Patent Box can apply an effective 10% Corporation Tax rate to qualifying relevant IP profits. Other profits remain taxed at your company's applicable rate.
Patent Box can reduce Corporation Tax to 10% on qualifying profits from patented inventions.
For companies paying the 25% main rate, qualifying profits can be taxed at 10% instead.
You normally need to elect into Patent Box within two years after the end of the relevant accounting period.
Patent Box applies to qualifying profits, not all company profits. Eligibility and the benefit depend on your patents, development activity and tax position.
A simplified main-rate illustration showing the effect when 50% of total trade profits is assumed to be qualifying relevant IP profit.
| Total Trade Profit | Assumed Relevant IP Profit (50%) | Tax Without Patent Box (25%) | Tax With Patent Box | Illustrative Saving |
|---|---|---|---|---|
| £250,000 | £125,000 | £62,500 | £43,750 | £18,750 |
| £500,000 | £250,000 | £125,000 | £87,500 | £37,500 |
| £1,000,000 | £500,000 | £250,000 | £175,000 | £75,000 |
| £1,500,000 | £750,000 | £375,000 | £262,500 | £112,500 |
Main-rate illustration: the table assumes 25% Corporation Tax on all total trade profit before Patent Box. With Patent Box, it applies 10% to the assumed relevant IP profit and keeps the remaining profit taxed at 25%.
Actual Corporation Tax rates vary: some companies pay the 19% small-profits rate or receive marginal relief, so their percentage-point benefit can be lower. The £50,000 and £250,000 thresholds are also adjusted for short accounting periods and divided by the number of associated companies.
Relevant IP income is not the final qualifying profit: HMRC's calculation deducts attributable expenses, a routine return and, where applicable, a marketing-assets return. The resulting relevant IP profit can then be restricted by the R&D nexus fraction, so the actual benefit may be lower than this simplified illustration.
Election timing matters: a company must elect into Patent Box within the applicable tax-return amendment window, normally two years after the end of the accounting period.
Official guidance: HMRC Patent Box guidance · Corporation Tax rates · HMRC calculation overview · HMRC election timing
Patent Box can reduce tax on qualifying relevant IP profits while leaving the rest of your profits taxed at the applicable Corporation Tax rate.
Qualifying relevant IP profits can benefit from an effective 10% Patent Box rate. Other profits remain taxed at the company's applicable Corporation Tax rate.
Direct financial reward for your investment in research, development and patented IP
Enhanced profitability from patent income gives you a competitive edge in your market
Tax savings can be reinvested into further R&D and business growth initiatives
These receipts can be relevant IP income, but further calculations determine the qualifying relevant IP profit eligible for the effective 10% rate.
Sales of products that incorporate your patented technology
Royalties and fees from licensing your patents to third parties
Gross proceeds from selling or otherwise disposing of qualifying patents, IP rights or exclusive licences can form relevant IP income within trading profits
Compensation received for patent infringement cases
Income from services using patented processes or methods
Expert guidance through every step of your Patent Box journey.
Comprehensive Patent Box guidance from eligibility through to ongoing optimisation
Initial consultation to confirm eligibility (patent ownership, R&D activity, commercialisation stage). Review of existing patents or pending applications.
Identify revenue streams linked to patented products/processes. Work with client's finance team to separate qualifying vs. non-qualifying income.
Apply HMRC's streaming rules, routine and marketing return deductions, and the R&D nexus fraction to determine qualifying relevant IP profits and the Patent Box deduction.
Liaise with accountants to make or confirm the Patent Box election, incorporate the claim into the CT600, and provide supporting documentation for HMRC.
Annual review of new patents, new product lines, and future eligibility. Strategic advice on how R&D Relief and Patent Box may apply together.
Strategic integration of R&D Relief and Patent Box delivers compound tax benefits for innovative businesses.
"If you're already claiming R&D, let's assess if you can also reduce tax on your profitable outcomes."
"Transform your intellectual property into ongoing tax savings while maintaining competitive advantage."
"A coordinated approach that considers qualifying development expenditure and IP-derived profits."
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Ensure your business meets the criteria for Patent Box tax relief.
Manufacturing
Engineering
Pharma/Biotech
Software/AI
Medical Devices
Automotive
Aerospace
Technology
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Insights and guides about Patent Box Tax Relief