From today (1 January 2025), an increased rate of tax relief is now available for visual effects expenditure in the UK.
UK Screen Alliance have long campaigned for a significant improvement in the screen sector incentives to allow the UK’s visual effects (VFX) sector to flourish and achieve its full potential for growth. VFX spending in the UK now attracts a net rebate of 29.25%, and is exempt from the overall 80% cap on spending eligible for the Audio Visual Expenditure Credit (AVEC) – the current tax system for film, high-end TV, children’s TV and animation.
Prior to this change, productions that chose to shoot in the UK would very often cap-out of available rebate, leading to VFX being taken to other territories where there were further incentives available. With the new uplift, productions are now incentivised to both shoot and perform their VFX in the UK. As a result, it is estimated that the UK is set to attract an additional £175 million per year of spending on VFX for film and TV, an increase of over 45%, which will create 2,000 new jobs directly and 800 indirectly. This is effectively free growth for the UK, as the tax receipts from the additional economic activity created will cover the cost of providing the incentive.
Today opens a new chapter in the history of VFX in the UK. We already had a reputation for high quality, innovation and creativity. Now, productions will be incentivised to place many more millions of dollars of inward investment work with our award-winning VFX community, creating jobs and considerable value for the UK economy.
Neil Hatton MBE, CEO of UK Screen Alliance
To be eligible for the VFX uplift and cap exemption, productions must first meet the qualification requirements of the AVEC. There is no specific minimum UK spending requirement for VFX, but productions must exceed the overall minimum UK expenditure requirement of 10% of total budget, and the project must qualify as British, via the Cultural Test or be an official co-production. It is not necessary to perform all production activity in the UK, and tax relief may be claimed for VFX, even if no principal photography occurs in the UK.
The uplift and cap exemption announcement means that productions could receive 25.5% relief on filming and other non-VFX costs in the UK (up to 80% of total budget), and still receive a 29.25% rebate on their VFX spend, regardless of whether that spend takes their total UK spend above the 80% cap on eligibility for relief.
Any VFX activity claimed must occur in the UK. From 1st January 2025, this activity is eligible for the uplift, and the rebate can be claimed for completed projects from 1st April 2025.
Last year, Enhanced AVEC for limited budget films (aka the Independent Film Tax Credit or IFTC) was introduced for films with budgets under £23.5 million, allowing them to claim a rebate of 39.75% net on UK eligible expenditure of up to 80% of the total budget, subject to a maximum net rebate cap of £4.77 million. The VFX uplift cannot be combined with the IFTC, meaning the VFX spend is not exempt from the 80% cap on total eligible expenditure. However, VFX and post production are eligible costs within the IFTC, and could receive a net rebate of up to 39.75%, depending on whether the 80% cap on total eligible UK expenditure or the overall £4.77 million IFTC cap are exceeded. If the budget is between £18 million and £23.5 million, it may be worth transferring to the AVEC if there is significant VFX expenditure, as the uplift can then be claimed on this spend, which will then be exempt from the 80% cap, meaning the overall UK net rebate may be higher.
For details on how to apply the UK tax incentives to VFX and post production, see our page here. For general information on the UK’s film and TV tax incentives, see our page here.
