Animation UK welcomes announcement of increased Expenditure Credit to support independent UK film, including animation

Industry News  |  06 March 2024

We welcome the announcements made in the 2024 Spring Budget to support VFX and the increased Expenditure Credit to support independent UK film, including animation.

Animation UK strongly welcomed the introduction of a 53% expenditure credit – equating to a tax relief of approximately 40% – for UK film productions with a budget up to £15 million, as announced today (6 March) in the Spring Budget by the Chancellor of the Exchequer, Jeremy Hunt.

Responsible for building the case for the original animation tax credit, Animation UK has campaigned tirelessly for tax incentives to increase, in the light of competitive international offers. It argued the case, supported by compelling evidence from its members, for the animation uplift to include animated theatrical release films, alongside TV. The wider campaign led by the BFI to support independent film, including animation, is hugely welcomed and the 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.

This is a dramatic moment for UK film, and the most significant policy intervention since the 1990s. The positive impact will be felt across our industry, and through all the new films that audiences will get to enjoy. The films we make are vital to our culture expression and creativity – they reflect a diverse and global Britain, and build careers – and we’re grateful to Government, the DCMS, and the industry.

Ben Roberts, Chief Executive of the BFI

This uplift in the expenditure credit is for UK films with a budget up to £15 million range (with either a UK writer, or UK director, or certified as an official UK co-production) and it marks a transformative moment for the sector, as producers and filmmakers have increasingly struggled to finance films at this level and get them into production in the UK. Films that meet the criteria will be able to claim an increased Audio-Visual Expenditure Credit (AVEC) at 53% (up from 34%) from 1 April 2024. This recognises the crucial role that making these films play in the whole ecosystem of film – from creative risk-taking and telling stories that reflect the diversity of the UK, to developing talent working both in front of and behind the camera. The AVEC replaces the Film Tax Relief rate, which has provided 25% of qualifying UK expenditure on up to 80% of a film’s total production budget. The AVEC at 53% equates to a relief rate of approximately 40% under the Film Tax Relief.

In addition, the Government has proposed that it will lift the 80% cap on total eligible expenditure for the VFX spend only, and that the rate of Audio Visual Expenditure Credit for the VFX spend will be lifted to 39%.

Animation UK enthusiastically embraces today’s Budget announcements, particularly the introduction of VFX tax relief and the substantial increase in the tax rate for indie films. With the new rate set at 54%, our sector anticipates a significant impact, propelling animation production in the UK even further. Additionally, the VFX proposals will directly benefit our animation studios, enhancing their ability to provide top-tier VFX services. This momentous occasion marks a significant milestone in the evolution of our digital production sector, paving the way for unprecedented growth and innovation.

Kate O’Connor, Executive Chair of Animation UK

This is a welcome announcement, at a time when it is really challenging to raise finance for independent film production in the UK. This will be significant in helping Aardman to continue to do what it does best in producing British animated films for a global audience.

Sean Clarke, Managing Director of Aardman

As UK producers of independent animated films which are often based on well-loved British literature, this is very welcome news indeed for Lupus Films. It will mean we can keep more IP in Britain, stimulate growth in the sector and create more jobs.

Ruth Fielding, Joint Managing Director of Lupus Films

Increasing the UK incentive to approximately 40% net of spend is a vital step in creating a level playing field with Europe and Canada. This is a game changer for our sector. For independent high quality animated films, this will be a great support and should encourage more animated films to be made in the UK.

Sean Feeney, Head of Production at GFM Animation

Read the full HMT-HMRC policy note on the UK Independent Film Tax Credit here.