Planning on investing in R&D? Make sure you know about the tax relief you can claim before you start your next project.
R&D Tax Credits help to drive growth and boost the UK economy, incentivising businesses by reducing the financial risk of innovation. This is why the UK Government has committed to maintaining the current level of support for the foreseeable future. In fact, the UK Innovation Report 2025 found that the UK offered the highest level of government-backed financial support for business R&D (as a share of GDP) among OECD countries.
Because the relief can have a significant effect on cash flow and return on investment, it shouldn’t be treated as an afterthought once projects are already underway. Taking the time to understand how the scheme works can really help to maximise your investment.
Why invest in R&D?
R&D helps businesses maintain their competitive edge. Through R&D, new products and services are developed or improved, processes and technologies are made more efficient and sustainable, and exciting breakthroughs are made that advance our overall scientific knowledge.
There are also huge financial advantages to investing in R&D. The State of Innovation 2025 found that innovative businesses reported an average sales growth of 7%, much higher than the 0.4% growth seen by those who weren’t innovating.
How much tax relief is available to support R&D investment?
Most profitable businesses, large or small, would claim through the merged R&D expenditure credit scheme:
- The credit rate is 20% for all eligible R&D expenditure
- This credit counts as trading income (so it is therefore subject to corporation tax)
- If you’re paying the main rate of 25%, the net benefit is 15%
- If you’re paying the small profits rate of 19%, the net benefit is 16.2%
Loss-making, R&D intensive SMEs can apply for Enhanced R&D Intensive Support (ERIS) so long as their qualifying R&D spend makes up at least 30% of the total expenditure.
ERIS offers:
- An additional 86% deduction on top of the normal 100% tax deduction for R&D
- A payable credit worth up to 14.5%
What counts as R&D for tax purposes?
Those who work on R&D, such as engineers, developers and scientists, often don’t realise that what they’re doing is eligible R&D in the eyes of HMRC. Instead, they think that their technical achievements are simply part of their job.
But where business innovation is concerned, it’s always worth checking to see if your projects are eligible for relief. For tax purposes, R&D occurs when a project seeks to achieve an advance in science or technology by resolving technical uncertainty.
This definition is more flexible than many businesses expect. R&D doesn’t have to take place in a laboratory, and it also doesn’t need to involve groundbreaking discoveries. Many companies invest in qualifying R&D simply as part of their normal efforts to improve products, services and internal processes.
What do we need to think about before our next R&D investment?
Before you begin your research and development project, it’s worth thinking about how you can maximise your R&D investment. The best way to achieve this is by planning to make an R&D claim from the outset.
Below, we list our tips for how you can proactively plan to maximise your R&D Tax Credits claim:
Understand what really qualifies
We know from experience that businesses often underestimate their eligibility, assuming that only their most ambitious or “headline” projects qualify. But in reality, many innovative activities, problem-solving efforts, and improvement projects can still fall within the scope of R&D tax relief. Getting clarity early helps to make sure that valuable work isn’t overlooked and that opportunities for claims aren’t missed.
Think beyond individual projects
Some companies initially approach R&D claims on a project-by-project basis, only to later discover that their overall level of innovation is much broader. Taking a more holistic view of your R&D activity can significantly increase the value of a claim and better reflect how innovation happens across your business.
Plan for documentation early
Good R&D claims rely on clear evidence of technical challenges and how they were addressed. The most successful businesses don’t try to recreate this retrospectively. Instead, they build simple processes into their projects from the start, making it easier to support a claim in the event of an HMRC enquiry.
Factor tax relief into cash flow, not just year-end results
Many businesses use R&D Tax Credits to help to fund new hires, equipment, or the next phase of research and development. Understanding when relief is received and how it has an impact on cash flow can really help to influence the scale, timing and ambition of your R&D investment.
Get the right support
R&D tax relief rules are complex, and expert support can make a tangible difference. Not just in maximising a claim, but in giving businesses confidence that their claim is both robust and compliant.
Our team of experts can help translate your technical projects into clear, successful claims, allowing your teams to stay focused on what they do best: innovation.
Get in touch to find out more.
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