R&D tax relief is hugely important for helping to fund innovation in the UK. But according to HMRC’s Research and Development Tax Credits Statistics: September 2025 report, the total relief claimed for the 2023-24 tax year has decreased by 2%. The report also shows that qualifying R&D expenditure is down by 1%. The drop reflects the impact of HMRC’s compliance rule changes, which rightly aim to reduce error and fraud.
One of the biggest factors in the fall is the introduction of the pre-claim notification for businesses claiming R&D Tax Credits for the first time (or if they haven’t claimed in their last three accounting periods). As businesses now have to submit their notification within six months of the end of the accounting period that they plan on claiming for, we sadly expect that claim volumes could fall even further next year – especially for SMEs, who are more likely to be first-time claimants.
The launch of the merged R&D scheme may have a positive impact for large businesses, who can now benefit from the inclusion of subcontractor costs – but more still needs to be done to support smaller businesses, which are often the driving force behind innovation in the UK.
While we strongly welcome the reduction in fraudulent claims, we also recognise that stricter regulations may be putting off legitimate businesses who might be intimidated by the complex paperwork, concerned about HMRC raising a lengthy Enquiry into their claim, or simply worried about making an error within their claim. At Leyton UK, we’ll continue to play an active role in educating businesses about R&D tax relief, while ensuring all claims are fully compliant with HMRC’s strict regulations.
The numbers also show signs of a sluggish economy, which is yet another reminder of how difficult things have been for UK businesses over the last couple of years. What’s especially worrying is that these stats cover the period before the rise in Corporation Tax and the introduction of global tariffs, which means that the environment for innovation is likely to become even more challenging.
Below, we drill into HMRC’s Research and Development Tax Credits Statistics: September 2025 report, which helps to reveal the health of innovation investment in the UK.
Number of R&D Tax Credit claims by financial year, 2019-20 to 2023-24
The numbers are provisional, but the current estimates show a significant drop in companies claiming across the board. The total number of R&D Tax Credit claims fell from 63,780 in 2022-23 to 46,950 in 2023-24 – a higher than ever drop of 26%. There were also 27% fewer returns, and 27% fewer companies claiming. While the fall largely comes from a 31% drop in the number of SME scheme claims, there has also been a 5% decrease in RDEC claims.
The decline, which started to accelerate in 2022-23, can partly be attributed to HMRC’s stricter compliance rules, which aim to reduce fraud and error. But even taking compliance rules into account, the fall in claims is still deeply concerning, and marks a continuing year-on-year trend of decline, which is clearly illustrated by the table below:
Amount of R&D relief claimed by financial year (£ million), 2019-20 to 2023-24
Financial Year
SME Total
RDEC Total
Total cost for all schemes
2019–20
4,185
2,710
6,890
2020–21
4,200
2,655
6,855
2021–22
4,620
2,980
7,600
2022–23
4,440
3,245
7,690
2023–24
3,145
4,405
7,555
In the 2022-23 tax year, we saw a decline in the number of claims but a small rise in the actual amount of R&D relief claimed. Unfortunately, for 2023-24 there has also been a decline in the total amount of relief claimed, falling from £7,690 million to £7,555 million.
The fall comes from a 29% drop in the amount of relief claimed via the SME scheme. There was actually a 36% rise in relief claimed via the RDEC scheme, which means that for the first time more relief was paid out via RDEC than the SME scheme (and this is before the merged R&D expenditure credit scheme came into effect):
Amount of qualifying R&D expenditure by financial year (£ million), 2019-20 to 2023-24
Financial Year
SME Scheme
RDEC by LCs
RDEC claims by SMEs
All R&D schemes
2019–20
15,510
23,150
4,275
42,940
2020–21
15,695
21,230
3,830
40,760
2021–22
17,270
23,265
4,570
45,110
2022–23
16,240
24,880
5,590
46,710
2023–24
14,505
25,765
5,800
46,070
The estimates show that qualifying R&D expenditure has fallen slightly by 1%, from 46.7 billion in 2022-23 to 46 billion in 2023-24. Most of the R&D expenditure was invested by large companies and SMEs claiming through the RDEC scheme (69%).
Regional Growth
Region
Total cost (£ million), 2022–23
Total cost (£ million), 2023–24
Total cost growth (%)
Total Expenditure (£ million), 2022–23
Total Expenditure (£ million), 2023–24
Total expenditure growth (%)
North East (England)
140
115
-17.86%
780
670
-14.10%
North West (England)
530
490
-7.55%
2,915
2,855
-2.06%
Yorkshire and The Humber
320
265
-17.00%
1,840
1,550
-15.76%
East Midlands (England)
335
315
-5.97%
1,975
2,030
2.78%
West Midlands (England)
465
565
21.51%
3,070
3,605
17.43%
East (England)
890
1,015
14.04%
5,725
6,305
10.13%
London
2,555
2,320
-9.19%
15,155
13,905
-8.25%
South East (England)
1,385
1,475
6.50%
8,930
9,250
3.58%
South West (England)
370
350
-5.41%
2,110
2,040
-3.32%
Wales
150
115
-23.33%
800
670
-16.19%
Scotland
365
360
-1.37%
2,185
2,160
-1.14%
Northern Ireland
155
140
-9.68%
960
860
-10.35%
Unknown
30
25
-16.67%
265
170
-35.98%
Total
7,690
7,555
-1.76%
46,710
46,070
-1.37%
While the amount of relief claimed and overall R&D expenditure is down, there are some regional success stories hidden within the figures:
The West Midlands, England saw 21.51% growth in R&D relief claimed and an increase of 17.43% in R&D expenditure.
East, England saw 14.04% growth in the amount of R&D relief claimed and an increase of 10.13% in R&D expenditure.
South East, England saw 6.50% growth in R&D relief claimed and an increase of 3.58% in R&D expenditure.
However, overall, most regions are down. The largest falls came from:
Wales, which saw a 23.33% fall in R&D relief claimed and 16.19% drop in R&D expenditure.
North East, England which saw a 17.86% fall in R&D relief claimed and 14.10% drop in R&D expenditure.
Yorkshire and The Humber, England which saw a 17.00% fall in R&D relief claimed and 15.76% drop in R&D expenditure.
Industrial Growth
Sector
Total cost (£ million), 2022–23
Total cost (£ million), 2023–24
Total cost growth (%)
Total Expenditure (£ million), 2022–23
Total Expenditure (£ million), 2023–24
Total expenditure growth (%)
A. Agriculture, Forestry, Fishing
100
90
-10.00%
550
560
1.82%
B. Mining & Quarrying
120
130
8.33%
740
750
1.35%
C. Manufacturing
1,775
1,975
11.27%
12,420
12,725
2.46%
D. Electricity, Gas, Steam and Air Conditioning
45
35
-22.22%
315
235
-25.39%
E. Water, Sewerage and Waste
45
30
-33.33%
240
175
-27.08%
F. Construction
445
365
-17.98%
2,560
2,280
-10.94%
G. Wholesale & Retail Trade, Repairs
260
200
-23.08%
1,575
1,260
-20.00%
H. Transport & Storage
55
50
-9.09%
335
300
-10.45%
I. Accommodation & Food
20
<10
N/A
110
55
-50.00%
J. Information & Communication
1,815
1,565
-13.77%
9,505
8,970
-5.52%
K. Financial & Insurance
365
395
8.22%
2,730
2,660
-2.56%
L. Real Estate
10
<10
N/A
55
25
-54.55%
M. Professional, Scientific & Technical
1,720
1,850
7.56%
9,900
10,640
7.47%
N. Admin & Support Services
525
525
0.00%
3,475
3,335
-4.03%
O. Public Admin, Defence & Social Services
15
15
0.00%
100
105
5.00%
P. Education
20
<10
N/A
90
45
-50.00%
Q. Health & Social Work
75
55
-26.67%
375
300
-20.00%
R. Arts, Entertainment & Recreation
135
125
-7.41%
760
795
4.61%
S. Other services activities
115
110
-4.35%
690
685
-0.72%
Other or unknown
25
30
20.00%
180
180
0.00%
Total
7,690
7,555
-1.76%
46,710
46,070
-1.37%
The majority of R&D tax relief claims are concentrated in just three key sectors: Information & Communication, Manufacturing, and Professional, Scientific & Technical. Each of these individually accounts for roughly a quarter of the total relief claimed (21%, 26%, and 24% respectively).
As with the regional analysis, we can also better understand the health of UK R&D by breaking down year-on-year expenditure growth by industry.
Qualifying R&D expenditure has noticeably grown in Professional, Scientific & Technical (7.47%), Public Admin, Defence & Social Services (5.00%), and Arts, Entertainment & Recreation (4.61%). There has also been a slight increase in R&D expenditure for Manufacturing (2.46%), Agriculture, Forestry, Fishing (1.82%), and Mining & Quarrying (1.35%).
The overall fall in R&D expenditure mainly comes from the Information & Communication industry, which fell by -5.52%.
How Leyton can help
As HMRC tightens their compliance, businesses across the UK need to think about how they can benefit from the valuable R&D tax incentives on offer while staying within the rules.
The tighter regulations put extra pressure on already busy companies, who have the added burden of needing to contact HMRC within six months of the end of the accounting period they plan to claim for. If they wait too long, theywill miss the deadline. The data suggests that some companies are indeed hesitating before applying for R&D Tax Credits, but this means that they could be missing out on financial relief to which they’re completely entitled.
Our advice is that if you aren’t yet sure whether you can make an R&D claim, we’d still recommend that you send HMRC a pre-claim notification. There’s no penalty for changing your mind, so there is nothing to lose and potentially huge tax savings to gain.
For those concerned about potential enquiries, we also offer a fixed-fee HMRC enquiry support service where we will put together a robust defence of your R&D projects, even if we didn’t prepare the original claim (and there’s no fee if we did).
