R&D tax relief
R&D tax relief rewards companies that seek an advance in science or technology by resolving genuine technical uncertainty. Most claims now go through the merged scheme, giving a taxable above-the-line credit at 20% of qualifying expenditure.
Also known as: research and development tax relief, R&D tax credits
How it works
The merged scheme replaced the old SME and RDEC regimes for accounting periods beginning on or after 1 April 2024. It gives an above-the-line expenditure credit of 20% of qualifying costs, which is taxable, producing a net benefit of roughly 15p to 16p in the pound depending on the company's corporation tax rate. Loss-making R&D intensive SMEs can instead claim enhanced support, with an extra deduction of 86% and a payable credit, where qualifying expenditure is at least 30% of total expenditure.
Qualifying costs are staff costs, a proportion of subcontracted and externally provided worker costs, consumables, software and data and cloud computing used directly in the project. Routine software configuration, market research, cosmetic product changes and work with no technological uncertainty do not qualify, however difficult the project felt commercially.
Compliance has tightened sharply. Most claims need an advance notification within six months of the period end if you have not claimed recently, and every claim needs an additional information form filed before the CT600, naming a qualifying technical contact and describing the projects. Miss either and the claim is invalid rather than merely late.
HMRC checks a large proportion of claims. A claim built on a genuine technical narrative, contemporaneous records and defensible cost apportionment stands up; one built on a percentage of the payroll does not.
Who this affects
- Software companies building genuinely novel platforms or algorithms
- Manufacturers developing new processes, materials or tooling
- Loss-making startups where the payable credit is real cash
- First-time claimants who must file an advance notification in time
Common mistakes
- Missing the advance notification window and losing the whole claim
- Claiming for routine development with no technological uncertainty
- Filing the CT600 before the additional information form
- Including costs of subcontractors or overseas workers that no longer qualify
Frequently asked questions
What is the R&D tax relief rate?
The merged scheme gives a taxable expenditure credit of 20% of qualifying costs. Loss-making R&D intensive SMEs can instead claim the enhanced 86% deduction and a payable credit.
What counts as R&D?
Work seeking an advance in science or technology by resolving uncertainty that a competent professional in the field could not readily resolve. Commercial novelty alone is not enough.
Do I need to notify HMRC in advance?
Most companies must submit a claim notification within six months of the end of the accounting period unless they have claimed in one of the previous three years.
How long does a claim take to pay out?
HMRC aims to process most claims within weeks of filing, but claims selected for compliance checks take considerably longer.
Related terms
Work this out
Related reading
Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 13 September 2026 · Figures for 2026/27 · About our practice
Official sources
Not sure how this applies to your company? Get a fixed-fee quote.