UK tax hit worse than expected, Jefferies analyst says
Summary
The Labour government announced a steeper-than-anticipated rise in gambling taxes, with a blended increase that pushes igaming taxation to 40% from April and raises online sports betting taxes to 25% (horse racing excepted). Jefferies analyst James Wheatcroft warned the 35% blended levy will likely push customers offshore, reduce operators’ revenue visibility and force cuts to marketing, promotions and sponsorships. Deutsche Bank estimated heavy pass-through to consumers and materially lower operator profitability, while the government targets around £1.1bn in additional revenue by the end of the decade.
Key Points
- Market expectation was a 25–30% increase; the government delivered a higher, 35% blended uplift.
- Igaming will face a 40% tax rate from April; online sports betting rises to 25% (horse racing unchanged).
- Brick-and-mortar sportsbooks remain at 15%, casinos at 20%, and bingo taxes would be abolished.
- Jefferies warns higher taxes may drive customers to offshore operators, reducing domestic revenues.
- Operators are expected to offset costs by cutting marketing, promotions, sponsorships and offering less favourable odds.
- Deutsche Bank predicts ~90% of the tax increase will be passed to customers and operator profitability could fall by about one-third.
- The government aims for roughly £1.1bn additional tax revenue by the end of the decade.
- Gross gaming revenue was reported up 9% to £12.6bn; igaming grew 15%, with online slots singled out for the largest tax rise.
- Analysts from Jefferies and Deutsche Bank kept ‘Buy’ ratings on major operators like Entain and Flutter despite expecting near-term price pressure.
Context and Relevance
This tax change sits at the intersection of public policy and a fast-growing digital gambling sector. The rise targets igaming and online slots specifically — areas that have shown double-digit growth — and follows broader regulatory scrutiny of online gambling products. The move mirrors experiences in other jurisdictions (eg the Netherlands), where high taxes encouraged betting to move offshore, reducing domestic tax take and creating enforcement challenges.
For investors, operators and regulators, the announcement reshapes near-term economics: higher state revenues are likely, but so are industry headwinds from customer migration and margin pressure. The reaction from analysts suggests the sector will face a clearing event that re-prices risk and profitability expectations.
Why should I read this?
Short version: if you care about gambling stocks, operator strategy, or UK tax policy, this matters — and fast. The hike is bigger than traders expected, which means profits, sponsorships and customer offers are all on the chopping block. We skimmed the detail so you don’t have to; this tells you who wins, who loses, and what might happen next.
Source
Source: https://cdcgaming.com/uk-tax-hit-worse-than-expected-jefferies-analyst-says/