A tax rise is rarely welcome news, but the betting sector may soon find itself brushing off the cobwebs from an old playbook.
With reports that the chancellor has dropped plans to lift income tax rates in the late-November Budget, attention has swung back to an easier target: gambling duties.
Citi has modelled what a jump to a flat tax on gambling, covering both betting and gaming across online operators and high street shops, might mean for the two big UK-listed names in the sector, Entain PLC (LSE:ENT) and Flutter Entertainment PLC (LSE:FLTR, NYSE:FLUT).
Horse racing would stay outside the net, which matters because it still drives a hefty chunk of shop turnover.
The bank assumes that one-third of online sports betting revenue and 40% of retail sports betting revenue comes from horse racing and therefore escapes any change. Everything else gets taxed at the new flat rate. With that in mind, Citi runs two scenarios for the 2026 financial year.
In the first, the government lifts the rate to 25%. On Citi’s numbers, that would trim adjusted earnings before interest, tax, depreciation and amortisation (a standard measure of operating profit) by about 4% at Entain and 2% at Flutter once any management measures offset the squeeze are taken into account.
Push the rate to 30% and the hit naturally grows: roughly 7% for Entain and 4% for Flutter on an annualised basis.
These figures assume companies respond in the usual ways, such as tightening marketing spend, nudging prices and leaning on efficiency, but even then, the impact is not trivial.
Investors will already know that both companies are in the midst of broader upheaval.
Entain is searching for firmer footing after a bruising spell of downgrades and governance questions, while Flutter is working to keep its US expansion on track without neglecting the home front.
A shift in UK tax policy would not derail either business, but it adds another layer of uncertainty to a sector that has had its fill of regulatory surprises.
With the Budget due on November 26, the market has just a short wait to see whether the Treasury reaches for the gambling lever again and how firmly it intends to pull it.