Chancellor George Osborne announced the move during the 2012 Budget alongside similar relief for the TV industry as a way to secure further investment and growth for UK entertainment.
While specifics have yet to be revealed, leading industry figures and trade association TIGA have praised the move, which has been in the works for a number of years.
"This is a brilliant decision by the government and terrific news for the UK video games industry. It is also a decisive victory won by TIGA through audacity, determination and endurance," said TIGA CEO Dr Richard Wilson.
"Like a boxer knocked down by his opponent, we refused to accept defeat and kept getting back in the ring. This victory will benefit not just the UK games development and digital publishing sector but also the wider UK economy."
Blitz Games Studios CEO and Dizzy co-creator Philip Oliver added: "It is fantastic that the government is supporting TIGA's Games Tax Relief and we are sure that this measure will grow the industry, create more jobs and lead to higher tax revenues for Government in the future.
"It is a great result for the games industry and for the UK economy."
Osborne is believed to have been discussing the idea of tax relief for the games industry since early last year.
TIGA succeeded in convincing Labour to introduce a tax credit in March 2010 before it was scrapped by the coalition government in the emergency Budget.
> Feature: Still Taxing Times For UK Gaming