Budget Tax Threat Puts UK Arcades in the Spotlight

Ahead of the Budget on 28 October, Treasury officials are reportedly modelling a higher rate of Machine Games Duty (MGD) targeted specifically at betting shops and adult gaming centres (AGCs) – the high-street arcades that offer gaming machines to over-18s only. If you play on the slots at your local arcade, this is the tax story to watch over the next week, because it could change what’s on offer and how many of these venues survive on the high street.

What’s actually changed

Officials are modelling higher rates of machine games duty, the tax on machine takings, for the budget on 28 October, with the Financial Times reporting that chancellor John Healey is weighing a rise aimed only at betting shops and AGCs
. MGD currently applies at three rates depending on stake and prize size, with most machines – including the higher-stake Category B machines found in AGCs and betting shops – taxed at 20%. The Social Market Foundation has proposed a new 40% band specifically for these machines, while leaving lower-stake Category C and D machines, found in pubs and family arcades, untouched.

Crucially, AGCs look more exposed than betting shops to any targeted rise.
The balance between the two has been tilting since 2019, when the government cut the maximum stake on fixed-odds betting terminals to £2, a move analysts say pushed machine spending from bookmakers towards casinos, bingo clubs and AGCs, particularly as shops have closed
.
Betting shops are limited to four higher-stake machines each and close by 10pm, whereas arcades can serve late-night custom and typically pack their floors with lower-stake machines that unlock a larger allowance of the higher-stake Category B terminals
.

Separately, 90 Labour MPs wrote to the Chancellor this month pushing for the increase, and part of their case rested on where these venues are located: their letter
cited figures showing that 47% of adult gaming centres are in the most deprived fifth of the country
. The Betting and Gaming Council has pushed back hard, arguing in a statement on 17 October
that MPs are right to worry about communities and high streets but that higher taxes on betting shops and casinos would not protect them, pointing to more than 600 betting shop closures and over 10,000 jobs lost or at risk since the last Budget
.

What it means for you

If a tax rise lands on AGCs specifically, expect operators to respond in ways that affect what players see on the shop floor. A sharply higher duty on Category B machines – the ones with bigger stakes and bigger potential losses – could push arcades towards offering fewer of them, or towards raising minimum spend elsewhere to cover costs. It may also accelerate closures in exactly the deprived areas the MPs’ letter flagged, which cuts both ways: fewer venues can mean less access to higher-risk machines nearby, but it can also mean fewer staffed premises with trained attendants and self-exclusion schemes on hand.

Separately, AGCs already face a structural change regardless of what happens in the Budget.
The government has said it intends to scrap the Gambling Act’s “aim to permit” principle, which currently limits councils’ ability to refuse new gambling premises, and adult gaming centres would need planning permission from 2027, subject to consultation
. Combined with a tax rise, that could make it considerably harder to open new arcades even where existing ones close.

The bigger picture

This sits within a wider pattern of the government reaching for gambling taxation to fund fiscal gaps while using player-protection language to justify it. Remote Gaming Duty on online casino products rose from 21% to 40% last year, and the same reasoning – that higher-harm products should carry higher tax – is now being applied to machines.
Industry analysts note that AGCs capture around 4% of spending on gambling in the licensed market overall, but take around a quarter of licensed machine spending against just under half for betting shops
, meaning any targeted rise would land unevenly across the retail gambling sector.

What’s not yet settled is exactly where the line will be drawn. Whether the Treasury carves out bingo halls and pubs, as some government sources have suggested, or applies a uniform rate across all Category B machines, will determine how directly this affects the arcade on your high street. We’ll have more once the Budget details are confirmed on 28 October.

Sources

• iGaming Business – Last orders for Britain’s arcades?
• Gambling.com – 90 Labour MPs Urge Chancellor To Lift Machine Games Duty
• Retail Times – Budget 2026: the gambling tax decisions retailers should be watching
• Racing Post – Another tax rise looms – but it won’t get rid of the slots, it will just hand the high street to the arcades