Answers · UK 2025/26
How does the R&D SME tax credit work in the UK for 2026/27?
From 1 April 2024, most UK companies use the merged R&D Expenditure Credit (RDEC) scheme at a 20% above-the-line credit rate, replacing the separate SME and RDEC schemes. Loss-making companies that are R&D intensive (qualifying R&D spend is at least 30% of total expenditure) can claim under the Enhanced R&D Intensive Scheme (ERIS) at a 27% credit rate. The old SME enhanced deduction scheme ended for accounting periods starting on or after 1 April 2024.
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The R&D tax relief landscape was significantly reformed from April 2024. Pre-April 2024 regime (for context): SMEs could claim an enhanced deduction of 186% on qualifying R&D expenditure (increased from 130% in August 2023 for accounting periods starting on or after 1 April 2023). Loss-making SMEs could surrender losses for a payable credit (SMEE&I credit) at 10%. Large companies used RDEC at 20%. April 2024 merged scheme: for accounting periods beginning on or after 1 April 2024, the merged RDEC scheme applies to all companies (SMEs and large companies alike). Rate: 20% above-the-line credit on qualifying R&D expenditure. The credit is first applied against the tax liability; any excess is payable (subject to the PAYE/NI cap). Net benefit: after 25% corporation tax, the net benefit of the 20% credit is 15% of qualifying spend. Enhanced R&D Intensive Scheme (ERIS): loss-making companies where qualifying R&D expenditure is at least 30% of total expenditure qualify for a 27% credit rate (net benefit approximately 20%). This is targeted at early-stage, heavily R&D-focused companies. Qualifying expenditure: staff costs (including employer NI and pension contributions), subcontracted R&D (externally provided workers and subcontractors at 65% of cost from April 2024), consumables used in R&D, payments to clinical trial volunteers, relevant payments to the subjects of trials. What does not qualify: capital expenditure (use AIA instead), production and distribution costs, land costs. Additional Information Form (AIF): from August 2023, all R&D claims require submission of an Additional Information Form online to HMRC before or at the time of the CT600 filing. Claims without an AIF are invalid. HMRC guidance: CIRD80000.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.