R&D tax relief rewards UK companies that spend money resolving genuine scientific or technological uncertainty. For accounting periods beginning on or after 1 April 2024, most claims fall under one merged R&D expenditure credit scheme with a headline rate of 20%, which is taxable and so worth roughly 15p in the pound after the main rate of corporation tax. Loss-making R&D-intensive small companies may instead use enhanced R&D intensive support (ERIS), which needs qualifying R&D to be at least 30% of total expenditure and can pay a credit of up to 14.5% of the surrenderable loss.

What is R&D tax relief?

R&D tax relief is a corporation tax incentive that lowers the tax bill, or pays a cash credit, to companies carrying out qualifying research and development. The work must seek an advance in science or technology by resolving uncertainty that a competent professional in the field could not readily work out. It is not limited to laboratories or people in white coats. Software development, engineering, manufacturing process improvement and product design can all qualify, provided there is a real technological question being answered rather than routine work.

Because it reduces the tax that a company would otherwise pay, R&D relief sits alongside the wider corporation tax rules. If you are new to how the tax itself works, our guide to corporation tax sets out the basics before you layer any relief on top.

Which scheme applies now?

The rules changed significantly. For accounting periods beginning on or after 1 April 2024, the previous separate SME additional-deduction scheme and the older RDEC scheme were combined into a single merged R&D expenditure credit scheme. In practice this means most companies, large and small, now claim through one set of rules rather than two.

There is one important exception. A loss-making company that is R&D-intensive can claim under enhanced R&D intensive support instead. To count as R&D-intensive, the company’s qualifying R&D expenditure must be at least 30% of its total expenditure. This route keeps a more generous outcome for the smaller, research-heavy companies the government wanted to protect when it replaced the old SME scheme.

How much is it worth?

Under the merged scheme the expenditure credit is calculated at 20% of qualifying R&D costs. That credit is itself treated as taxable income, so the true benefit is lower than the headline figure suggests. For a company paying the 25% main rate of corporation tax, the net benefit works out at around 15p for every pound of qualifying spend. The exact figure depends on your tax position, and if your profits fall in the marginal band you should read our note on marginal relief to see how the effective rate is set.

Under enhanced R&D intensive support, a qualifying loss-making company gets an extra deduction of 86% of its qualifying costs on top of the normal 100%, and can then surrender the resulting loss for a payable tax credit worth up to 14.5%. For a genuinely research-intensive start-up with little or no tax to pay, that cash credit can be a meaningful source of funding.

What counts as qualifying R&D?

Not every cost in a project qualifies, and getting the categories right is where many claims go wrong. Broadly, the following can be included where they relate directly to the qualifying R&D:

  • Staff costs, covering gross salaries, employer National Insurance and pension contributions for people working on the R&D.
  • Payments to subcontractors and, in some cases, externally provided workers who carry out qualifying activity.
  • Consumable items used up in the R&D, such as materials, water, fuel and power.
  • Software licences used for the project.
  • Data and cloud computing costs, which are now within scope for the reformed reliefs.

Ordinary running costs that would exist anyway, such as rent, and the cost of producing goods for commercial sale, generally do not qualify. Because R&D spend and everyday operating spend often overlap, it pays to keep this separate from your general allowable business expenses so the claim is clearly evidenced. Capital spending on equipment follows a different route entirely through capital allowances rather than an R&D revenue claim.

How do you make a claim?

An R&D claim is made through your company tax return, but two extra steps now apply. First, many companies must submit a claim notification form to HMRC in advance. This catches first-time claimants and those who have not claimed recently, and it must be filed within a set window after the end of the accounting period, so it is easy to miss if you leave the claim until the return is due. Second, every claim must be supported by an online additional information form, which has been mandatory since 8 August 2023. Without it, HMRC will remove the claim from the return.

Timing matters throughout, and an R&D claim does not extend your normal filing obligations. Keep our summary of corporation tax deadlines to hand so the notification and the return are both in on time.

Protect the claim against enquiry

HMRC has stepped up compliance activity on R&D, and claims are now a well-known enquiry hotspot. Even a well-prepared and honest claim can be opened for review, and answering HMRC can take many hours of professional time. Solar Protect tax investigation insurance covers up to £100,000 of your accountant’s fees, with no excess, if a claim you have submitted is enquired into, so a challenge does not turn into an unexpected bill. You can get a quote in minutes, and if you would like to talk it through first our team is happy to help.

For the wider picture of how these reliefs sit alongside your other filings, our accountancy and tax guide pulls the key topics together in one place.

Reviewed by Matthew Bartlett, Director, Solar Protect. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.