UK Government Enhances Tax Relief for Video Game Industry

The UK Government has unveiled plans to replace the existing Video Games Tax Relief with a more robust support system, dubbed the Video Games Expenditure Credit. This announcement was made as part of the Spring Budget, which also confirmed a corporation tax increase to 25% for companies with profits exceeding £250,000, effective next month. The new credit offers a 34% relief rate on 80% of 'qualifying expenditure', surpassing the previous 25% rate. However, to qualify, goods and services must be 'used or consumed' within the UK, excluding expenditures made in the European Economic Area. To compensate, the cap on subcontracting has been lifted, previously set at £1 million per game. The Video Games Expenditure Credit requires a minimum of 10% of expenditure to be used or consumed in the UK to be eligible. The new system will come into effect from January next year, with a transition period allowing companies to adjust. Projects currently in development as of April 2025 can continue to claim existing tax reliefs until April 2027. According to Dr. Richard Wilson OBE, CEO of TIGA, the UK's game development sector generates £1.2 billion in annual tax revenues and contributes £2.9 billion to the UK GDP. TIGA welcomes the increased relief rate and the government's recognition of the sector's critical importance. Following an extensive consultation on the UK video games tax relief, the Government's full response is available. The UK tax relief was initially introduced in 2014, with the Treasury providing £197m in tax breaks to game studios last year.