Racing’s budget ‘victory’ is not quite the win it was hoping for

When UK Chancellor Rachel Reeves unveiled the UK budget in November 2025, Britain’s horse racing industry breathed a collective sigh of relief. The sport had been spared the most direct blow of the tax reform as the government chose not to raise betting duty on horse racing bets, leaving the rate at 15%, amid hikes more broadly across the sector. 

The outcome was widely framed as a political victory for the “Axe the Racing Tax” campaign, a lobbying effort that included unprecedented action such as the cancellation of race meetings and a rally in Westminster to inform politicians on the impact a betting tax hike could have on racing. The industry’s leaders described the decision as recognition of racing’s cultural and economic importance. 

But beneath the surface of that relief lies a more complicated reality. The tax hikes on remote gambling – particularly online casino and non-racing sports betting – have altered the economic environment in which racing survives. The sport may have dodged the direct tax increase, but it is not insulated from the shockwaves.  

As Racecourse Media Group (RMG) chief executive Nick Mills puts it: “Some people initially thought racing had dodged a bullet, but it’s now very clear that racing will be affected by the fallout from the budget.” 

In many ways, the budget has forced horse racing to confront an uncomfortable truth: its fate is now even more tightly bound to the health of bookmakers than before. 

The mood across the industry can best be described as cautious realism. Racing’s leaders are relieved that the sport was spared a direct levy increase, yet they are increasingly aware that the wider gambling tax hike threatens the very ecosystem that funds it.  

The budget’s indirect damage 

The chancellor’s decision to raise Remote Gaming Duty from 21% to 40%, and to increase online betting duty on non-racing sports from 15% to 25%, was aimed at both tackling gambling harms and raising tax contributions to help plug holes in the government’s budget. But the practical effect has been to squeeze bookmaker margins and force a retrenchment in spending across the sector. Mills describes the shock as profound. “Nobody expected a 40% gaming tax,” he says. “That’s a huge part of bookmaker profitability and revenue.” 

Bookmakers are now in a period of intense cost scrutiny, and discretionary spending is the first casualty. Mills warns that if operators cut back on “marketing, advertising, promotions around racing,” it will “affect customer behaviour, turnover and ultimately revenues flowing back into the sport”. In other words, the industry’s long-term health depends less on the tax rate applied to racing bets and more on whether bookmakers can afford to promote racing at all. 

Operator Betwright’s CEO David Matthews captures this dynamic with clarity. When costs rise, operators cut where they can. “Racing isn’t singled out ideologically, but it is exposed commercially,” he says. “When a product is already marginal or loss-making once taxes and fees are applied, it becomes much harder to justify incremental spend versus higher-margin verticals.” Racing, under the new tax regime, increasingly looks like a “loss leader”, useful for customer acquisition but less valuable as a profit centre. 

A shift in bookmakers’ strategy 

The budget has also shifted the industry’s strategic priorities. Operators are likely to invest more heavily in products that remain profitable under higher taxation – primarily casino and gaming. This is not simply a matter of preference but of necessity. Racing is expensive to offer: it carries not only duty but also additional levies specific to the sport. Alex Frost, CEO of the UK Tote Group, noted in a recent interview with Peel Hunt, that “horse race betting operators have to pay gambling duty, a responsible gambling levy and the horse race betting levy. It’s an expensive product.” 

For many bookmakers, the economics of racing betting have already been stretched thin. Frost describes the cost of pictures, media rights and the overall cost of doing business in racing as making the environment “much tougher” for large operators. “You’re seeing pullbacks from things like best odds guarantees because margins are under pressure,” he says.

The implication is that even if racing remains exempt from the direct tax increase, the broader fiscal squeeze makes racing offers less tenable. 

This does not mean racing will disappear from bookmaker portfolios. Mills insists that racing still matters: “Racing is still a great way of bringing in new customers and remains a very important product.” But the role racing plays is changing. It is becoming a strategic acquisition channel rather than a profitable product. Matthews concurs, noting: “Racing still has strategic value, but its role is increasingly acquisition-focused rather than profit-driven.” 

Racing’s commercial model under strain 

The budget has also exposed structural tensions in racing’s commercial model. The industry’s revenue is heavily dependent on turnover-based payments from operators. This model worked in a lower-tax environment, but it now creates an incentive where the more bookmakers promote racing, the more turnover they generate – and the more they pay.

Matthews describes the problem bluntly: “Charging operators on turnover rather than as a percentage of net gaming revenue creates a self-defeating loop. The more you promote racing, the more you’re penalised for doing so.” 

That loop helps explain why bookmakers are pulling back from racing sponsorship and broadcast exposure. When spending on racing yields less return under a high-tax regime, the rational response is to reduce investment. If bookmakers’ marketing budgets continue to shrink, the current media rights and sponsorship model “is not sustainable, not indefinitely”, Matthews says. 

Racing’s leaders now face a choice: either accept a more transactional relationship with bookmakers or redesign commercial structures to align incentives. Matthews suggests a shift toward a percentage-of-NGR model, arguing that it would better reflect the realities of modern taxation and regulation. “To remain commercially attractive, racing needs to move toward a percentage-of-NGR model,” he says. 

The black-market threat 

Another looming worry is that higher taxes will push more betting activity offshore. Mills estimates that “around £1.5 billion was bet on UK racing via the black market last year”. He warns that “making the UK a harder place to operate simply gives the black market more ammunition to grow”. 

The black market does not contribute to media rights income, the levy, or any of the sport’s funding streams. In effect, higher taxation could accelerate the shift of betting activity to unregulated platforms, undermining the very financial base racing depends on.

Some within the industry have pointed to retail betting as a possible buffer. Mills notes that retail turnover has “held up really well over the last three or four years”, despite shop closures. But he cautions that retail was not fully spared in the budget. “Rate rebates have been reduced or removed, and minimum wage increases add further pressure.” Retail, while resilient, is not a growth engine and it is unlikely to offset the decline in online promotional spending. 

Fractures within the sector 

The budget outcome has also exposed fractures within the sector. One source hints at tension between racing and bookmakers during the lobbying process, saying that “some bookmakers believe parts of racing pushed for higher taxes on other gambling products to protect racing and that caused friction”. 

While racing’s campaign succeeded in sparing the sport from a direct tax rise, it may have done so at the cost of deeper industry unity. Mills suggests that “in hindsight, racing and betting could probably have worked more closely together during the lobbying process”. 

The stark reality seems evident: the sport may have escaped the tax, but not the tension.