Games studio funding: tax credits, investment and loans

Every funder asks the same first question: how much, and for what. Build the budget against milestones (prototype, vertical slice, alpha, beta, early access, launch) and cover salaries or contractor fees, engine and tool licences, hardware and dev kits, art, audio, localisation, QA, platform certification, marketing and community management, plus running costs and a contingency, since schedules slip. A milestone budget lets you raise only what each stage needs and is also the basis for any tax credit claim.

Video Games Expenditure Credit (VGEC) replaced Video Games Tax Relief for new games from 2024. A qualifying company can claim a credit on core expenditure on designing, producing and testing a game, provided the game passes the BFI cultural test for video games and the spending meets the UK expenditure rules. Claims are made through the company tax return, and HMRC's guidance on claiming Video Games Expenditure Credits sets out what qualifies and what to submit.

The credit is valuable but slow: it arrives after the accounting period ends, the return is filed and HMRC processes the claim. That delay is what tax credit lenders fill. A specialist lender advances a proportion of the expected credit, then is repaid directly from HMRC's payment. They typically want:

• An interim BFI certificate, or clear progress towards one
• A claim calculation prepared by an adviser with a games track record
• Management accounts that tie the qualifying spend to the budget
• Evidence that previous claims, if any, were paid without significant adjustment

R&D tax relief is separate and narrower. It covers genuine technological advances, such as new engine, networking or tooling technology, not creative content, and the same costs cannot be claimed under both regimes. Lenders that advance against R&D claims apply a similar test; for the wider picture of HMRC-related borrowing see our tax and HMRC loans page.

Lenders rarely fund pre-revenue development from ordinary loans, because there is nothing yet to repay from. Debt becomes realistic in these situations:

• Released titles earning: platform payouts arrive in arrears on each store's schedule, and revenue-based finance can advance against that income stream, repaid as a share of future receipts.
• Work-for-hire and co-development: invoices to other studios or publishers can support invoice finance if milestones are signed off before invoicing.
• Trading history and profit: an unsecured business loan for hiring, a move or new hardware, usually with a director's guarantee.
• New studios: founders may qualify for start-up business loans, assessed largely on them personally.

Borrowing against hoped-for sales is the classic studio mistake: launches slip and sales curves are steep. A tax credit advance carries its own risk, because if HMRC reduces or delays the claim the shortfall still has to be repaid. Keep borrowing to amounts your existing income or a well-evidenced claim can cover. If the plan only works with a hit, equity or a publisher is the more honest fit.