Increased tax on high stakes gambling machines is likely to cost William Hill £22 million a year, the British bookmaker said today, raising its initial estimate of the impact.

The surprise tax hike on fixed odds betting terminals was announced yesterday.

“The total impact of this increase in MGD (Machine Gaming Duty) would be £22 million as opposed to the previously guided £16 million impact,” William Hill said in a statement.

The duty will rise to 25 per cent from 20 per cent, finance minister George Osborne said in his annual budget statement, responding to the spread of fixed-odds betting terminals that critics say are highly addictive.

The announcement led to a raft of analyst downgrades for the sector today morning.

The increase is expected to cost Ladbrokes around £20 million a year and hit the company harder because it makes more of its profits from its high street betting shops than William Hill which has grown its online business more quickly.

"Ladbrokes is most affected given the dominance of UK retail in its business mix. We see a dividend cut as unavoidable at this point and we reiterate our Sell recommendation," analyst James Ainley of Citi said in a research note.

Gamblers can spend up to £300 a minute on the machines, more than 33,000 of which have been installed in shops around the country over the past decade.

Bookmakers recently introduced warnings to try to prevent players from running up rapid losses but say there is no evidence to support claims that the machines are leading to an increase in problem gambling. (Reuters)