Machine Games Duty (MGD) Explained: Rates, Registration and Filing
If your pub, arcade, or venue has fruit machines, quiz machines, or similar gaming machines with a cash prize, Machine Games Duty applies to you, and getting registration and filing wrong risks real penalties. Here's what you need to know.
What is Machine Games Duty?
Machine Games Duty (MGD) is a UK excise duty charged on the net takings from dutiable gaming machines. It replaced the older Amusement Machine Licence Duty system in February 2013.
MGD is administered entirely by HMRC, separately from the UK Gambling Commission (UKGC). The UKGC handles licensing and regulatory compliance under the Gambling Act 2005, HMRC handles the tax on the income those machines generate. They're separate obligations, and being licensed with the UKGC doesn't mean you're automatically compliant with MGD.
Net takings means what you charge to play, minus the winnings paid out (including the value of non-cash prizes).
You don't pay MGD on: charity events, tournaments, lottery machines, or machines used purely for domestic purposes.
Current MGD rates
MGD uses a three-tier rate structure based on the cost to play and the maximum prize available:
| Machine type | Cost to play | Prize | Rate |
|---|---|---|---|
| Type 1 (lower rate) | 20p or less | £10 or less | 5% |
| Type 2 (standard rate) | 21p to £5 | £11 or more | 20% |
| Type 3 (higher rate) | More than £5 | Any | 25% |
Important: if a single machine offers more than one game at different rate tiers, you pay the highest applicable rate on all takings from that machine, not just the takings from the higher-rate games.
Example: a machine offering five games costing 20p each, plus one game costing £6, is taxed at the 25% higher rate on its entire net takings, because the £6 game pushes the whole machine into Type 3.
Who needs to register
You must register for MGD with HMRC before making gaming machines available to play, not after you've started operating them.
Who's responsible: HMRC looks to the person responsible for the premises, not the machine supplier or owner. In a typical pub, this is the tenant or operator running the premises, even if the pub company, brewery, or a separate route operator owns the machines or shares in the profits. For an arcade, it's the operator. For unlicensed premises like a café with a single dutiable machine, it's usually the owner or manager.
Registration timing: apply at least 14 days before you plan to make machines available, to give HMRC time to process the application. Build this into any opening or refurbishment timeline, registering late (or not at all) before machines go live can result in penalties.
If no one registers: HMRC can hold multiple involved parties liable for the duty, though it will only collect the amount once. This doesn't mean registration is optional if you assume someone else will handle it, confirm who's actually registered before assuming you're covered.
Filing MGD returns
- Accounting periods: three months (quarterly)
- Filing deadline: within 30 days of the accounting period ending
- You must file every period, even with £0 takings, a nil return is still required, it isn't optional just because you had no dutiable income
- Returns can be filed online, or by post using HMRC's official paper form
Common MGD questions
Do I need to register separately for each machine?
No, you register once as the operator responsible for the premises, and the registration covers all dutiable machines on that premises. But you do need to correctly categorise each machine's rate type for your net takings calculations.
What if I stop operating gaming machines?
You need to deregister with HMRC, continuing to hold an active registration when you no longer have dutiable machines can create unnecessary compliance obligations and potential confusion over filing requirements.
Does MGD apply to machines that only pay out non-cash prizes, like tokens or extra plays?
MGD applies where cash, or something that functions like cash (including anything allowing a player to obtain money on demand), can be won. Machines paying out purely in non-cash prizes with no cash-equivalent value may fall outside MGD, but this is a genuinely easy area to get wrong, worth confirming your specific machine types rather than assuming.
Is MGD affected by Making Tax Digital?
No, MGD is a separate excise duty with its own registration and filing system, distinct from VAT or Income Tax MTD requirements.
What penalties apply for late registration or late filing?
Operating dutiable machines before your registration is fully processed can itself trigger a penalty, separate from any penalties for late or missing quarterly returns. Given both registration timing and quarterly filing carry real financial risk, this is an area worth getting properly set up from the start rather than correcting after HMRC flags an issue.
How Books & Returns helps
Machine Games Duty is exactly the kind of compliance obligation that's easy to overlook, quarterly filings, precise rate categorisation per machine, and registration timing rules that don't forgive being a few days late. We handle MGD registration, quarterly returns, and rate categorisation for pubs, arcades, and hospitality clients, so it's one less deadline you need to track yourself.
This guide is for general information only and does not constitute tax advice. Machine Games Duty rules depend on your specific machines and premises, always confirm your position with a qualified accountant or check current HMRC guidance (Excise Notice 452) at gov.uk before making decisions based on this content.