Video Games Expenditure Credit: Comes into Play January 2024

November 27, 2023

The UK video game market is growing. In fact, last year the UK had the second largest video game market in Europe, after Germany, and it is currently the sixth largest globally. The UK video game market is worth £7billion.

New developments are continuing to shape the industry and the UK is a leader in gaming innovation, from cutting edge technology, immersive experience creation to the use of AI. One of the most notable advancements is virtual reality (VR) and the UK has become a hub for VR development. Earlier this year Fallen Planet, a Liverpool based VR gaming developer secured £500,000 of investment to accelerate their development of new games using AI.

In the March Budget, the Chancellor announced that Video Games Tax Relief will be replaced with a Video Games Expenditure Credit. This comes into effect from 1st January 2024.

Our tax experts give a reminder of the ‘game changers’.


Changes to Video Games Tax Relief

The current Video Games Tax Relief (VGTR) allows British game developers to claim a 20% rebate on costs incurred for design and production of new video games.

Under the new regime, Video Games Expenditure Credit (VGEC) the new rate will be 34%, however this is received net tax deductions at the main rate of corporation tax, so the actual value of the relief is 25.5%. A modest increase on the current rate.

Some other points to be aware of are:

  • This will only apply to expenditure on goods used and consumed in the UK. It will not include the European Economic Area, unlike the current scheme
  • The 80% cap on qualifying expenditure currently in place will remain
  • The £1m subcontracting cap will be removed
  • From 1 April 2025 all claims must use VGEX rather than VGTR
  • Any games already in development prior to 1 April 2025 can continue to claim VGTR until 1 April 2027
  • Companies can start claiming VGEC from 1 January 2024
  • If a business has multiple projects, they can claim both VGEC and VGTR for different, specific projects


What will the impact be?

The changes will primarily affect businesses within the video game industry. This will include video game developers, publishers, game researchers and testers and third parties involved in the video games market.

Financial Advantage: Although the percentage rate increase is slight, video game companies with large qualifying expenditures could see a substantial tax saving.

Improved Investment: The higher rate of tax relief could make the UK gaming industry more appealing to investors from both within the UK and globally.

Improved Cashflow: The additional tax reliefs can improve cash flow, particularly for companies who are operating with large costs.

Stimulated Industry: With the removal of the subcontracting cap and the requirement for the expenditure to be used or consumed within the UK, we could see a positive impact on the UK economy in the video games space, which in turn impacts software, digital technology, and art & design more generally.

Competitive Edge: Tax savings allow more budget to be pumped into innovations and getting further ahead of the competition in other countries.


Powering Up Innovation

If your company is pioneering tech advancements, investing in research and development or finding clever ways to gain a competitive edge, then you may be entitled to various grants and tax relief schemes to further help you innovate.

For a conversation about your business and to see if you are making the most of the help available, please get in touch.

Call Bonham & Brook on 020 3523 9125 or email

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