As the new tax year advances, Isobel Sims and Alex Tutty of Sheridans outlines the funding available to UK studios – and why there's no such thing as a free lunch. Happy new-ish tax year! As we proceed into 2026/27, many UK businesses are preparing for what their new financial year brings.
Happy new-ish tax year! As we proceed into 2026/27, many UK businesses are preparing for what their new financial year brings. Given the recent trends in the industry, it is understandable that some games studios aren’t feeling optimistic about the future. With publishers seemingly increasingly reluctant to take risks on early-stage projects and a general player preference for established franchises, many games are being held in development purgatory while developers look for the funds to bring their concepts to life.
However, there are methods to obtain at least some of the funding developers may need to get projects off the ground, or at least to put them in a better position to secure a more lucrative partnership.
Video Games Expenditure Credit (VGEC) is a valuable benefit to UK games development and can help with cashflow if money is being spent. Through VGEC, development studios can receive a tax credit constituting 34% of qualifying expenditure spent on the VGEC-qualifying game – the ‘qualifying’ expenditure being the lower of either 80% of the game’s core expenditure, or the total UK core costs spent on the game. This means that eligible development studios can receive a resulting Expenditure Credit of around 25.5% of eligible costs each financial year. To be eligible for VGEC, you need to have a UK-registered company leading the development of the game, and your game needs: - At least 10% of core expenditure to be ‘used and consumed’ in the UK - To be accessible to the general public - To pass the cultural test to be considered a ‘British’ game. The cultural test doesn’t mean that your game needs to have Union Jacks in every corner, either. To obtain the 16 points required, points can be gained through areas like categories of UK expenditure, UK or EU personnel in key roles, and underlying material created by a British or EU national or ordinary resident. While you need to spend money to receive money, a benefit of VGEC is the limited strings attached: the amount is credited or paid directly to your company through HMRC and can be spent however you wish, and any funds or credit received under the scheme are not repayable if your eligible game is cancelled. In certain cases, the credit could be converted into a cash payment or used as the basis for a loan with the Expenditure Credit being used for repayment. If your game started development before 1 April 2025, then you could consider the Video Games Tax Relief route, which allows you to claim tax relief on qualifying EU expenditure. However, bear in mind that this route is being discontinued and all projects moved to VGEC from 1 April 2027.
Development grants For larger chunks of funding, there are various private and government-backed grants available for games studios. Applying for platform-specific grants – such as the $5,000 to $150,000 Epic MegaGrant – are a consideration for when you have specific platforms in mind for your game. For those based outside the UK, Sony’s Hero Project supports independent developers in emerging markets, providing support and recoupable funding for developers based in India and the Middle East and North Africa (MENA) region. However, as with any grant, these schemes are hugely competitive, and there is no certainty that you will succeed in receiving any money towards your game. For the Epic MegaGrant in particular, your application would be against not just gaming projects but a variety of other creative project prototypes from around the world using Unreal Engine, or projects where development will move to Unreal Engine. There are also government-supported grants available for UK games companies. As of 13 April 2026, the UK Games Fund funding budget has been increased to £28.5 million, and you can apply to receive a grant from this pot of funding for up to 50% of your game’s total budget, for a total of between £20,000 and £250,000 (depending on whether you are applying for Entry Track, Emergent Track or Expansion Track). For narrative-focused video games, the UK Global Screen Fund can provide a grant between £50,000 and £200,000 over a three-year funding period. If you are spending time on R&D activity to develop your game, you should keep an eye on the UK Research and Innovation (UKRI) website, where a specialist grant could be available to support your contribution to the wider industry. UKRI funding for game developers is mainly accessed through innovation and R&D programmes, particularly via Innovate UK and Arts and Humanities Research Council. Opportunities typically focus on new technologies, tools or collaborative projects (often with universities), delivered through schemes like Creative Catalyst and Creative Industries Clusters. As part of the UKRI’s offering, Scotland-based developers in the Tay Cities Region could also apply for a slice of funding from the government’s investment in creative industries in the area, which is up to £20 million in total.
We commonly see grants issued with restrictions on how developers can use the funds When looking for a grant to fund your game, it’s important to check the terms of the grant ahead of signing any agreements. The best grant would be non-recoupable and non-exclusive (such as for a platform-specific grant) and with no restriction on how the grant can be used, while you retain full ownership of the IP in your game. However, the reality is that grants will have terms that need to be met and these should be considered alongside any grant application. In particular, we commonly see grants issued with restrictions on how developers can use the funds, alongside regular reporting obligations to demonstrate that any expenditure has been limited to t
