Budget 2026: £500 Jackpot Slot Machine Tax Rises to 25%, But What Does It Mean for Players?

The UK government has confirmed an increase in Machine Games Duty from April 2027, with £500 jackpot slot machines among those affected. The changes could put additional pressure on arcade operators and raise questions about the future return to player (RTP) percentages offered on machines.

• Machine Games Duty rises from 20% to 25% on games with stakes above £1 or maximum prizes above £100.
• Category C £100 jackpot pub slots and qualifying lower-stake machines retain their existing tax rates.
• Higher operating costs could put pressure on RTP percentages, although no changes to payouts have been announced.

What Has the Government Announced?

The Autumn Budget, delivered on 28 October 2026 by Chancellor John Healey, has confirmed an increase in Machine Games Duty (MGD) for higher-stake and higher-prize gaming machines.

From 1 April 2027, the applicable rate will rise from 20% to 25%, affecting many of the £500 jackpot machines commonly found in adult gaming centres (AGCs), betting shops and other gambling premises across the UK.

The announcement follows considerable speculation about a potentially much larger increase, with figures as high as 40% discussed in the months leading up to the Budget. Although the government has stopped short of introducing that rate, the confirmed increase still represents a substantial additional cost for the land-based gaming industry.

Importantly, this is not a direct tax on players or individual winnings. Machine Games Duty is paid by businesses on the net takings generated by gaming machines, calculated by subtracting prizes paid out from the money taken in.

For example, if a machine takes £10,000 in stakes and returns £9,300 in prizes, its net takings are £700. Under the existing 20% rate, the duty would be £140. At the new 25% rate, that increases to £175.

The difference might appear relatively small when looking at one machine, but across hundreds or thousands of machines operating throughout the year, the additional expense becomes significant.

Which Slot Machines Will Be Affected?

One of the most important details in the Budget is the distinction between the maximum stake and maximum prize offered by a machine.

The new 25% rate will apply to machine games where either:

• The maximum cost to play exceeds £1.
• The maximum prize exceeds £100.

A machine only needs to meet one of these conditions to fall into the higher tax band. This means the increase is not limited to machines accepting bets above £1.

For example, a B3 slot machine offering a £500 jackpot would qualify for the 25% rate even if the player selected a 20p, 50p or £1 stake. Its maximum prize exceeds £100, so the lower amount being staked does not remove it from the higher tax category.

Similarly, a game offering a maximum prize of £100 could fall into the higher band if its maximum cost to play exceeds £1.

This distinction matters because some early reporting concentrated on machines with stakes above £1, without making clear that the maximum prize is equally important.

What About £100 Pub Slots?

Category C machines, commonly found in pubs and offering maximum prizes of £100, will generally remain within the existing 20% Machine Games Duty band.

These machines have a maximum stake of £1 and a maximum prize of £100, placing them within the revised standard-rate thresholds.

The government has also retained the 5% lower rate for qualifying low-stake machines, including those with a maximum cost to play of 20p and maximum cash prizes of £10.

The revised system therefore creates a clearer division between lower-stake gaming and machines offering larger prizes.

The classification is determined by the applicable stake and prize thresholds, rather than simply the location of the machine. A qualifying lower-stake game does not automatically attract the higher rate merely because it is situated in an adult gaming centre.

For multi-game cabinets, the rules also need to be considered at machine level. HMRC’s existing guidance states that where a machine offers games attracting different duty rates, the highest applicable rate is charged on the machine’s takings.

Could the Tax Increase Affect RTP?

For regular slot players, one of the biggest questions is whether the higher tax rate could eventually result in lower RTP percentages.

RTP, or Return to Player, is the theoretical percentage of money staked that a game is designed to return as prizes over a large number of plays.

For example, a machine operating at 94% RTP is designed to return an average of £94 for every £100 staked over the long term, retaining £6 before taxes and other operating costs.

A machine operating at 92% RTP retains £8 from the same £100 of stakes.

That difference of just two percentage points might sound insignificant, but it has a considerable effect on the amount retained by an operator.

How the New Tax Changes the Figures

Consider a machine generating £100,000 in total stakes over a period of time, operating at a theoretical RTP of 94%.

Under the current system:

• Total stakes: £100,000
• Player winnings: £94,000
• Net machine takings: £6,000
• Machine Games Duty at 20%: £1,200
• Remaining after duty: £4,800

From April 2027, assuming the RTP and total stakes remain unchanged:

• Total stakes: £100,000
• Player winnings: £94,000
• Net machine takings: £6,000
• Machine Games Duty at 25%: £1,500
• Remaining after duty: £4,500

The operator would retain £300 less from exactly the same level of play.

In other words, the tax rate increases by five percentage points, but the amount of duty payable increases by 25%.

The remaining £4,500 is not pure profit. Businesses must still cover premises costs, wages, electricity, machine rental or supply agreements, maintenance and other expenses.

Could Operators Lower RTP to Recover the Difference?

Potentially, yes, although there is no evidence that operators or manufacturers have announced widespread RTP reductions in response to this Budget.

If an operator wanted to recover the additional tax entirely through lower payouts, it would need to retain a greater proportion of the money staked.

Using the same £100,000 example, reducing RTP from 94% to approximately 93.6% would leave the operator with roughly the same amount after the new 25% duty as it previously retained at 94% RTP and 20% duty.

These figures are illustrative and assume the same total amount is staked, regardless of RTP.

They demonstrate why relatively small changes in RTP can have a meaningful financial impact. However, they should not be interpreted as a prediction that manufacturers will reduce their games to any particular percentage.

Operators have other ways to manage increased costs, including renegotiating machine agreements, reducing expenditure or changing their machine selection.

There is also a commercial balance to consider. Players may notice poorer value over time, and operators risk losing customers if their machines become less attractive.

Can Manufacturers Simply Change the RTP?

Gaming machines cannot simply disregard their advertised RTP when operating costs increase.

The Gambling Commission requires gaming machines to provide information about their RTP or odds of winning. Individual games must operate according to their stated characteristics.

However, there is no statutory minimum RTP for UK gaming machines.

This means lower-RTP versions of games may be possible, provided they meet the applicable technical standards, testing requirements and disclosure rules.

A manufacturer could potentially develop or supply different approved versions of a game, with different theoretical returns. This is different from an existing machine secretly reducing its payout percentage because the operator has received a higher tax bill.

For players, the most useful approach is to check the RTP information displayed on individual games, rather than assuming every machine in an arcade operates at the same percentage.

It is also important to remember that RTP is a long-term mathematical average, not a guarantee of what will happen during an individual playing session.

Adult Gaming Centres Face Another Financial Blow

The increase in Machine Games Duty is not the only Budget announcement affecting adult gaming centres.

The government has also confirmed that AGCs will be excluded from qualifying retail, hospitality and leisure business rates relief arrangements from 1 April 2027.

This means affected premises will no longer benefit from the preferential business rates multipliers available to eligible businesses within those sectors.

For arcade operators, the combination of higher Machine Games Duty and less favourable business rates treatment could place further pressure on already tight operating margins.

The effects will vary depending on the size of the business, its premises, rateable value, machine performance and existing costs.

Larger operators may have greater opportunities to spread expenses across their estates, while smaller independent arcades could have less flexibility.

Possible consequences include reduced investment in new machines, fewer replacements of older cabinets, changes to opening hours and, in some cases, decisions about whether less profitable premises remain commercially viable.

These are potential industry responses, rather than closures or reductions directly announced as part of the Budget.

Machine Suppliers Will Also Face New Tax Responsibilities

A further change is scheduled for 1 April 2028, when responsibility for paying Machine Games Duty will move to machine suppliers in certain circumstances.

Currently, responsibility generally rests with the business operating the premises where the machine is available to play.

Under the proposed reform, suppliers will become responsible where they own machines supplied under profit-sharing agreements.

These arrangements are common across parts of the land-based gaming industry. A supplier may own and maintain the machine while sharing its takings with the pub, arcade or other premises where it operates.

The government believes placing the tax responsibility with the supplier in these circumstances will better reflect who controls the machine takings and holds the information required to calculate the duty.

Businesses that own their machines outright, or operate them under fixed rental or lease agreements while controlling the takings, will generally remain responsible for the duty themselves.

The government has launched a 12-week consultation on how the new arrangements should operate, closing on 20 January 2027.

This is primarily an administrative change rather than another increase in the tax rate. However, it could affect commercial agreements between suppliers and premises operators.

How Much Will the Government Raise?

According to the Treasury’s Budget figures, the increase in Machine Games Duty is expected to generate approximately £135 million in additional revenue during the 2027–28 financial year.

The forecast rises to £150 million in 2028–29, before settling at approximately £145 million annually in subsequent years covered by the Budget projections.

These are government forecasts, not guaranteed receipts. The actual amount collected will depend on machine performance, the number of machines in operation and how businesses respond to the new tax regime.

The government has presented the increase as part of its wider approach to taxing higher-risk gambling activities.

Industry representatives, meanwhile, have raised concerns that increasing costs could discourage investment and make some venues less commercially sustainable.

Tax specialists have also warned that the additional burden could influence decisions about machine numbers and the future of less profitable locations.

What About Online Gambling?

The Budget changes should also be viewed alongside the wider restructuring of UK gambling taxation.

Remote Gaming Duty, which applies to online gaming profits, stands at 40%, while the rate for most remote fixed-odds betting, excluding UK horse racing, is scheduled to increase from 15% to 25% in April 2027.

The new Budget does not introduce a further increase to the 40% Remote Gaming Duty rate.

Although online and land-based gaming operate under different commercial conditions, higher taxation across the sector raises similar questions about operating costs, investment and the long-term value offered to players.

It is important not to assume that the same RTP changes will occur across both markets. Land-based gaming machines and online slots have different cost structures, operating arrangements and technical requirements.

What Happens Next?

The higher Machine Games Duty rate and the changes affecting adult gaming centres are scheduled to take effect on 1 April 2027.

That gives operators and machine suppliers several months to assess the financial impact and decide whether any adjustments are necessary.

For players, the immediate position is straightforward. The Budget has not changed the £500 maximum jackpot on B3 machines, imposed a new tax on individual winnings or required manufacturers to lower RTP percentages.

The concern is what may happen over time as businesses respond to higher operating costs.

Some operators may absorb the additional duty. Others may review machine selection, supply agreements or operating expenses. Changes to the RTP of future game versions are also a possibility, but there is currently no confirmed industry-wide move in that direction.

The much-discussed prospect of a 40% Machine Games Duty rate has not materialised. Nevertheless, the increase to 25%, combined with changes to business rates relief, represents a significant development for Britain’s land-based gaming industry.

For regular arcade players, the most important issue to watch over the coming months will be whether these additional costs lead to measurable changes in the RTP percentages and variety of games available on the machines they play.