If you are of a certain vintage, you’ll probably remember the days when UK bettors paid tax on their betting slips. The “Betting Duty,” as it was known up until 2001, required a 9% upfront payment on the betting slip. So, for example, if you bet £10, you would add 9% tax on the betting slip, paying £10.90 in total. Technically, you could pay the 9% tax on your winnings instead, but this was unpopular for obvious reasons, i.e., it was possible you would have a hefty tax bill if you won a significant amount.
Nonetheless, in 2001, then-Chancellor Gordon Brown changed the system, basically announcing that bookmakers would pay a flat 15% tax on gross profits. For punters, this obviously simplified the system, and it was at least perceived that they were getting more bang for their buck. As you might expect with the timing, it also coincided with a steep rise in the popularity of online horse racing betting as bookmakers went digital.
The System Could be Overhauled
Gordon Brown’s system has broadly been in place for the last 25 to 20 years. If you follow the ins and outs of British gambling legislation, you’ll probably be aware that there are always proposals for changes, White Papers that move through parliament, yet very little moves into law. Indeed, many criticisms of the UK Gambling Act 2005 (the overarching law that overhauled the industry in the UK) failed to anticipate the growth of online gambling, especially in areas like remote operations.
Still, the current Labour Government does have plans to make the first major change to taxes since the days of Gordon Brown, and it comes in the form of Remote Betting & Gaming Duty (RBGD). Effectively, the concept of the change is that it will harmonise the duty (tax) paid by operators between sports betting (termed as fixed odds sports, which are levied at 15%) and online casino and bingo games, which are taxed at 21%. Critics believe that “harmonisation” basically means tax rises for the former.
Bettors May Get Less Value if Taxes Rise
And here’s the rub: the casual punter probably won’t know the difference. As we mentioned earlier, punters noticing the way the tax code changed in the early 2000s “perceived” they were getting a better deal because they were no longer paying that proverbial 90p on their slips. Yet, we know that the bookies would have to earn their profits elsewhere to pay taxes, and that means the cost would filter down to the odds.
Critics say that the new proposals will have a knock-on effect across the sport of horse racing, impacting profits for punters and bookmakers, thereby impacting investment in the industry. There are also predicted consequences like an increase in betting with unlicensed operators. However, there are positives in some respects, including the fact that the proposal relates to online betting only, so it could benefit on-premises (racecourses, betting shops) operators.
Yet, largely, the feedback has been negative from the racing sector. There are reasons to be sceptical, however. First is, as we have said, gambling bills seem to be notoriously difficult to get through parliament. There is so much complication due to the presence of remote (international) operations. Secondly, any bill that passes would take a while to become law; 2027 at the earliest. That said, there is momentum behind this Labour Government to pursue tax-raising measures across all sectors, so there is no reason to think that sports betting will be any different. It’s worth keeping an eye on because it could represent the biggest change in sports betting duties since the start of the millennium.
