UK government extends TV animation tax relief uplift to include feature films

Wallace & Gromit studio Aardman has welcomed the tax change

The UK government is extending the animation tax relief announced earlier this year to include animated feature films.

In his budget speech in March, Chancellor of the Exchequer Jeremy Hunt announced a 39% audiovisual expenditure credit for the children’s animation TV sector. On Tuesday, the government said the tax relief will be extended to include animated films released in theatres.

The 39% tax relief will represent a net figure of 29.25% and takes effect from January 1, 2024. Currently, animated features are eligible to claim a film tax credit of 25%, meaning the new rate represents a 4.25% net uplift after tax.

The government said the tax changes are expected to be worth £5m (US$6.5m) each year to the business.

Victoria Atkins, financial secretary to the Treasury, said: “We want the UK to be the best place to start and grow a business, and while we have the lowest corporation tax rate in the G7 we are not complacent.

“The changes we are making are about backing business to innovate and grow the UK economy, creating good jobs across the country.”

Kate O’Connor, executive chair of Animation UK, said the organisation is “delighted” with the tax relief extension, calling it “a strategic move that firmly places the UK animation industry on the global stage during this crucial period.”

She added: “The resulting enhancement across the industry is set to supercharge its overall growth. Not only do these animations attract significant budgets (in the ballpark of £15m-100m), but they also herald advanced technological breakthroughs, while offering long-term, sustainable employment opportunities for a workforce of up to 250 people throughout the entirety of a project’s lifespan.

“Overall, our animated content plays an immeasurable role in our nation’s soft power, driving exports and promoting the uniqueness of UK creativity worldwide. Regarded as the zenith of our animated output, this inclusion of animated features is not just beneficial, but fundamentally essential to the vitality of the industry. The animation sector as a whole stands to reap immense benefits from this progressive step.”

Sean Clarke, MD of Wallace & Gromit producer Aardman, said: “The film industry is continuing to go through much change on how films are distributed and consumed, and this is an important step to ensure a level playing field for raising finance for all films, no matter how they are distributed, giving more flexibility in distribution models and of course, attracting investment in the UK animation industry.”