Answers · UK 2025/26
What is the Research and Development Expenditure Credit (RDEC) in the UK?
RDEC is a 20% above-the-line credit for qualifying R&D expenditure, primarily for large companies and certain SMEs under the merged R&D scheme (from April 2024). The credit is taxable income, making the net benefit approximately 15% after 25% Corporation Tax.
Full answer
Research and Development tax relief in the UK was significantly restructured from April 2024 with the introduction of a merged R&D scheme, replacing the previous two-track SME and RDEC systems for most companies. Current RDEC rate (from 1 April 2023) The RDEC rate is 20% of qualifying R&D expenditure. This increased from 13% for expenditure on or after 1 April 2023 (previously 11%). The merged scheme RDEC rate also remains at 20%. Net benefit calculation RDEC is an above-the-line credit -- it appears as income in the profit and loss account before the corporation tax charge. After paying CT at 25%: -- GBP 1,000 qualifying R&D spend -- GBP 200 RDEC credit (added to taxable income) -- CT on the credit: GBP 200 x 25% = GBP 50 -- Net RDEC benefit: GBP 200 - GBP 50 = GBP 150 -- Effective net rate: 15% of qualifying spend For companies paying the 19% small profits CT rate (profits below GBP 50,000): net benefit = GBP 200 - (GBP 200 x 19%) = GBP 162 = 16.2% of spend. The merged scheme (from 1 April 2024) From 1 April 2024, most companies (both large and SME) use the merged RDEC-style scheme at 20%. The previous enhanced SME deduction (186% of spend) was abolished. The merged scheme requires the work to have been contracted to a UK company by any customer (including overseas customers), and qualifying costs exclude subcontracted overseas work unless there are specific qualifying reasons. SME intensive scheme Loss-making R&D-intensive SMEs (where qualifying R&D expenditure is at least 30% of total expenditure) retain access to a higher credit at 27% of qualifying costs -- equivalent to approximately 20.25% net. This "ERIS" (Enhanced R&D Intensive Support) scheme targets startups that are not yet profitable. Qualifying expenditure -- Staff costs (salary, employer NI, pension contributions, bonuses related to R&D staff) -- Externally provided workers (EPW) -- 65% of cost included -- Software licences and cloud computing (restricted rules apply) -- Consumable materials used in R&D -- Clinical trials (volunteer costs) -- Payments to qualifying bodies (universities, charities) for R&D -- Subcontracted R&D (UK-based under merged scheme; overseas in certain restricted circumstances)
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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.