Affordability checks, the levy and tax - how government policy and gambling regulation have hit racing's finances

The financial blows British racing has been subjected to from government policies and gambling regulation have pummelled the sport's already fragile economy in recent years.

The huge concern is that what chancellor of the exchequer Rachel Reeves announces in the budget on November 26 could deliver the coup de grace. 

Affordability checks have contributed to tens of millions of pounds being lost from betting turnover on horseracing and forecasts of £250 million being wiped from the sport's finances over five years. Meanwhile, ministers have failed to deliver reform of the levy system which was supposed to help fill that hole, at least in part.

That was before the Treasury announced proposals to harmonise online gambling taxes, which has brought fears that general betting duty, which covers horseracing bets, will rise. An increase to parity with remote gaming duty on games of chance to 21 per cent would result in a £66m blow for racing in year one according to BHA estimates.

The regulation of gambling has seldom been out of the headlines in recent years, and the actions of both the Gambling Commission and ministers have not spared British racing. Affordability checks were the first blow, with the industry regulator proposing that gambling operators should set limits on consumers’ spending until affordability checks had been conducted as long ago as March 2018.

Following the Gambling Commission's proposals in 2018, the clamour in some circles for the introduction of affordability checks continued to grow. Among those calling for them was Labour deputy leader Tom Watson, who did so in a wider gambling policy announcement in 2019.

The following year Watson's former adviser Dr James Noyes was lead author of a report by the Social Market Foundation cross-party think tank, which called for the introduction of a £100 monthly 'soft cap' for net spending by online gamblers.

In November that year the Gambling Commission launched a consultation which included a call for evidence on what the thresholds for affordability checks should be. The regulator's compliance and enforcement report published that month also told operators that customers wanting to spend more than the national average "should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements".

Special report part two:

• 'Why are you risking all of this?' - racing's enormous economic and social contribution to the UK 

A month later the Conservative Party launched its own gambling review, which asked for evidence on whether controls on gambling accounts should include deposit, loss, and spend limits and whether such limits should be "targeted at individuals based on affordability or other considerations".

Letters sent to MPs by the racing industry in the new year of 2021 spoke of a £60m impact per annum on the sport's revenues from lost levy and media rights payments if blanket affordability checks as low as £100 were introduced. Other estimates put the potential damage as high as £100m a year.

As a result of the pressure from the regulator, while affordability checks had not been officially mandated, gambling operators began to implement their own measures.

In November 2022 Gambling Commission chief executive Andrew Rhodes told industry chief executives in a speech: "A number of the largest operator groups – some sat in this room – are stating revenues are down due to safer gambling measures they are introducing in terms of stake limits and affordability measures they have taken."

The impact of those measures could be seen in the Gambling Commission's official statistics.

This chart shows the gulf between actual and expected online turnover on racing - the situation has since worsened

The commission's annual industry statistics run to the end of March each year and in 2018 they revealed betting turnover on horseracing in Britain was around £9 billion. The impact of the Covid-19 pandemic in 2020 muddied the waters as far racing's performance was concerned but by 2022 the figure had broken the £10bn mark.

However, over the next two years betting turnover on racing fell sharply, to £9.1bn in 2023 and then again to £8.4bn last year. Taking inflation into account, that £1.6bn drop represented a £3bn reduction in real terms.

In a letter sent to the then culture secretary Lucy Frazer in October 2023, Arena Racing Company chief executive Martin Cruddace claimed that more than £1bn of online betting turnover on British racing had been lost since 2021 when he argued the Gambling Commission had begun insisting that bookmakers ask customers for personal financial information "to support even fairly moderate losses".

Cruddace added: "Over the next five years affordability checks will directly cost the racing industry £250m.The resulting damage to the industry, which currently employs some 80,000 people, is extremely alarming."

The Gambling Commission's next set of industry statistics are due to be published in November, but information released by the BHA in the interim would suggest the decline has continued.

In February, BHA director of racing Richard Wayman, in a blog looking back at 2024, said that total betting turnover on British racing has fallen by 6.8 per cent compared with the previous year and by 16.5 per cent compared with two years before.

• The £3 billion black hole: calls for urgent action on affordability checks as online betting turnover on racing crashes 

In a subsequent blog published in May, Wayman added that total betting turnover has fallen by nine per cent in the first quarter of 2025 compared with the same period in 2024.

In February Wayman said there were "several factors impacting that decline". He added: "I’ve no doubt that these are headed by the impact of affordability checks and the extent to which they have resulted in people either stopping betting or placing their bets with unlicensed operators where such checks don’t take place."

While the actions of the government and the Gambling Commission have already cost British racing financially, so has the inaction of politicians when it comes to levy reform.

When the last government published its gambling white paper in 2023 it acknowledged that the plans for affordability checks – or financial risk checks as they were termed – would have an impact on the economics of the sport.

The white paper said the government recognised the "significant contribution" British racing makes "and is keen to ensure that measures such as financial risk checks do not adversely affect the sector".

It added: "We have therefore commenced the review of the horserace betting levy which we are required to undertake by 2024 and will take account of the changes set out in this document to ensure the levy delivers an appropriate level of funding for the sector."

However, the Conservative government did not intervene directly to ensure that the levy was reformed. Instead it left British racing's leaders and bookmakers, represented by the Betting and Gaming Council, to thrash out a deal between themselves.

Twelve months later there was still no agreement, with bookmakers having made two offers which had both been rejected by racing.

Racing's best case scenario was a deal which would have produced a levy yield increase of around £30m. That would have involved the levy system being extended to bets placed on foreign racing, a clear red line for bookmakers, but by May last year it appeared that a deal which would have produced an extra £25m in its first year and the creation of a growth fund was on the verge of being announced in parliament, certainly from the perspective of racing's leadership.

However, the prime minister Rishi Sunak chose that point to announce a general election and the agreement collapsed.

Since then there has been no resurrection of talks and little sign the new Labour government has any inclination to intervene.

Hopes that the new administration might implement a change of course were dashed in January when gambling minister Baroness Twycross told a parliamentary reception it was "really important" the betting and racing industries continued joint work on a growth fund. "This is quite simply the quickest way to get increased funding flowing back into racing," she added.

All of which means racing has been left without the millions of pounds of extra funding that levy reform might have provided.

Now the government is proposing changes to the taxation of gambling operators which British racing's leadership believes is a threat to very existence of the sport.

The Treasury has consulted on plans to harmonise online gambling taxes which it is assumed will mean a rise in the rate of general betting duty, which covers horseracing, to match remote gaming duty paid on games of chance such as online casino and slots, currently levied at 21 per cent.

The BHA commissioned economic analysis which claimed that such a move could hit racing’s finances to the tune of £66m in lost income through the levy, media rights and sponsorship as bookmakers seek to mitigate the rise through cutting bonuses, reducing advertising and marketing budgets and offering worse value prices.

Over five years such a tax rise would produce a "catastrophic" £330m revenue hit to the industry.

The analysis went on to find that a 21 per cent tax rate would put 2,752 jobs at risk in the initial year. In Yorkshire's racing economy alone, which is home to nine racecourses including Doncaster and York and major training centres in Malton and Middleham, such an increase is predicted to produce a £37m economic hit in the first five years, with 342 jobs immediately at risk in the first year.

There is of course the danger that the government could decide the rate of the proposed remote betting and gaming duty even higher.

The BHA said such a move would be "devastating", with a projected £97m loss at a tax rate of 25 per cent, a £126m loss at 30 per cent and a £160m loss at 40 per cent.

Even before any official announcements have been made, Flutter Entertainment – parent company of Paddy Power and Sky Bet – has announced it is ending its £1m funding for the ITV docuseries Champions: Full Gallop due to the "uncertainty" over the tax situation. The company's £1.5m contribution to the David Power Jockeys' Cup also looks in jeopardy.

That could be a drop in the ocean compared to what comes next if the government fails to heed British racing's warning.

Read these next:

'Racing will not sit quietly by while our future is placed in jeopardy' - BHA chair and leading trainers issue rallying cries on crucial day 

'I've lobbied Rishi Sunak and when the chips are down, the sport pulls together' - racing's boots on the ground anticipate pivotal day 

'This would be the third part of a triple whammy' - BHA chief Brant Dunshea on why racing must be treated differently in tax fight 

Write to your MP about the Racing Tax

Racing TV has created a template letter than can be used to email local MPs about your concerns over the 'racing tax'. Follow this link to access the template – it should not take more than a couple of minutes to complete.