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Online casinos and bookmakers will pay billions of pounds more in tax under a steep rise in duties levied on their takings from British gamblers.

In her second budget as chancellor, Rachel Reeves announced duty changes expected to raise an extra £1.1bn a year by 2029-30, raiding a fast-growing sector that made £12.6bn from punters last year.

Shares in UK gambling firms began tumbling even before Reeves announced the change in her budget, after the Office for Budget Responsibility (OBR) – which assesses the likely impact of tax changes – accidentally published a document confirming that the industry had been singled out for higher taxes.

By the end of the day three major gambling companies, Rank Group, Evoke and Entain, had either revised down profit forecasts or warned of major job losses.

The boss of Entain, which owns Ladbrokes, said the company was “deeply appalled” by changes that it says will shave £150m off underlying profit by 2027. The industry’s lobby group – the Betting & Gaming Council (BGC) – lamented a “devastating hammer blow” for the sector.

The most eye-catching change is a near doubling of remote gaming duty (RGD), levied on online casinos, rising from 21% to 40% next April. The rise is higher than many investors and industry sources had expected.

Meg Hillier, the chair of the Treasury select committee, said Reeves had rightly refused to bow to industry “scaremongering”, something her committee had accused lobbyists of in a report earlier this month.

“Some parts of the gambling industry, such as racecourses and bingo halls, make a cultural contribution to our country,” she said. “This is not the case, though, for online slots and other remote gaming, which can quickly drain the bank balances of vulnerable people after just a few clicks of a button on a phone.

“It’s reassuring to see that the chancellor agrees with us on this and I look forward to discussing it further with her when she appears in front of us in December.”

General betting duty, levied on sports bets, will rise from 15% to 25% for wagers placed online from April 2027, but there will be no change for bets placed in high street bookmakers.

Bets on horse racing – a sport that relies heavily on income from gambling firms – will be exempted from the increase. Bingo duty of 10% will be abolished from April.

Reeves said she was targeting online gambling because it was “associated with the highest levels of harm”. However, she did not increase machine gaming duty, charged on income from high-street slot machines, which are also linked to high rates of addiction.

Leading figures from the gambling industry, including company chief executives and lobbyists, claim that an increase on the scale announced by the chancellor will cost jobs and ultimately damage the economy.

Grainne Hurst, the chief executive of the BGC, said the increases were a “devastating hammer blow to tens of thousands of people working in the industry”.

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She said: “The government’s budget is a massive win for the incredibly harmful, unsafe, unregulated gambling black market, which pays no tax and offers none of the protections that exist in the regulated sector.”

The government said it would allocate an extra £26m over three years to help the Gambling Commission tackle the illicit market.

Shares in the heavily indebted London-listed Evoke, which owns the 888 and William Hill brands, plunged by more than 18% on news of the changes but Rank (up 10%) and Entain (up 3.4%) both enjoyed an increase potentially on the basis that Rank would benefit from the abolition of bingo duty, while both could prosper if smaller rivals, unable to cope with duty rises, are forced out of the UK.

However, all three companies warned of a financial hit in statements to investors after the London Stock Exchange closed. Entain expects underlying profit to fall by £100m next year and £150m the year after, although it expects to gain market share. Evoke, which owns William Hill and 888, predicted extra duty costs of £135m, while Rank forecast a £40m hit to operating profit.

The OBR said it expected the changes to raise an extra £1.1bn a year for the Treasury by 2029-30. The figure would be higher, at £1.8bn, but the government expects some customers to bet less and admits that others are likely to switch to the illicit market, as the extra duty is passed on to consumers in the form of less attractive odds and bonuses.

Reeves explicitly linked the increase to the government’s decision to lift the two-child cap on child benefit, listing the duty rise among the measures that funded the latter decision.

The former prime minister and chancellor Gordon Brown previously called for a larger increase in duties, raising about £3bn, to pay for lifting children out of poverty.