Improved tax credits came into play yesterday (1 January) for UK film, TV and video-game producers.

The new breaks include an extra £42,500 in relief for children’s TV, animated TV and animated film production and £5,000 in relief for high-end TV (HETV), film or video game production.

The Audio-Visual Expenditure Credit and the Video Games Expenditure Credit replace the previous tax reliefs for film, TV and video games.

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.”

All companies will receive more tax relief than they did previously. Under the new scheme, 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 feature film, HETV production or video game will receive £5,000 in relief. The rise in tax 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.

Children’s TV productions and animation will be eligible for a higher credit rate of 39%, a rate increase of 5.5% from the previous system. The 34% credit rate for film, HETV and video games is roughly equivalent to a rate increase of 0.5% under the previous tax reliefs.

Because companies will need time to adapt to the new method, productions and games in development on 1 April 2025 may continue to use the previous tax reliefs until they end on until 1 April 2027. The UK has the largest video game employee base in Europe, at nearly 21,000 by the last estimate.

The new system has been developed in consultation with the UK entertainment industry, with consultations on both the policy itself and the draft legislation. It is being legislated as part of the Finance Bill 2023-24.

Happy Valley image via BBC.