If you’re considering moving or expanding your business to the UK, Corporation Tax is going to be a crucial consideration.
However, the UK offers several tax incentives designed to support business investment, innovation, and growth which mitigate your Corporation Tax to a greater or lesser degree.
In 2025, these reliefs are going to remain an important part of the tax landscape, helping you reduce your tax liabilities and (hopefully) improve your cash flow.
Below are key Corporation Tax reliefs and exemptions that international businesses should be aware of when entering the UK market.
Research and Development (R&D) tax relief: The merged scheme
From 1 April 2024, the UK introduced a merged R&D tax relief scheme, combining the previous Research and Development Expenditure Credit (RDEC) and Small and Medium-Sized Enterprise (SME) R&D schemes.
The new system provides tax relief for businesses engaging in qualifying research and development activities, regardless of size.
Under the merged scheme:
- The R&D expenditure credit rate is 20 per cent, and the credit is taxable as trading income.
- The Enhanced R&D Intensive Support (ERIS) remains available for loss-making SMEs whose R&D spending accounts for at least 30 per cent of their total expenditure.
- ERIS allows loss-making SMEs to deduct 186 per cent of qualifying R&D costs and claim a payable tax credit worth up to 14.5 per cent of the surrenderable loss.
Companies engaged in scientific or technological innovation will need to explore whether their projects qualify, as even routine process improvements may be eligible for relief.
Capital allowances
Capital allowances provide tax relief on the cost of qualifying plant and machinery used in a business.
In 2025, the following remain key:
- Full expensing – Businesses can deduct 100 per cent of the cost of qualifying new plant and machinery from taxable profits in the year of purchase. This applies to items such as equipment, vehicles (excluding cars), and IT infrastructure.
- Annual Investment Allowance (AIA) – For businesses purchasing plant and machinery that do not qualify for full expensing, the AIA allows up to £1 million of qualifying expenditure to be deducted from taxable profits each year.
- Writing Down Allowance (WDA) – Used for assets not eligible for full expensing or AIA, allowing businesses to claim a percentage of the asset’s value over time.
If you are thinking about setting up in the UK, strategically timing capital investments can lead to significant tax savings.
Patent Box regime
The UK’s Patent Box allows companies to apply a reduced Corporation Tax rate of 10 per cent on profits derived from patented inventions.
This relief remains highly valuable for businesses that commercialise intellectual property, particularly those in technology, pharmaceuticals, and manufacturing.
To qualify, you must actively develop the patented invention and own or exclusively license the patents.
Creative industry tax reliefs
For businesses operating in the creative sector – such as film, TV, video games, and animation – the UK continues to offer generous tax reliefs in 2025.
These include:
- Film Tax Relief (FTR) – A production company can claim an additional deduction of up to 80 per cent of qualifying production expenditure.
- Video Games Tax Relief (VGTR) – Eligible video game developers can claim a payable tax credit worth up to 25 per cent of qualifying costs.
- High-End TV and Animation Tax Reliefs – Similar to FTR, these apply to certain television and animation productions that meet specific UK cultural criteria.
If you operate in these industries, you could explore how structuring your operations in the UK could maximise these reliefs.
Freeports and Investment Zones
The UK’s Freeports and Investment Zones provide additional Corporation Tax reliefs for businesses establishing themselves in designated areas.
These zones offer:
- A zero rate of Corporation Tax for qualifying profits in specific sectors.
- Enhanced capital allowances for investments in plant and machinery.
- Additional reliefs on employer National Insurance contributions for new hires.
It’s worth remembering that a couple of these exist in Scotland, which has some minor differences in rules when it comes to Income Tax.
If you’re planning on expanding to the UK, assess whether your sector aligns with the focus areas of these zones, which are designed to boost investment in key regions across the UK.
If you think you’d suit a freeport or investment zone, speak to a tax adviser.
How to take advantage of these reliefs
The UK’s tax reliefs can be complex, particularly for businesses new to the country.
To ensure you maximise the available incentives, it’s therefore essential to seek professional advice from an international tax adviser.
Our advisers can:
- Assess your business’s eligibility for reliefs based on your activities and structure.
- Help you structure investments and R&D activities to qualify for maximum benefits.
- Ensure compliance with UK tax legislation and reporting requirements.
- Identify additional opportunities for tax efficiency tailored to your business model.
