Government updates VGEC rules as part of UK Budget

• Transitional rules are fixed to ensure European spend is counted correctly.
• VFX credit calculation updated to support cinematic and effects-heavy projects.
• Tiga says enhanced VGEC could unlock growth and thousands of new industry jobs.

The UK Government has revealed a series of technical updates to its Audio-Visual and Video Games Expenditure Credit regimes as part of the 2025 Autumn Budget. 

The changes include clarifying how group companies should treat payments made when one entity surrenders its AVEC or VGEC to another. 

It also aligns the rules with the Research and Development Expenditure Credit system to reduce uncertainty for larger studio groups.

A correction has also been made to the transitional rules for games moving from the former Video Games Tax Relief to VGEC. 

Moreover, European expenditure will now be accounted for at step two of the calculation, ensuring projects in the middle of shifting regimes are not penalised by a technical oversight.

The Budget also updated how the special credit for visual effects is calculated, a move expected to benefit studios producing high-end cinematics and VFX-heavy titles.

Elsewhere, the Chancellor has announced full-time workers on the national living Wage will see a rise of £900 a year, while full-time workers on the 18 to 20 national minimum wage rate will see an £1,500 increase.

Industry potential 

Tiga's Richard Wilson welcomed the Budget’s fiscal focus but urged the government to boost economic growth by strengthening the Video Games Expenditure Credit. 

“Today’s Budget saw the Chancellor focus on rebuilding her fiscal headroom to meet her key fiscal rules," said Tiga CEO Richard Wilson in a post. “The Government needs to drive economic growth across the UK. The video games industry can support this objective. 

“Our industry generates £12 billion in Gross Value Added (GVA) annually, supports more than 73,000 jobs (including approximately 28,000 developers), and contributes £2.2 billion in tax revenues.

“The best way to accelerate growth in the UK video games industry is to enhance our Video Games Expenditure Credit (VGEC)," Wilson continued. VGEC reduces the cost of games development, which in turn encourages investment and the creation of high-skilled jobs in the sector. 

“TIGA research with the University of Portsmouth shows that a VGEC with a rate of 53% on qualifying costs for games with budgets of up to £15 million could create over 6,000 jobs, including over 800 development roles, whilst generating tax revenues for HM Treasury."

UKIE CEO Nick Poole commented: “Today’s Budget proposed measures to address immediate fiscal pressures as the government looks to secure long-term economic growth. Going forward, we remain confident that targeted measures for the UK’s games and interactive entertainment industry can drive significant economic and cultural value for the UK.

"Introducing significant improvements to the UK’s system of tax reliefs, in particular the Video Games Expenditure Credit (VGEC) would give studios the support they need to scale, create high-quality jobs and compete globally.

"We will continue to work constructively with Ministers and officials to make the case for this relief, alongside other policy measures in support of the UK’s pioneering video games and interactive entertainment industry. We have the talent, ideas and potential to drive economic growth and, with the right policy environment, can help deliver the investment and innovation the country needs.”