Responding to the Shift to a 40% Remote Gaming Duty

Key Points at a Glance 

• Improving bonus efficiency is fundamental. 

• Data and cloud cost reduction represents a meaningful, under-discussed mitigation opportunity. 

• Applying differentiated Return to Player (RTP) strategies at the individual player level has the potential to change the structure of player rewards in a more efficient and targeted way.
  

• I will be hosting a live AMA on Tuesday 16 December – Register your spot 

Introduction 

Last week’s Budget delivered a material shift to the economics of the UK gambling market. 

The increase in Remote Gaming Duty (RGD) to 40%, which continues to be applied to Gross Gaming Revenue (GGR) rather than Gross Gaming Yield (GGY), creates a series of commercially challenging dynamics. 

This article breaks down why the change is so problematic, how the tax is calculated in practice, and where the industry will now focus to mitigate its impact. 

The Budget Shock 

I must admit to being shocked at the RGD increase announced in last week’s budget. 

I genuinely believed we would see the normal dance of draconian changes being leaked, then much less severe measures being implemented. 

I think it’s politically unavoidable, under any party, that regulated gambling will see a tax burden above other businesses. However, to echo many other commentators, 40% on GGR is demonstrably illogical. 

But as it stands, it is here from April, and once again the industry must mitigate as best it can, while trying to maintain great player experiences – made even more difficult by the nature of how the tax is applied. 

Further to the commentary by Regulus Partners, I do believe the industry should now focus in the short-term on lobbying around a single objective: changing the application of the tax from GGR to GGY. 

A shift of this nature is not unprecedented and would deliver two major benefits: 

• It would remove a perverse disincentive on bonuses and rewards – a fundamental part of the customer experience. 

• It softens the commercial impact: at a 20% bonus rate, revenue decline is closer to -19% rather than -32% — recognising that even then it would be one of the highest effective tax rates in the world. 

How the Tax Works 

A short refresher is helpful for those less familiar with the mechanics. 

RGD at 40% is applied to GGR, defined as: 
Total stakes (including bonuses) – Total payouts (including bonuses) 

However, operators’ actual revenue is GGY, commonly referred to as Net Gaming Revenue (NGR): 
GGR – bonus stakes 

This means operators are taxed on revenue that is given back to customers via bonuses and free spins – the most important levers for player experience and retention. 

A simple analogy: a supermarket runs a “3 for 2” offer but is taxed on the value of all three items, not the two that customers actually pay for. 

Crucially, lobbying should not focus narrowly on “removing tax on bonuses”. That could still result in tax being applied to “cash GGR”, delivering negligible benefit. The clear and aligned message must be: 
RGD should be applied to GGY, not GGR. 

Modelling the Impact 

The table below shows a simplified illustration of the commercial effect of the current structure versus applying tax to GGY. 

What matters is the conclusion: 
Under the current system, the effective tax rate is actually 50%.  Applying to GGY would at least mean an effective rate the same as the headline rate, 40%. 

Where Operators Will Now Focus 

Commercial focus will likely consolidate around three core areas: 

1. Bonus Strategy 

We would counsel caution in how any changes to bonuses are applied, given how core they are to player experience. 

It’s natural and necessary to look at reducing bonus/GGR ratios given the nature of the change described. However, there is a risk of harming revenue further if changes are not well targeted. 

The key becomes the relationship between revenue and bonuses. 
For every 1% reduction in bonuses, what is the percentage reduction in revenue? 

Our modelling suggests that the revenue impact needs to be very low to achieve appreciable mitigation effects. Otherwise, the effect will actually be worse. 

From an economic standpoint, this becomes a question of bonus elasticity. 

Improving Bonus Efficiency: Making Every Moment Matter 

The best lever available is improving bonus efficiency. 
This means hyper-personalised, real-time targeting – ensuring rewards go to the right players, at the right time, to drive retention and share of wallet. 

Even within acquisition flows, where bonus levels traditionally run high, efficiency gains may be achieved by shifting incentives into early-lifecycle behaviours rather than upfront offers. 

Technology now exists to execute this at an individual level in real time. 

2. Return to Player (RTP) Strategy 

It’s natural to look to RTP, and I’m sure the innovative studios in the industry are already investigating ever more refined maths models and mechanics to deliver the same experience at a narrower return to player. But there are only so many times we can go to that well. 

A more nuanced approach is emerging: 
Use personalised recommendation systems to vary RTP exposure at a player level. 

For example: 

• Offering higher-RTP games to loyal, high-value players 

• Serving lower-RTP games to others in a controlled, transparent manner 

This mirrors long-standing practices in land-based settings where table minimums change at peak times. 

Including RTP increases in the treatment mix may seem counterintuitive, but again reflects the unintended consequence of taxing gross rather than net revenue. 

3. Operational Efficiency 

The third area is less discussed but potentially significant: data and cloud infrastructure costs. 

Online gambling’s unit economics are increasingly stark. 
An average UK online slot stake of 80p now returns around 2p in revenue after RGD (before other costs). 

To generate revenue, operators process billions of micro-transactions, which naturally drives higher-than-average data and cloud usage costs. 

Efficiencies in this area matter more than ever. 
Future Anthem’s own move to Amazon Web Services (AWS) reduced operating costs by almost half, and there is ongoing work to make these capabilities available to operators at scale. 

If you would like a preview of what is coming, we are happy to share more. 

Conclusion 

The shift to taxing GGR at 40% makes an already challenging landscape even more demanding. Operators now face the dual challenge of preserving player experience while absorbing a structurally inefficient tax design. 

Practical mitigation requires: 

• More efficient, personalised bonus allocation 

• Thoughtful RTP strategies using recommendation systems 

• Meaningful reductions in operational data and cloud costs 

The structure of this change makes the challenge unnecessarily severe. Targeted bonuses, thoughtful RTP strategies, and tighter operational cost management will be critical in mitigating the pressure created by taxing gross rather than net revenue. 

As commercial dynamics distort and margins compress, the risks associated with unregulated alternatives become materially more real. This is no longer abstract — it is a direct consequence of the system’s current design. 

I have to confess that in the past I viewed some of the commentary in the UK around the black market as maybe a touch overblown. However, that is not the case now. 

Call to Action – Join My AMA 

I’ll be hosting a live Ask Me Anything (AMA) session on Tuesday 16 December, where you can submit questions in advance and I’ll answer them directly. 

You can sign up and submit your questions here