Key takeaways
- For accounting periods starting on or after 1 April 2024, most companies claim through the merged R&D expenditure credit of 20% of qualifying costs.
- The credit is taxable, so its net value is about 15% of qualifying spend for a company paying 25% Corporation Tax and about 16.2% at 19%.
- Loss-making SMEs spending at least 30% of their total costs on R&D can use enhanced R&D intensive support: an 86% extra deduction and a 14.5% payable credit.
- First-time claimants must send a claim notification within six months of the end of the period, and every claim needs an additional information form.
- Most costs of R&D carried out overseas no longer qualify.
Research and development (R&D) tax relief rewards companies that spend money resolving scientific or technological uncertainty. The schemes were overhauled in 2024, when the old SME and RDEC schemes were merged. This guide explains how relief works now and how to claim it.
What counts as R&D
For tax purposes, a project is R&D if it seeks an advance in science or technology by resolving scientific or technological uncertainty, in a way that a competent professional in the field could not readily work out. It can include:
- developing new products, processes or software that go beyond the current state of knowledge
- appreciably improving existing ones, where the improvement is not readily deducible
- the work directly contributing to resolving the uncertainty, including some testing and prototyping
Work in the arts, humanities and social sciences does not qualify, and nor does routine development, adapting known technology or cosmetic changes. Since April 2023, pure mathematics qualifies. The government’s guidelines on the meaning of R&D are the starting point.
The merged scheme
For accounting periods beginning on or after 1 April 2024, companies claim under a single R&D expenditure credit (RDEC):
| Feature | Merged scheme |
|---|---|
| Credit rate | 20% of qualifying expenditure |
| Tax treatment | The credit is taxable income |
| Net benefit (25% Corporation Tax payer) | About 15% of qualifying spend |
| Net benefit (19% Corporation Tax payer) | About 16.2% of qualifying spend |
| Loss-making companies | Credit can be paid in cash, after a notional tax deduction |
Example
A profitable company paying 25% Corporation Tax has £200,000 of qualifying R&D costs. Its credit is £40,000 (20%). The credit is taxable, so £10,000 of tax is due on it, leaving a net benefit of £30,000.
Enhanced R&D intensive support (ERIS)
Loss-making SMEs that are R&D intensive, meaning qualifying R&D spend is at least 30% of their total relevant expenditure, can claim enhanced support instead of the merged credit:
- an additional deduction of 86% of qualifying costs, increasing the loss, and
- a payable credit of 14.5% of the surrenderable loss
This gives a cash benefit of up to about 27% of qualifying spend. There is a one-year grace period if a company falls just below the intensity threshold after meeting it.
Qualifying costs
- staff costs of employees directly and actively engaged in R&D: salaries, employer NI and pension contributions
- externally provided workers (agency staff), usually at 65% of the cost if unconnected
- subcontracted R&D, usually at 65% of the cost if unconnected, under the rules on who decides to undertake the R&D
- consumables used up in the R&D, such as materials, water, fuel and power
- software used directly in R&D
- data licences and cloud computing costs for computation and storage (since April 2023)
- payments to clinical trial volunteers
Capital expenditure does not qualify for R&D relief, though R&D allowances (100%) can apply to capital spend on R&D facilities.
The overseas restriction
Since April 2024, subcontracted R&D and externally provided workers generally only qualify if the work is carried out in the UK, with narrow exceptions where conditions such as geography or the environment make it impossible to do the work here.
How to claim
- Claim notification: if the company has not claimed in the previous three years (including first-time claimants), it must notify HMRC within six months of the end of the accounting period. Without it, the claim is invalid.
- Additional information form: submitted online before the Corporation Tax return, describing the projects, costs and the people responsible.
- CT600: the claim is made on the return (with supplementary page CT600L), within two years of the end of the accounting period.
HMRC checks a high proportion of claims after a period of significant error and fraud in the old SME scheme. Keep contemporaneous records of the projects, the uncertainties, who worked on them and how costs were calculated.
Using an adviser
Many companies use specialist R&D advisers. Since 2023 the additional information form must name any agent involved. Be wary of firms that encourage aggressive claims or charge large contingent fees, and make sure the technical case is written by people who understand the work. Penalties for inaccurate claims fall on the company.
Frequently asked questions
What is the R&D tax credit rate in 2026?
20% of qualifying expenditure under the merged scheme, worth about 15% net for a company paying 25% Corporation Tax.
What is the merged R&D scheme?
The single R&D expenditure credit that replaced the separate SME and RDEC schemes for accounting periods starting on or after 1 April 2024.
Who can claim enhanced R&D intensive support?
Loss-making SMEs whose qualifying R&D spend is at least 30% of their total relevant expenditure.
Do I need to tell HMRC before claiming R&D relief?
Yes, if you have not claimed in the last three years. A claim notification must be made within six months of the end of the accounting period.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.