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A Look at Patent Box, One Of The Biggest Tax Reliefs You’ve Never Heard Of
30 Sep 2025
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The Patent Box is one of the UK’s most generous tax reliefs and is designed to reward businesses that innovate and protect their intellectual property. It allows companies to hold onto more of the revenue they generate from patented inventions by reducing Corporation Tax on certain profits to just 10%.
Despite its clear incentive, however, it is an incredibly underused tax relief with many businesses unaware of the benefits out there. These benefits have increased in the last few years, too. The value of the Patent Box has surged since the main rate of Corporation Tax rose to 25% in April 2023.
Here, we’ll break down Patent Box Tax relief and show how WR Partners can help you maximise its benefits with bespoke advice.
What exactly is Patent Box, and why does it matter?
The Patent Box was introduced back in 2013 to encourage businesses to develop, retain, and commercialise their intellectual property (IP) in the UK in order to support the wider economy and keep innovation firmly rooted on home soil.
Put simply, Patent Box reduces the effective tax rate on profits linked to qualifying patents from 25% all the way down to 10%. The profits of these may come from selling products which include the patent or by licensing out the patented technology.
Patent Box, however, is not an automatic tax relief.
Companies need to make what’s called an “election” to benefit from it. This additional step is why so many businesses miss out on this relief, because they fail to act.
Who can claim Patent Box relief?
- For a business to qualify for this relief, it must: • Be liable to pay UK Corporation Tax (CT)
- Own or have an exclusive license for a qualifying patent
A “qualifying” patent can be one granted by the UK Intellectual Property Office, as well as the European Patent Office and other particular EU patent offices. Having a paper patent (which is a patent for an invention which is never put into use) is unfortunately not enough to fit the eligibility criteria.
Businesses must have been actively involved in creating or developing the patented invention, or at the very least in managing or exploiting it. This is called “active ownership”. This condition applies to companies that are part of a group and ensures the businesses are genuinely directing and benefiting from their IP.
Patent exclusivity must also extend across an entire national territory for a business to claim Patent Box. Rights which only cover a region, such as permission to sell in part of a country, will not qualify.
These conditions mean the Patent Box is open to a greater number of businesses, including those that generate income from licensing technology or who receive infringement compensation.
What income qualifies for the reduced 10% tax rate?
Crucially, Patent Box does not apply to all the profits your business makes, but it does cover a range of income streams which are linked to patents, such as:
- Profits from selling patented products or products which include patented technology.
- Income generated from licensing patented inventions to others.
- Proceeds made from selling a patent outright.
- Compensation or damages which were awarded for patent infringement cases.
- Insurance payments related to patent rights.
The income is then subject to a complex calculation, including an adjustment for a “marketing assets return”.
For instance, if a famous brand was able to sell its patented device and charge more because of this fame, not the patent itself, the extra profit would not qualify for the reduced 10% rate.
The scheme is about rewarding innovation, not how many people know your brand.
Another notable benefit of this scheme is that profits made while a patent is pending may still qualify after it is officially granted. Claims such as this can reach back up to six years but the company has to elect into the regime in the period the profit was generated.
Why you can benefit from R&D and Patent Box
Another reason why this relief goes unclaimed is that businesses are under the misconception that they must choose between claiming R&D tax credits or electing into a Patent Box.
The reality is, however, that the two reliefs are designed to complement each other.
R&D tax relief rewards the upfront investment you make in developing new products and technology, offering reductions in your tax bill or a cash credit.
After that, Patent Box rewards the success of the innovation once a patent has been awarded and it is generating income.
These schemes create a full lifecycle of support from the idea stage to commercial success. Combining these two reliefs can create significant cash flow advantages and de-risk future development for companies which innovate regularly.
Why Patent Box is more valuable than ever
The rise in Corporation Tax to 2025 has made the incentives around Patent Box even greater, with businesses now being able to achieve a tax saving of up to 15% (as the headline rate of corporation tax is 25% while the tax rate on Patent Box profits is 10%) on qualifying profits, a 9% increase since April 2023.
And yet, despite this huge incentive, HMRC records show just 1,600 companies claim the relief, suggesting that thousands of innovative SME are, frankly, leaving money on the table.
If your business holds patents or licenses, now is the ideal time to assess whether you could benefit.
How WR Partners can support your claim
Careful calculations and strict compliance with complex rules are required to get the most relief from Patent Box, but as we’ve seen, the rewards are certainly worth it.
At WR Partners, our goal is to maximise your benefit while minimising risk, which we do by combining our tax expertise with sector-specific knowledge to identify qualifying intellectual property.
We’ll then integrate your Patent Box relief with your R&D tax credits so that you earn as much relief as possible from being an innovative, groundbreaking UK business.
Don’t miss out, get in touch today
It’s no over-exaggeration to say Patent Box tax relief can transform your bottom line, especially now that Corporation Tax is higher.
Now is the time to act if your business develops or uses patented technology.
Speak to WR Partners today to explore your eligibility.
