Patent Box Tax Calculator 2026/27

Calculation runs based on standard HMRC rules.

Deductions are calculated and adjusted accordingly.

Frequently Asked Questions & Detailed Tax Guide

What is the UK Patent Box scheme and how does it save tax?

The Patent Box is a government tax incentive designed to encourage companies to commercialize and keep intellectual property (IP) and scientific innovations in the UK. The scheme allows companies to apply a significantly reduced Corporation Tax rate of **10%** (compared to the standard rates of 19% or 25%) on profits earned from patented inventions or qualifying intellectual property. By lowering the tax rate on IP-derived profits, the government aims to encourage tech and pharmaceutical companies to locate their R&D and manufacturing operations in the UK.

What are the eligibility requirements?

To qualify for the Patent Box, your company must meet the following criteria:

• Qualifying Patents: You must own or hold an exclusive license for a patent granted by the UK Intellectual Property Office (IPO) or the European Patent Office (EPO).
• Development Condition: Your company must have actively contributed to the creation, development, or commercial application of the patented invention. Merely owning the patent without developing the technology does not qualify.
• Nexus Fraction: The profit eligible for the 10% rate is scaled based on the proportion of R&D carried out directly by your company (the Nexus formula), discouraging companies from outsourcing development abroad.

Step-by-Step Mathematical Calculation: Patent Box

Let’s calculate the tax saving for a medical device company generating £200,000 in net profits solely from a patented surgical tool (assuming a 25% main Corporation Tax rate):

• 1. Total IP Profit: £200,000
• 2. Standard Corporation Tax at 25%: £200,000 * 25% = £50,000
• 3. Patent Box Tax Rate: 10%
• 4. Patent Box Corporation Tax: £200,000 * 10% = £20,000
• 5. Annual Tax Saving: £50,000 – £20,000 = **£30,000 cash saving**.
• 6. The company’s effective tax overhead is halved, allowing them to reinvest the £30,000 in further R&D.

Tax Expert Pro-Tips: Tracking Profits and Combining Schemes

David Vance, CTA FCA, recommends: “The Patent Box calculations are highly complex because you must isolate your patented profits from your standard commercial revenues (known as stream-by-stream profit tracking). You must set up your internal accounting to track direct R&D costs and revenues per patent. Furthermore, the Patent Box can be combined with R&D Tax Credits. You can claim R&D relief on the development phase, and then apply the 10% Patent Box rate on the commercial profits, creating an incredibly tax-efficient lifecycle for tech innovations.”

Legislative References

• Corporation Tax Act 2010 – Part 8A (Profits arising from the exploitation of patents).
• HMRC Corporate Intangibles and R&D Manual (CIRD50000) – Patent Box guidelines.