R&D Tax Credits
R&D Tax Credits Explained
Could your business qualify for valuable Research and Development tax relief? Discover how UK companies can benefit from R&D tax credits, which projects qualify, and how to prepare an accurate claim under the latest HMRC rules.
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What Are R&D Tax Credits?
R&D tax credits are UK Corporation Tax incentives for companies undertaking qualifying research and development. They can reduce tax liabilities or, subject to the relevant rules, produce a payable credit for eligible expenditure on projects seeking an advance in science or technology.
Companies do not need to invent a completely new product or achieve a successful result. The key test is whether a project sought to resolve scientific or technological uncertainty that a competent professional could not readily resolve using existing knowledge.
Taxable expenditure credit on qualifying R&D costs for accounting periods beginning on or after 1 April 2024.
Potential payable credit rate on surrendered losses for eligible loss-making R&D-intensive SMEs.
Typical claim deadline following the end of a period of account of 18 months or less. Earlier notification may be necessary.
Who Qualifies for R&D Tax Credits?
UK companies within the Corporation Tax regime may qualify where they undertake eligible R&D activity. The company's size, accounting period, project ownership, contracting arrangements and financial circumstances determine which scheme applies.
✓ Potentially qualifying projects
- Developing new technical capabilities in software
- Overcoming engineering performance limitations
- Experimenting with new manufacturing processes
- Resolving technological problems in AI systems
- Improving materials through scientific experimentation
- Developing technically uncertain energy solutions
! Work that normally does not qualify
These activities do not qualify merely because they are commercially innovative:
- Routine website development
- Standard software configuration
- Cosmetic or aesthetic improvements
- Market research and commercial strategy
- Routine maintenance and debugging
- Applying established solutions without qualifying uncertainty
Which industries can claim?
Software & AI
Technical challenges involving algorithms, scalability, security, performance or systems integration.
Engineering
New manufacturing methods, component design, testing and technical performance improvements.
Construction & materials
Qualifying scientific or technological uncertainty involving materials, structural systems or construction processes.
R&D Tax Credit Rates for 2026
For accounting periods beginning on or after 1 April 2024, the merged RDEC scheme and Enhanced R&D Intensive Support (ERIS) replaced the previous SME and RDEC arrangements.
| Feature | Merged RDEC | ERIS |
|---|---|---|
| Eligible businesses | Most qualifying companies | Qualifying loss-making R&D-intensive SMEs |
| Headline relief | 20% taxable expenditure credit | 86% additional deduction |
| Payable credit | Subject to the RDEC payment steps | 14.5% of eligible surrendered losses |
| R&D intensity | No minimum intensity threshold | Generally 30% of relevant total expenditure, subject to detailed rules |
| Corporation Tax treatment | Credit is taxable | Enhanced deduction and possible loss surrender |
| Key restrictions | Contracting, overseas expenditure and PAYE cap rules | SME, loss-making, intensity and PAYE cap rules |
Historical claims for periods beginning before 1 April 2024 may be governed by the previous SME or RDEC schemes and different rates.
R&D Tax Credit Calculator
Estimate the headline credit based on qualifying expenditure. The figures are illustrative, not an assessment of eligibility or an HMRC repayment quotation.
Illustrative net benefit after 25% tax: £7,500
RDEC is a taxable credit. The final benefit depends on the company's circumstances and the statutory payment mechanism.
Estimates exclude PAYE/NIC caps, RDEC payment restrictions, grant and contracting issues, connected-company rules and other tax adjustments. The ERIS calculation assumes the company meets all relevant eligibility tests.
What R&D Costs Can You Claim?
Only expenditure attributable to qualifying R&D activities can be included, and the detailed eligibility and payment conditions must be satisfied.
| Cost | Potentially eligible? | Important conditions |
|---|---|---|
| Employee salaries | Yes | Relevant proportion of qualifying R&D duties |
| Employer NIC and pension contributions | Yes | Eligible staffing costs apportioned appropriately |
| Software licences | Yes | Qualifying R&D use |
| Cloud computing and data | Yes | Relevant R&D usage and statutory conditions |
| Consumable materials | Yes | Consumed or transformed in qualifying R&D |
| Contracted-out R&D | Conditional | Who decided and intended that R&D should be undertaken matters |
| Overseas expenditure | Restricted | Limited statutory exceptions may apply |
| Rent and marketing | Generally no | Ordinary overheads and commercial expenditure are excluded |
| Director dividends | No | Dividends are not qualifying employment costs |
R&D Tax Credit Worked Examples
Profitable software company
A company incurs £100,000 of eligible R&D expenditure during an accounting period beginning after 1 April 2024.
Gross expenditure credit
£100,000 × 20% = £20,000.
At an illustrative 25% Corporation Tax rate, the net credit benefit could be £15,000, before other adjustments and payment restrictions.
Loss-making intensive SME
An eligible loss-making SME has £100,000 of qualifying R&D costs and sufficient trading losses to surrender the full enhanced expenditure.
Illustrative payable credit
Enhanced expenditure: £100,000 × 186% = £186,000.
Payable credit: £186,000 × 14.5% = £26,970, subject to loss availability, caps and other statutory conditions.
For related tax reporting, see our limited company tax guide and Corporation Tax deadlines guide.
How to Claim R&D Tax Credits
Identify qualifying projects
Establish the scientific or technological advance sought, the uncertainties faced and the work undertaken to resolve them.
Check the claim notification requirement
First-time and certain previous claimants must notify HMRC within six months after the end of the period of account. Check the detailed three-year history and exception rules.
Calculate qualifying expenditure
Review payroll, staff time, consumables, software, cloud costs and contracted-out R&D. Apply the correct scheme and restrictions.
Prepare the Additional Information Form
Provide the required project descriptions, technical details, cost breakdown and named senior officer information. Submit the AIF before the Company Tax Return containing the claim.
Complete the CT600 and tax computation
Report the claim using the correct Corporation Tax treatment, CT600 declarations and CT600L where required.
Retain supporting evidence
Keep contemporaneous technical records, calculations, invoices, staff allocations and relevant correspondence to support the claim if HMRC opens an enquiry.
HMRC claim notification guidance ↗ · HMRC CT600 claim guidance ↗
How to Prepare an HMRC-Ready R&D Claim
A strong R&D claim explains not only what the company developed but why the underlying scientific or technological challenges were not readily solvable by a competent professional.
Technical evidence
- Project objectives and technological baseline
- Descriptions of uncertainties
- Testing and failed approaches
- Technical records and project timelines
- Input from competent professionals
Financial evidence
- Staff cost calculations
- Timesheets or reasonable allocation evidence
- Supplier contracts and invoices
- Cloud and software usage records
- Reconciliation with statutory accounts
Common claim problems include unsupported project narratives, claiming routine development, inaccurate staff cost apportionments, missing AIF submissions and incorrect treatment of subcontracted work.
R&D Tax Credit Accountants – Our Services
The Online Accountants provides R&D claim preparation and Corporation Tax reporting support for UK limited companies, with a focus on evidence, accurate calculations and compliance.
From £1995
For straightforward qualifying projects.
- Project eligibility review
- Technical narrative
- Qualifying cost calculation
- Additional Information Form
- CT600 coordination
From £2,495
For companies requiring more detailed support.
- Detailed project review
- Enhanced evidence review
- Cost reconciliation
- AIF and CT600 coordination
- Enquiry correspondence support
From £3,495
For complex or multiple-project claims.
- Multi-project analysis
- Detailed technical documentation
- Complex cost review
- Claim preparation support
- Enhanced enquiry assistance
Indicative starting prices based on the service levels published on this page. Confirm scope, VAT, specialist technical input and enquiry support terms before engagement. HMRC acceptance or payment cannot be guaranteed.
R&D Tax Credits FAQs
What are R&D tax credits in the UK?
How much R&D tax relief can my company claim?
Can a small limited company claim R&D tax credits?
Can software development qualify for R&D tax relief?
Can a loss-making company claim?
What is the R&D claim notification deadline?
What is the deadline for an R&D tax credit claim?
Is the R&D tax credit taxable?
Do unsuccessful R&D projects qualify?
Can HMRC investigate an R&D tax credit claim?
Need Help Claiming R&D Tax Credits?
Get professional assistance reviewing eligibility, identifying qualifying costs, preparing the technical documentation and reporting your R&D claim correctly to HMRC.
Discuss Your R&D Claim →UK-wide online accountancy services • Limited company tax specialists
Official HMRC guidance and further reading
For authoritative information, consult HMRC's R&D tax relief guidance collection, the R&D tax relief calculation guidance and the Additional Information Form requirements.
Reviewed October 2026. General UK tax information only. Individual eligibility and calculations require professional assessment.