UK’s New 39% VFX and AI Tax Credit: What Casting Agencies Need to Know

The UK creative sector is benefiting from a major new tax incentive. Since 1 January 2025, productions have been able to count UK visual effects (VFX) and qualifying AI costs at a 39% Audio-Visual Expenditure Credit (AVEC) rate. From 1 April 2025, companies have been able to start claiming this higher rate through their corporation tax returns. This VFX and AI tax credit uplift, alongside the removal of the old 80% cap on qualifying spend, is strengthening Britain’s position as a global hub for VFX-heavy projects. For casting agencies, the implications are significant, as the credit shapes budgets, creative scale, and opportunities for actors.

Understanding the 39% VFX and AI Credit

The enhanced AVEC rate now applies to eligible productions that incur VFX costs in the UK. It replaces the standard 34% rate for these activities. The definition of VFX is broad. It covers CGI, animation, motion capture, colour grading, 3D modelling, compositing, and digital enhancement. Crucially, generative AI costs are eligible. This means spending on AI tools for background visuals, crowd creation, or digital character work can be included.

This measure has already encouraged productions to keep their post-production work in the UK. It also future-proofs the scheme as more studios adopt AI-driven techniques. For casting agencies, this means more ambitious productions choosing the UK and higher demand for local talent.

How the 39% AVEC Links to the UK Film Tax Credit

The UK Film Tax Relief (FTR) remains a cornerstone of support for film production. Under this scheme, films that pass the cultural test or qualify as an official co-production can claim a payable cash rebate worth up to 25% of UK core expenditure. This applies to both UK productions and international films choosing to shoot in Britain.

The introduction of the 39% AVEC rate for VFX and AI costs works in tandem with the UK film tax credit. While the film tax relief covers broad production spend, the enhanced AVEC specifically targets high-cost post-production and visual effects. This dual structure ensures that both on-set and post-production activity benefit from strong financial incentives.

For casting agencies, this combination means two things:

• More international productions are drawn to the UK because the overall tax environment is attractive.
• Budgets saved through both FTR and AVEC can be reallocated to casting and talent, increasing opportunities.

Together, these measures strengthen the UK’s reputation as a leading global destination for filmmaking, from casting through to final VFX.

Eligibility Criteria For VFX Tax Relief

The 39% VFX tax relief is available for UK films and high-end TV programs that qualify under the AVEC scheme. Projects must obtain a final certificate from the British Film Institute (BFI) by meeting the cultural test. Claims are made in the completion period, so a project must be finished or formally abandoned before the uplift is paid.

Productions using animation or children’s TV reliefs are excluded, as those schemes already offer enhanced support. The key requirement is that the VFX work is carried out in the UK. The nationality of artists or vendors is irrelevant – the location of the work is what counts.

Claim Process for Casting Agencies’ Clients

Claiming the credit requires careful planning and compliance:

• Finish and certify. The project must be completed and carry BFI certification before the enhanced credit is paid. Interim claims still apply the 34% rate, with the uplift added at completion.
• Track costs. Detailed records of UK VFX and AI expenditures from January 2025 onwards should be kept separately.
• File with HMRC. Companies file the Corporation Tax return with an AVEC claim, including the Additional Information Form (AIF).
• Provide evidence. Invoices, contracts, and cost breakdowns must be submitted. HMRC has introduced stricter evidence rules for VFX claims.
• Receive credit. Approved claims deliver a refund equal to 39% of eligible VFX spend. After corporation tax, this gives an effective benefit of around 29.25%.

For producers, the relief often means freeing up funds to expand creative ambition rather than scaling back.

Opportunities for Casting Agencies

The credit is already bringing wider benefits to the UK creative industry:

• More productions. The higher rate makes the UK attractive for international projects, boosting casting opportunities.
• Bigger budgets. With VFX spend partially refunded, producers can allocate more to talent, additional roles, or high-profile actors.
• Industry stability. Growing VFX capacity keeps projects anchored in Britain, securing more consistent work for casting agencies.
• Added credibility. Agencies that understand these incentives can guide clients, showing awareness of how financial planning supports creative choices.

How Apex Accountants Helped a VFX-Heavy Production

Apex Accountants recently supported a UK high-end TV drama with extensive VFX and AI use. The production involved CGI battle scenes and AI tools for background imagery. Our role included:

• Identifying eligible VFX and AI costs early in pre-production.
• Supporting the cultural test application for BFI certification.
• Preparing the claim with full evidence, including AI-related invoices.
• Ensuring compliance with HMRC’s new AIF and evidence rules.

The result was a £300,000 tax credit approved in mid-2025. The producers reinvested this into an additional epilogue scene and hired a well-known actor for a cameo. The casting agency benefitted from more roles and a higher-profile production.

Final Thoughts on VFX and AI Tax Credit in UK

The 39% VFX and AI tax credit is reshaping the UK production business. It rewards investment in cutting-edge visual storytelling while supporting a thriving domestic industry. For casting agencies, the incentive means more productions, larger budgets, and richer opportunities for talent.

At Apex Accountants, we help productions and agencies take advantage of these benefits. With expert planning and compliance, our clients gain financial support that translates directly into creative ambition. Contact Apex Accountants today to make the most of the VFX and AI credit.