R&D Tax Relief Calculator

R&D tax relief lets UK companies reduce their Corporation Tax bill — or receive a cash credit — for money spent on qualifying research and development. The relief is designed to encourage innovation by making it cheaper for companies to invest in developing new products, processes, and services.

The Merged Scheme (April 2024 onwards)

From 1 April 2024, the separate SME and RDEC schemes were merged into a single scheme for all companies. The new scheme provides a 20% R&D Expenditure Credit (RDEC) on qualifying spend. Because the credit is taxable, profitable companies paying 25% Corporation Tax receive a net benefit of 15% (20% credit minus 25% tax on the credit). Loss-making companies do not escape that tax charge: the credit is a taxable receipt either way, so the payment steps withhold a notional tax charge at the small profits rate of 19% before paying it out — a net 16.2% of qualifying spend (20% credit minus 19% notional tax on the credit).

ERIS — Enhanced R&D Intensive Support

ERIS provides a more generous regime for loss-making SMEs that spend at least 30% of their total expenditure on R&D in an accounting period beginning on or after 1 April 2024 — a period beginning before that date and ending on or after 1 April 2023 has to clear the higher legacy condition of 40%. Qualifying companies can claim the 186% enhanced deduction (same as the old SME scheme) and surrender the resulting loss for a payable credit at 14.5% — significantly higher than the standard 10% rate. This gives an effective cash benefit of approximately 27% of R&D expenditure, making it one of the most generous R&D incentives in the world.

Legacy SME Scheme (pre-April 2024)

For accounting periods starting before April 2024, SMEs (under 500 employees, turnover under €100m or balance sheet under €86m) could claim an enhanced deduction of 86% on qualifying R&D spend. This meant the total deduction was 186% of the expenditure. Profitable companies benefited from a tax saving of 21.5% on R&D spend (86% × 25%). Loss-making SMEs could surrender losses for a 10% payable credit.

RDEC for Large Companies (pre-April 2024)

Large companies used the RDEC scheme, receiving a 20% above-the-line credit. Because the credit itself is subject to Corporation Tax, the net benefit for a profitable company paying 25% tax was 15% of qualifying expenditure. Loss-making large companies could receive the credit as a cash payment, but net of a notional tax charge at the main rate of 25% — so 15%, the same net benefit as a profitable claimant. The lower 19% notional rate for loss-makers only arrives with the merged scheme, for accounting periods beginning on or after 1 April 2024.

A cash R&D credit is capped by reference to your payroll. The figure the calculator shows before the cap is a ceiling, not an entitlement: HMRC pays the lower of it and the cap. The restriction only reaches claims that are actually paid out — a profitable company's relief discharges a Corporation Tax liability at Step 1 of the payment steps and never gets as far as the cap step — so it bites hardest on exactly the shape it was introduced to catch, a small payroll carrying large subcontracted or connected-party R&D spend.

Merged scheme and ERIS: £20,000 plus 300% of your PAYE and NIC

For accounting periods beginning on or after 1 April 2024, one cap covers both the merged-scheme RDEC and Enhanced R&D Intensive Support: £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities for payment periods ending in the accounting period (CTA 2009 s1112B). It is applied at Step 3 of the payment steps in s1042I. The legacy SME payable credit worked the same way for periods beginning on or after 1 April 2021 — £20,000 plus 300% of relevant expenditure on workers, under s1058(1A) — so a pre-April-2024 SME or ERIS claim faces the same shape of cap from a different statutory home.

Legacy RDEC is capped differently — and more tightly

Do not carry the £20,000 formula back to a pre-April-2024 RDEC claim. That cap (CTA 2009 s104N Step 3 / s104P) is 100% of the PAYE and NIC of directors and employees directly and actively engaged in the relevant R&D. It differs in all three dimensions: no fixed amount at all, a 100% multiple rather than 300%, and a narrower base of R&D workers only instead of the whole relevant payroll. A large company with a modest R&D headcount can be capped under the legacy rules and uncapped under the merged scheme on identical spend, which is why the calculator relabels the payroll field when you switch accounting period.

A short accounting period shrinks the fixed amount

The £20,000 is a full-year figure. For an accounting period of less than 12 months it is proportionately reduced (CTA 2009 s1112B(3); s1058(1B) for the legacy SME cap), so a six-month period is capped at £10,000 plus 300% of the PAYE and NIC for those six months. The multiple itself is not reduced, and the legacy RDEC cap has no fixed component to reduce, so period length makes no difference there. Enter the length of the period in the calculator to see the effect.

Conditions A and B: when no cap applies at all

The cap is disapplied entirely for a period in which the company meets both conditions (CTA 2009 s1112E / s1058D). Condition A is that the company is creating, or preparing to create, relevant intellectual property, or performing a significant amount of management activity in relation to relevant IP it holds, and that this work is wholly or mainly undertaken by its own employees. Condition B is that qualifying expenditure on connected-party subcontracted R&D and connected externally provided workers does not exceed 15% of the company's qualifying expenditure for the period. Both must be met; an in-house R&D team that outsources heavily to a connected company fails the second.

The excess is not always lost

What happens above the cap depends on which cap applied. Under the merged scheme, the amount deducted at the cap step is added to the R&D expenditure credit the company is entitled to for its next accounting period (CTA 2009 s1042J), and legacy RDEC does the same at Step 3 of s104N — it is deferred, not forfeited. There is no equivalent for the SME and ERIS payable credits: s1058 simply pays the lesser of the credit and the cap, so the excess is not paid this period and does not carry forward as a credit. The loss you did not surrender for it stays a loss, available under the ordinary rules.

Claim deadline: R&D tax relief claims must be made within 2 years of the end of the accounting period to which they relate. For a period ending 31 March 2025, the claim deadline is 31 March 2027.

Advance notification: From April 2023, companies making their first R&D claim (or that haven't claimed in the previous 3 years) must submit an advance notification to HMRC within 6 months of the end of the accounting period.

Additional Information Form: All R&D claims must include a completed Additional Information Form, submitted before or with the CT600. This requires a named senior officer, a description of R&D activities, and a breakdown of qualifying costs.

Definition of R&D: HMRC follows the DSIT (Department for Science, Innovation and Technology) guidelines. R&D must seek an advance in science or technology by resolving scientific or technological uncertainty. Routine development, aesthetic design, and social science research do not qualify.