UK offers 40% tax break for films with budgets up to £15m in bid to revive independent sector

Eligible UK films with a budget of up to £15 million will now receive a 40% tax break following the introduction of the long-awaited “Independent Tax Credit” aimed at revitalizing the local production sector.

Chancellor Jeremy Hunt revealed the changes to the Spring Budget today (6 March).

Hunt also said: “I have committed to providing more tax credits for visual effects in high-end film and television. Today I can confirm that we will increase the tax credit rate by 5% and remove the 80% cap on visual effects costs.” “In the appropriations for audio-visual expenses.”

The enhanced visual effects mitigation rate will begin in April 2025. The overall UK visual effects mitigation rate has now been boosted to 39%.

A 40% exemption on business rates has also been introduced for studio facilities in England.

High End Movies & Television (HETV) currently has a prime credit rate of 34%. This equates to 25.5% of actual relief, up to a maximum of 80% of core expenditures, but with no budget limits. The Audio Visual Expenditure Credit (AVEC), a reform of the film and television tax credit system, went into effect at the beginning of this year and amounts to a slight increase from the 25% previously available.

a screen Understand that the revised incentive will see 53.33% AVEC for films falling within the £15m budget band, which equates to 40% relief. Full details are yet to be confirmed.

“We have become the largest center for film and TV production in Europe, with Idris Elba, Keira Knightley and Orlando Bloom all filming their latest productions here,” Hunt said. “Studio space in the UK has doubled in the last three years, and at the current rate of expansion, next year, we will be second only to Hollywood globally.”

He continued: “After working closely with the Culture Secretary and listening carefully to representatives of companies such as Pinewood, Warner Bros. and Sky Studios, we will offer eligible film studios in England a 40% exemption on their gross business rates until 2034.”

“After listening to the views of the British Film Institute, BAKT and the Prime Minister, we will introduce a new tax break for independent films in the UK with a budget of less than £15 million,” he added.

Billions of pounds

First introduced in 2007, the tax incentive was praised for helping attract billions of pounds of inward investment money from US broadcasters and studios, reaching record levels in 2022, when inward investment films and HETV generated £5.4bn. Last year, inward investment and co-production spending on high-end film and TV in the UK was £3.31 billion.

To qualify for the UK Creative Sector Tax Incentive, all films, animation, TV shows or video games must be certified as British through cultural testing or qualify as official co-productions.

new beginning

Calls for enhanced support for the UK's independent production sector have been ongoing for several years, with producer organization Pact being a key driver in lobbying efforts, first proposing the 40% figure in 2017.

The enhanced tax credit has been a key focus in written submissions and ongoing oral evidence given to the UK Parliament's cross-party Culture, Media and Sport Committee, with Pact, BFI, Film4, BBC Film, Creative UK and Screen. Scotland, Producers' Collective UK, Paramount and Screen Alliance North are among those calling for it.

For some, the changes unveiled today may not be enough. The 40% tax credit is not only available to independent producers, but can also be accessed by studios and streamers if they shift towards more modestly budgeted features worth under £15m.

In its written report to the CMS committee, Packet said that focusing on the budget level rather than defining independence “may have unintended consequences and lead to potential gaming of the system.”

Rebecca O'Brien, producer of Sixteen Films, testified before the committee: “Some additional financial support for this particular sector is essential. We could really die without it.”

UK independent producers were in dire straits, struggling to compete with the power of inward investment from US studios and broadcasting companies, which sucked up talent, intellectual property rights, crew and studio space for large sums with which the indies could not compete. Meanwhile, the BFI, BBC Film and Film4 as financiers face limited financial resources, while production costs continue to rise.