Bookmaker William Hill said it took a £44m hit from changes to the way the Government taxes online betting and gambling machines as it reported a slide in half-year profits.

Results for the six months to the end of June showed pre-tax profits down 35pc to £78.7m, also impacted by one-off charges relating to its Australian operations. Shares fell 5pc.

Meanwhile, Hills announced that it was moving into the online lotteries market with the purchase of a 29pc stake in US-focused business NeoGames.

The group said that its half-year results had been dragged down by the effect of the 'point of consumption tax' on online gambling as well as the hike in duty on fixed odds betting terminals from 20pc to 25pc.

It also said its 'profit progression' had been hit by the Machine Games Duty increase, as well as new controls on the way customers who wish to stake more than £50 on gaming machines may bet.

Meanwhile, the group said the introduction of the National Living Wage for workers over 25 is expected to cost it £1m to £2m in 2016.

Net revenues were marginally ahead from £805.2m to £808.1m compared to a period last year including the start of the World Cup, while UK online revenues grew 16pc.

The group said its US business continued to deliver strong growth.

Chief executive James Henderson said: 'We have delivered a good operational performance in the past six months during a period of significant regulatory and taxation change for the industry.

'Whilst factors such as the Point of Consumption Tax and the increase in the Machine Games Duty rate have impacted our cost base as expected, we continue to progress our strategy and invest in our long-term growth drivers.'

The company said that the UK 'remains an exciting growth market', citing latest data showing National Lottery participation losing ground while betting and online gambling were increasing in popularity.

Hills, which has 2,360 betting shops in the UK, is set to be overtaken as the country's largest bookmakers' network after rivals Ladbrokes and Coral agreed a £2.3bn merger last month.