Machine Games Duty is an excise duty on the net takings from machine games that offer a cash prize bigger than the cost of a single play. It is paid by the person who holds the licence or permit for the premises (or, in a pub, the tenant) at 5%, 20% or 25% of net takings depending on the type of machine, with a return and payment due within 30 days of the end of each three month accounting period.

Which gaming machines are liable to Machine Games Duty?

The duty is charged under section 191 and Schedule 24 of the Finance Act 2012, supported by the Machine Games Duty Regulations 2012 and the Machine Games Duty (Exemptions) Order 2012. HMRC’s working guidance is Excise Notice 452. Paragraph 1 of Schedule 24 charges duty on the playing of dutiable machine games in the United Kingdom, and paragraph 2 sets the two tests.

  • It must be a machine game. That means a game of skill, chance or both, played on a machine for a prize. HMRC includes quizzes, skill with prize machines and games on portable devices such as tablets.
  • It must be dutiable. At least one prize must be or include cash, and the maximum cash a player can win must exceed the lowest charge to play the game once.

Cash is read widely. Vouchers, tokens, tickets and points count as cash if they can be exchanged for money, even if they can also be swapped for goods. There is also an appearance test: if an adult would reasonably assume a game offers a cash prize above the stake, it is dutiable whether or not that prize can really be won. A 10p game advertising a £50 prize on a machine set never to pay more than 5p is still dutiable, at the standard rate.

Crediting a machine from a counter does not avoid the charge, and records must link payments to credits. Where one machine offers several games, each game is looked at separately.

What falls outside the duty?

Paragraph 3 of Schedule 24 takes out games covered by other gambling duties: betting on real future events, bingo with two or more players on the same premises, lottery chances charged to Lottery Duty, and real games of chance that are dutiable for Gaming Duty.

Games that only ever offer non cash prizes are outside the charge, as are redemption ticket machines where the tickets cannot be exchanged for cash. A crane grab that costs 50p is dutiable if any of the teddy bears inside has a £5 note pinned to it, because a cash prize above the stake is on offer.

Takings are also exempt in specific circumstances set out in Notice 452:

  • play at charity and similar events where the main reason for attending is something other than playing machine games;
  • tournament play, where two or more real players compete against each other;
  • Category B3A lottery machines operated legally in certain clubs;
  • play on a domestic occasion;
  • premises where Crown exemption applies, such as a mess on a military base;
  • play on ships travelling to the UK from a foreign destination.

If all takings at a site are expected to be exempt, nobody needs to register for it, but records proving the exemption must be kept.

Who has to register and pay?

Liability sits with the holder of the relevant licence or permit for the premises. GOV.UK lists premises licences for gambling, alcohol licences, family entertainment centre gaming machine permits, club premises certificates, club gaming and club machine permits, prize gaming and amusement permits, club registration certificates, and bookmaking office or bingo club licences. The legal list is in paragraph 22 of Schedule 24.

A pub tenant is responsible for the duty, not the pub company that holds the premises licence. A business that only supplies the machines is not liable. Where premises are unlicensed, the manager or owner usually has to register.

You must register at least 14 days before machines are made available to play, and you can apply up to three months ahead. Providing dutiable games before the registration is processed can lead to a penalty; the maximum for failing to register is 100% of the revenue lost, and the machines can be seized. HMRC can also register a person compulsorily, and if nobody is registered it can assess anyone who shares in the profits from the machines for up to four years.

Two or more companies can apply for group treatment, giving one registration and one return. The application must reach HMRC at least 90 days before the group starts, and every member is jointly and severally liable.

What are the Machine Games Duty rates for 2026 to 2027?

The rate depends on the type of machine, which is fixed by the most expensive game to play and the largest cash prize on it.

Machine type Test Rate on net takings
Type 1 (lower rate) Every dutiable game costs no more than 20p to play and offers a maximum cash prize of no more than £10 5%
Type 2 (standard rate) Not Type 1, and every dutiable game costs no more than £5 to play 20%
Type 3 (higher rate) Any other machine, including one where any game can cost more than £5 25%

One game decides the rate for the whole machine. HMRC’s example is a fixed odds betting terminal with a mix of games: if any game costs more than £5 to play, all takings are taxed at 25%, even if nobody ever plays that game. If a machine changes type part way through a period, net takings before and after the change are worked out separately.

How are net takings worked out?

Duty is charged on net takings: the charges to play due in the period, less the value of prizes paid out as winnings. No other deduction is allowed. You cannot deduct the machine supplier’s share, rent for the machine, licence costs or any other overhead.

  • Charges to play include amounts due but not actually paid.
  • Floats placed in a machine are not takings, provided records show they really are floats.
  • Non cash prizes on a dutiable game can be deducted at their cost including VAT, or for prizes bought from a connected person, the lower of the price paid and the open market price. The deduction is only allowed when the prize is handed over, not when it is bought.

HMRC’s own worked example: a business has one Type 1 machine with £200 of charges to play and £100 of prizes, and one Type 2 machine with £500 of charges and £200 of prizes. Net takings are £100 and £300. Duty is £5 (5% of £100) plus £60 (20% of £300), so £65 for the period.

When are returns and payments due?

A standard accounting period is three calendar months. HMRC uses three staggers:

  • Stagger A: periods ending 31 January, 30 April, 31 July and 31 October;
  • Stagger B: periods ending 28 or 29 February, 31 May, 31 August and 30 November;
  • Stagger C: periods ending 31 March, 30 June, 30 September and 31 December.

You can ask for non standard periods ending up to 16 days either side of the normal date, for example to match your year end, by choosing at registration or writing to HMRC at least 28 days before the first period starts.

The return must reach HMRC by the 30th day after the end of the period, and payment is due by the same date. If the 30th is not a business day, both are due on the last business day before it. A return is required even when nothing is owed or the premises were closed; you enter 0 in every box. Direct Debit can be used for payments up to £20 million. Returns, takings records and calculations must be kept for four years.

Errors from earlier periods can be corrected in box 9 of the return if the net value is no more than £10,000, or no more than £50,000 and not more than 1% of the total net takings from dutiable games in the period when the error is found. Larger errors must be reported in writing. Using box 9 is not a disclosure for penalty purposes, so if an error was careless you also need to tell HMRC in writing to get the full penalty reduction. The general rules are covered in our guide to penalties for errors in returns.

How does Machine Games Duty interact with VAT?

Takings from machine games are exempt from VAT if you pay Machine Games Duty, so a pub or arcade does not account for output VAT on them. Winnings paid to players are a separate question, covered in tax on gambling and betting winnings.

What are the common mistakes?

  • Assuming the machine supplier pays. The licence holder or pub tenant is liable, whatever the supply agreement says about splitting takings.
  • Classifying a machine by its most popular game. The highest cost or highest prize game sets the type for the whole machine.
  • Not cancelling registration. When a tenancy ends or the machines go, cancel the registration; otherwise HMRC keeps issuing central assessments based on estimates.
  • Missing nil returns. A closed pub still has to file, and late returns can attract penalties. Failing to register at all is treated as a failure to notify; see HMRC failure to notify penalties.

Other current figures are on our UK tax rates and thresholds for 2026 to 2027 page.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.