Osborne to give TV drama a tax break

Tax relief to ensure that big-budget television programmes such as Downton Abbey are made in Britain will be announced in the Budget next week.

George Osborne will extend to "top-end" TV productions a tax regime similar to that enjoyed by the UK film industry which, in the 2009-10 financial year, secured almost £100m from special tax allowances. They helped to secure £1bn of investment in more than 200 films, which contributed £4.2bn a year to the economy.

Britain's "cinematic TV" industry, which includes more than 1,500 production companies and is worth over £2bn, is second only to the United States as an exporter. But the Chancellor is worried that TV blockbusters are increasingly being made in countries with more favourable tax systems.

Unlike Downton Abbey, filmed on location at Highclere Castle in Berkshire, the vast majority of TV dramas with budgets of over £1m an hour are being made abroad. Titanic, written by Downton creator Julian Fellowes, was produced in Canada and Hungary, and Tom Stoppard's adaptation of Parade's End was filmed mainly in Belgium.

America has also seen a substantial amount of television production head overseas. The proportion of shows produced for HBO – the US network which aired such hits as The Wire and The Sopranos – and made in countries offering tax relief has risen from 10 to 85 per cent.

A Treasury source said: "One of the ways the world sees Britain at its best is through world-class films and TV. They not only help us showcase the country but are also an important part of a dynamic and diversified economy. Tax relief for British films has been critical in ensuring that the industry continues to thrive."

Lord Fellowes, who was made a Conservative peer in 2010, said: "British TV is second to none, but unfortunately, great British programmes are being made overseas where the tax climate is more favourable. If the Budget can address this, it would be a fantastic move forward for our industry."