How this is calculated
The merged scheme gives an RDEC of 20.0% of qualifying R&D expenditure. Unlike the old SME scheme's enhanced deduction, this credit is added to taxable profit as income (hence "above the line"), which is why it shows up as extra profit before corporation tax is applied.
Because the credit itself is taxable, the net cash benefit is the gross credit less the corporation tax charged on it, calculated at the company's actual marginal rate for the period, including marginal relief if total profit including the credit falls between £50,000 and £250,000.
Where a company has little or no other profit, the credit is used first to discharge any corporation tax liability, then the balance is subject to a net-of-tax payable credit calculation with a cap linked to PAYE and NIC liabilities on R&D staff, a step this calculator simplifies by assuming the credit can be used against overall taxable profit.
Why the net benefit is lower than the headline rate
A 20.0% gross credit does not translate into a 20.0% cash benefit, because the credit itself increases taxable profit. At the small profits rate of 19% the net benefit works out at roughly 16.2% of qualifying spend, while at the 25% main rate it falls to around 15%, which is why companies straddling the marginal relief band see a slightly different effective rate again.
This above-the-line mechanic was carried over from the old large company RDEC scheme specifically so the credit is visible in accounting profit, which finance teams and lenders often find easier to work with than the old SME scheme's below-the-line enhanced deduction.
Comparing with ERIS
Loss-making, R&D-intensive small companies (spending at least 30% of total expenditure on qualifying R&D) usually get a better cash result under the separate Enhanced R&D Intensive Support scheme instead of RDEC, because ERIS gives an enhanced deduction and a higher payable credit rate rather than a taxable above-the-line credit.
Companies close to the intensity threshold should model both routes for the same figures, since crossing 30% intensity, or moving from loss-making to marginally profitable, changes which scheme applies and can materially change the outcome.
What this means for your company
Treat the result as a planning figure for the 2026/27 tax year. If it changes what you were about to do, take a director's salary, a dividend, a large asset purchase or a filing decision, check it against your own accounts first. We can review the position with you and confirm the tax treatment before you commit.
Frequently asked questions
What is the RDEC rate under the merged scheme?
The merged scheme gives a taxable credit of 20.0% of qualifying R&D expenditure for accounting periods starting on or after 1 April 2024, shown above the line in the accounts.
Why is the credit taxed if it is meant to be relief?
The RDEC mechanism deliberately adds the credit to taxable income so it is visible as revenue in the accounts, then taxes it at the normal corporation tax rate, leaving a smaller but still valuable net cash benefit after tax.
Can a loss-making company still claim RDEC?
Yes, but the payable credit for a loss-making company is subject to further restrictions, including a cap linked to the PAYE and National Insurance paid on R&D staff, so the cash received can be lower than a simple percentage calculation suggests.
Is RDEC better than the ERIS scheme?
It depends on profitability and R&D intensity. Profitable companies use RDEC by default, while loss-making companies spending at least 30% of expenditure on R&D usually get a larger cash benefit under ERIS instead.