Internal Papers Reveal Doubts over UK Gambling Tax Hikes

Tensions are rising between the UK Treasury and the Department for Culture, Media and Sport (DCMS). Recent reports revealed that DCMS officials had warned racing would see little benefit from a betting tax exemption introduced in last year’s budget. However, the Treasury ignored these claims, leaving the UK’s horse racing sector in an increasingly precarious situation.

The Government Stands to Gain Significant Tax Revenue

According to reports from news outlets, such as Racing Post and The Sun, the DCMS was highly critical of the government’s tax reforms. The warnings focused on the Treasury’s suggestion to shield horse racing from higher betting taxes, even as duties on other gambling rose sharply.

DCMS officials believed such a measure would offer limited protection to the sport without a reform of the Horse Racing Betting Levy. They argued that bookmakers would have little incentive to channel any tax savings back into racing without such a change, as they could direct their resources toward products with higher profit margins.

Chancellor Rachel Reeves’s Autumn Budget ultimately increased the remote gaming duty from 21% to 40%. The government also plans to increase the remote betting duty on sports to 25% in 2027, up from the current 15%. Racing bets were excluded from the latter increase, but the levy remained untouched. The Office for Budget Responsibility predicted that the new gambling taxes would generate approximately GBP 1.1 billion ($1.47 billion)  in revenue.

Operators Are Already Feeling the Pinch

Recent reports suggest Treasury officials received warnings about broader market consequences. The DCMS feared that bookmakers would adjust odds, promotions, and pricing to offset higher taxes. A less attractive legal betting market could also push certain gamblers to seek out unregulated operators that do not pay taxes and offer insufficient consumer protections.

The racing industry reports that its fears have begun to materialize since the tax changes became public. Several bookmakers, including Entain and Bet365, have withdrawn from longstanding sponsorship agreements with racing organizations and events, citing the new tax regulations. Other companies have signalled cuts to marketing and sponsorship spending.

Industry representatives argue that the developments validate DCMS’s earlier warnings that even without a technical exemption, decisions by operators exposed to a more hostile and expensive environment could affect racing. Despite these concerns, the UK government has shown little interest in restarting discussions about levy reform as higher tax revenues remain a priority.