Patent Box relief overview: 10% corporation tax rate on qualifying profits
Summary
Updated May 2026 — Sources: GOV.UK Patent Box, HMRC CIRD201000.
Patent Box incentivises UK companies to commercialise patented inventions by taxing qualifying profits at an effective 10% corporation tax rate instead of the standard 19–25%.
1. How Patent Box works
Calculate profits attributable to qualifying IP (relevant IP income minus a routine return and marketing asset return). Apply the Patent Box deduction to reduce taxable profit. The effective rate on qualifying profits is 10%.
2. Qualifying conditions
- Company subject to UK corporation tax
- Profits from exploiting qualifying patents
- Company developed the IP or acquired it and continued R&D
- Election made within two years of the relevant accounting period
3. Example — £200,000 IP profit
Without Patent Box: £200,000 × 25% = £50,000 corporation tax. With Patent Box (effective 10%): £20,000 corporation tax. Saving: £30,000.
4. Interaction with R&D relief
Companies often claim both R&D tax relief (on development costs) and Patent Box (on commercial profits). HMRC requires streaming of income and expenses to prevent double-counting. Professional advice is essential for combined claims.
5. Sources
FAQ
What is Patent Box relief?
A reduced 10% corporation tax rate on profits attributable to qualifying patented inventions. Standard corporation tax is 19–25%, so Patent Box can halve the tax on IP-related profits.
What IP qualifies for Patent Box?
Patents granted by the UK IPO or certain European patent offices. The company must have developed the patent or hold an exclusive licence. Software patents are generally excluded in the UK.
Can I claim both Patent Box and R&D relief?
Yes, but the regimes interact. R&D expenditure that qualifies for enhanced deduction must be deducted from the Patent Box profit calculation to avoid double relief.