New UK film tax incentives come into effect

New UK Audio-Visual Expenditure Credit and the Video Games Expenditure Credit have come into effect. 

All companies will receive more tax relief than they did under the previous system, greater flexibility over production decisions and greater clarity about the amount of credit companies can expect to receive.

Under the new system, a children’s TV production, animated TV production or film with £1 million of qualifying expenditure will receive an additional £42,500 in relief. A high-end TV production, film production or video game will receive £5,000 in relief. To ensure fairness, the uplift in relief for animation will be extended to include animated films as well as TV programmes.

The credits will be calculated directly from a production or game’s qualifying expenditure, instead of being an adjustment to the company’s taxable profit.

Animation and children’s TV productions will be eligible for a higher credit rate of 39%, a rate increase of 5.5% under the previous reliefs. The 34% credit rate for film, high end TV and video games is roughly equivalent to a rate increase of 0.5% under the previous tax reliefs.

The new system applies to the whole of the UK. The government has listened to feedback from industry that companies will need sufficient time to adapt to the new expenditure credits. Therefore, productions and games in development on April 1, 2025 may continue to use the previous tax reliefs until they end on until April 1, 2027.

Qualifying expenditure will remain broadly unchanged. For the Video Games Expenditure Credit, to align the conditions for video games with film and TV, at least 10% of expenditure has to be ‘used or consumed’ in the UK.

In a statement, Nigel Huddleston, Financial Secretary to the Treasury, said: "We are backing the makers of the next Barbie, Happy Valley and Grand Theft Auto with this new, more generous, tax credit system for British production talent. The UK is a world leader in creativity, and we want to ensure that continues well into the future by making it easier for British film, TV and video games to thrive."