Britain’s biggest bookmakers have warned a £1.1 billion online gambling tax raid will hit profits, deter investment, put jobs at risk and drive consumers to the black market.

In her second budget Rachel Reeves announced measures to lift remote gaming duty, which applies to online casino games, to 40 per cent from 21 per cent, next April in an attempt to tackle a segment of the gambling industry she said was “associated with the highest levels of harm”.

A new remote betting rate will also come into effect in April 2027, raising the level at which online sports betting, excluding horse racing, is taxed to 25 per cent, from 15 per cent. The tax increases are expected to raise an extra £1.1 billion annually for the Treasury by 2029-30.

While industry leaders welcomed the chancellor’s decisions to scrap bingo tax, spare high street betting shops from paying higher taxes and additional land-based duties, they warned that “excessive” online tax increases would be highly damaging for the economy and drive players to “illegal, unregulated operators with no player protections”.

The Betting and Gaming Council said: “Massive tax increases for online betting and gaming make them among the highest in the world, and are a devastating hammer blow to tens of thousands of people working in the industry across the UK, and millions of customers who enjoy a bet.”

Flutter, the owner of Paddy Power and Betfair, warned that the budget tax increases will result in a $320 million (£242 million) hit on adjusted profits next year rising to $540 million (£408 million) by 2027.

Evoke, the gambling group behind William Hill, warned that lifting remote gaming duty to 40 per cent would ultimately reduce the amount of tax generated by the UK gambling industry and “reduce the commercial rationale for licensed operators such as Evoke to invest in the UK market”. Evoke will incur between £125 million and £135 million in annual costs from 2027 because of the tax rises, it warned, as it withdrew its medium-term financial targets.

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Most gambling stocks, which have been battered in recent months by speculation around potential tax increases, fell sharply before the chancellor’s speech after the accidental early release of the Office of Budget Responsibility’s forecasts confirmed that the sector would face higher taxes.

However, some stocks such as Rank, the Mecca Bingo owner, jumped 10 per cent after Reeves announced the scrapping of bingo duty. Shares in Entain, the FTSE 100-listed group behind Coral and Ladbrokes, improved 3.4 per cent and Playtech, the gambling technology firm, rose 5.7 per cent. Shares in Evoke, which analysts at Investec believe will be the hardest hit by the tax rises, ended the day 18.3 per cent lower.

Entain said the move to disproportionately increase gambling taxes “will not only have a detrimental impact on our industry but also heightens the risk for customers”.

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Entain estimates the planned tax rises will add about £200 million in costs to its UK operations, before any mitigation measures. It anticipates that its adjusted profit for 2026 will suffer an approximate £100 million hit, rising to £150 million in 2027. Playtech expects the tax rises will result in an “up to high-teens millions of euros” impact on 2026’s adjusted profits.

Rank told shareholders that while the move to abolish bingo duty was welcomed, the impact of the proposed increase in remote gaming duty on the group’s digital business would increase the company’s costs by about £46 million, offsetting a £6 million benefit from scrapping bingo duty. The company said that the tax increases would “inevitably” have an impact on profitability.