Paddy Power and Betfair owner Flutter Entertainment has warned the Government’s Budget move to hike gambling taxes will hit its annual earnings by hundreds of millions of pounds over the next two years.

The Chancellor announced on Wednesday that remote online gaming duty will rise from 21% to 40%, while online sports betting – excluding horse-racing – will increase from 15% to 25%.

Flutter which also owns Betfair, Sky Bet and FanDuel in the US – said the tax raid will impact its underlying earnings by around 320 million US dollars (£241.7 million) in 2025-26 and 540 million US dollars (£407.9 million) in 2026-27.

It hopes to offset the hit by up to 40% by 2027 through efforts to cutting promotion and marketing spend and wider cost reduction efforts.

Kevin Harrington, Flutter’s UK and Ireland chief executive, said the tax increases were “a very disappointing outcome and will have a significant adverse impact on our industry”.

“The Chancellor rightly wants to address harm, but these changes will hand a big win to illegal, unlicensed gambling operators who will become more competitive overnight.

“These black market operators don’t pay tax and don’t invest in safer gambling.

“At 40%, the UK’s remote gaming duty is now above countries such as the Netherlands, where a recent tax increase saw a rise in illegal gambling and a fall in government receipts.”

He added that “through both our scale and leading position in the UK, as well as the proactive cost initiatives that we are taking” the firm is “well placed to navigate” the changes.