Gambling Giant Faces Major Profit Squeeze from Tax Reforms
The owner of Paddy Power and Betfair has issued a stark warning that the UK government's decision to significantly increase taxes on online gambling will severely impact its profits. Flutter Entertainment anticipates a combined financial blow of approximately £650 million ($860m) over the next two fiscal years as a direct result of the changes announced by Chancellor Rachel Reeves.
Budget Announcement Delivers a Heavy Blow
In her budget statement on Wednesday, the Chancellor confirmed a substantial rise in the remote gaming duty, which will jump from 21% to 40%. Simultaneously, the tax rate for online sports betting, excluding horse racing, will increase from 15% to 25%. The move is part of a broader fiscal strategy but has sent shockwaves through the gambling sector.
Flutter, a global gambling powerhouse that also controls Sky Bet and the US-based FanDuel, quantified the immediate impact. The company stated that the additional tax burden will reduce its underlying earnings by about $320 million in the 2025-26 financial year. This is projected to escalate dramatically to a $540 million hit in the 2026-27 financial year.
Strategic Response and Market Fallout
In response to this significant financial pressure, Flutter has outlined a plan to mitigate the damage. The company hopes to offset up to 40% of the profit impact by the year 2027. This will be achieved through a combination of strategic measures, including a reduction in promotional and marketing expenditure and wider cost-cutting initiatives across its operations.
The market reaction was swift and severe. Following the announcement, shares in Flutter fell by 1% in early trading on Thursday. The news triggered a wider sector sell-off, with competitors also seeing their stock value plummet. Rank’s shares dropped a staggering 10%, while Evoke, the owner of William Hill, fell by more than 5%, adding to an 18% slide from the previous day.
Industry Backlash and Warnings of a Black Market Boom
Kevin Harrington, the Chief Executive of Flutter’s UK and Ireland division, expressed profound disappointment with the government's decision. He stated that the tax increases represent “a very disappointing outcome and will have a significant adverse impact on our industry.”
Harrington issued a strong warning about unintended consequences, arguing that the hike will hand a major competitive advantage to illegal, unlicensed gambling operators. “The chancellor rightly wants to address harm, but these changes will make illegal operators more competitive overnight,” he said. “These black market operators don’t pay tax and don’t invest in safer gambling.”
He further highlighted that the new 40% remote gaming duty rate now places the UK above countries like the Netherlands, where a similar tax increase reportedly led to a surge in illegal gambling activity and a subsequent fall in government tax receipts.
Despite the challenges, Harrington confirmed that Flutter believes it is “well placed to navigate” the changes, citing the company's scale, leading market position, and proactive cost management.
In a partial reprieve for the industry, the Chancellor spared in-person gambling venues and horse racing from any tax rises, following warnings about potential job losses. In a positive move for another sector, bingo duty will be abolished entirely from April next year.
