty from 21% to 40% and on online betting from 15% to 25%. 

The decision was met with grave concern in Gibraltar, amid fears the UK increase could impact the Rock’s gaming sector disproportionately and have a devastating effect on the local economy. 

The increase will affect Gibraltar-based betting and gaming businesses with UK-facing business, which are licensed and regulated by both the Gibraltar Gambling Division and by the UK Gambling Commission, and already contribute to the public purse in both the UK and Gibraltar.  

The Chancellor said there would be no changes for in-person gambling or horse racing in the UK, while bingo duty was being abolished entirely from April next year. 

 “Remote gaming is associated with the highest levels of harm and so I am increasing remote gaming duty from 21% to 40%, with duty on online betting increasing from 15% to 25%,” Ms Reeves said. 

“I am making no change to the taxes on in-person gambling or horse racing and I am abolishing bingo duty entirely from April 2026.” 

“Taken together, my reforms to gambling tax will raise over £1 billion per year by 2031.” 

The reforms are expected to raise an estimated £1.1 billion for the UK government by 2029-30. 

The announcement was closely monitored in Gibraltar including by Nigel Feetham, the Ministry for Justice, Trade and Industry, who had flown to London and watched the Budget session from the public gallery in the House of Commons. 

Ahead of the Budget, the Commons’ Treasury Select Committee had called for duties on remote gaming to be set higher than Gaming Duty at 50%.  

Mr Feetham had engaged in intense lobbying in the run-up to the Budget, warning earlier this month that an increase to 50% would be “devastating” for Gibraltar and could put at risk thousands of jobs and up to £160m in government tax receipts here. 

While few expected the increase to be that high, the announcement on Wednesday pushed it well above the 5% rise that experts believed the industry could comfortably accommodate. 

“I listened to the Budget announcement from the public gallery in Parliament today,” Mr Feetham told the Chronicle. 

“This marked my third trip to the UK in the past six weeks.” 

“The outcome falls within the range of challenging scenarios for Gibraltar’s gaming sector, particularly for online operators.” 

“Over the coming weeks, we will carefully assess the potential impact on our own tax revenues and engage with operators both individually and collectively.” 

Gibraltar-based betting and gaming businesses make a vital contribution to the Rock’s economy, accounting for 30% of GDP and employing more than 3,400 people, over 10% of the total workforce.  

They also generate approximately a third of all Gibraltar Government tax receipts through a combination of corporate income tax, personal income tax, social insurance, local gambling duties and other local taxes.  

But they also pay more than £750m annually to the UK in betting and gaming duties, which are levied on a “point of consumption” basis.  

The concern is that the hike in UK gaming duties could tip that balance to a point where businesses are forced to take radical steps to restructure and reduce costs. 

That could potentially mean cutting marketing costs, reducing employee headcount and limiting customer bonuses handed to players, or a combination of all three, one industry expert said. 

The UK increase will also place the Gibraltar Government under huge pressure to find alternative ways to replace any drop in tax revenues arising as a result. 

Wednesday’s development comes against the backdrop of the final stages of a negotiation for a UK/EU treaty designed in large part to protect the freedom of movement vital to this critical sector of the Rock’s economy, a sector that has now been dealt a heavy blow by the UK Budget announcement. 

On Wednesday, the Rock’s gaming sector was still digesting the news and assessing its wider implications, as were Mr Feetham and his team. 

The GSD said the UK increase was of economic concern to Gibraltar given that the sector is a major employer and tax contributor.  

“Given the Minister for Tax’s [ Mr Feetham] own statements to the press here a couple of weeks ago that a significant UK gaming tax rate rise could cause ‘devastating’ impact and his own lobbying efforts in the UK ahead of this UK Government announcement, the GSD calls on the Hon Nigel Feetham to make a ministerial statement to Parliament at the next sitting on 1 December, setting out the nature of discussions that he had with UK Ministers in London and what if any mitigation might be available and any likely impact on Gibraltar’s tax revenues,” the Opposition said in a statement. 

The Budget announcement came the day after the UK gambling regulator released official figures showing the industry made £16.8 billion from UK consumers in the year to March after paying out any prizes, up 7.3% on the year before. 

The Gambling Commission said the latest annual industry statistics, which report on the customer-facing gambling industry in Great Britain, showed the rise in “gross gambling yield” (GGY) was largely driven by online gambling, which had gone up by more than £900 million to an annual figure of £7.8 billion. 

Two influential think tanks, the IPPR and SMF (Social Market Foundation), had both recommended that remote gaming duty applied to online games of chance and the largest of the duties because it is charged on the fast-growing online sector, should be more than doubled to 50%. 

Companies and industry groups warned that steep increases in levies could push punters on to the black market while threatening jobs and investment, drive consolidation among smaller operators and force them to streamline their businesses or shut down altogether. 

The gaming industry in the UK was swift to respond to the Budget announcement. 

“Massive tax increases for online betting and gaming announced in the Budget make them among the highest in the world, and are a devastating hammer blow to tens of thousands of people working in the industry across the UK, and millions of customers who enjoy a bet,” said Grainne Hurst, chief executive of the Betting and Gaming Council. 

“Regulated betting and gaming is one of the UK’s few globally successful sectors, generating £6.8 billion for the economy, contributing over £4 billion in tax and supporting 109,000 jobs, while delivering vital funding for British sport.” 

“While we welcome the decision not to raise land-based duties and to scrap bingo duty, these excessive online tax increases will undermine jobs, investment and growth across the UK.” 

“The Government’s Budget is a massive win for the incredibly harmful, unsafe, unregulated gambling black market, which pays no tax and offers none of the protections that exist in the regulated sector.” 

“These decisions are bad for jobs, bad for customers, bad for sports and bad for safer gambling.” 

But there was support too for the Chancellor’s decision at a time when the UK Government was faced with difficult decisions to bolster its strained public finances. 

“The gambling sector’s scaremongering has failed,” Treasury Select Committee chairwoman Dame Meg Hillier said. 

“The Chancellor has made the right decision in agreeing with my committee that the tax rate for remote betting, including highly addictive casino games, should reflect the harm it inflicts.” 

“Some parts of the gambling industry, such as racecourses and bingo halls, make a cultural contribution to our country.” 

“This is not the case, though, for online slots and other remote gaming which can quickly drain the bank balances of vulnerable people after just a few clicks of a button on a phone.”