{"id":1848,"date":"2025-09-05T10:35:54","date_gmt":"2025-09-05T10:35:54","guid":{"rendered":""},"modified":"2026-07-26T16:35:38","modified_gmt":"2026-07-26T14:35:38","slug":"benchmarking-the-uks-rd-tax-incentives-against-the-rest-of-the-world","status":"publish","type":"article","link":"https:\/\/leyton.com\/uk\/insights\/articles\/benchmarking-the-uks-rd-tax-incentives-against-the-rest-of-the-world\/","title":{"rendered":"Benchmarking the UK\u2019s R&D tax incentives against the rest of the world\u00a0"},"content":{"rendered":"\t\t
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Almost all countries fund research and development to some extent. They do so because governments around the world know that lowering the cost of R&D for businesses encourages private investment, which helps to drive productivity and boost economic performance. R&D efforts can also help deliver the solutions to some of society\u2019s biggest challenges, such as curing deadly diseases or cutting carbon emissions.   
 
But there are different ways to fund R&D. Some governments prefer to offer incentives through tax relief, and others will choose more targeted public investments, (many will opt for a mix of both). Of the different options available, recent data from the OECD<\/a> (the Organisation for Economic Co-operation and Development) revealed that \u201cR&D tax incentives continue to outpace other forms of government support for R&D in most countries.\u201d <\/p>\n\n\n\n

In the past, the UK has used OECD data as justification for the \u201cgenerosity\u201d of its R&D tax relief scheme. For this article, we\u2019ve looked at how the UK\u2019s R&D incentives really compare to the support offered by the rest of the world. <\/p>\n\n\n\n

Where does the UK rank on R&D tax support? <\/h2>\n\n\n\n

So, where does the UK sit? According to the OECD data, which includes OECD countries and other major economies, the UK ranks third for government tax support for business R&D as a percentage of GDP, at 0.30%. The table below shows the top ten countries from the report: <\/p>\n\n\n\n

Government tax support for business R&D as a percentage of GDP (2023) <\/h2>\n\n\n\n\n \n \n \n
Ranking<\/th>\n Country<\/th>\n Tax support<\/th>\n <\/tr>\n <\/thead>\n
1<\/td>Portugal<\/td>0.39%<\/td><\/tr>\n
2<\/td>Iceland<\/td>0.38%<\/td><\/tr>\n
3<\/td>UK<\/td>0.30%<\/td><\/tr>\n
4<\/td>France<\/td>0.28%<\/td><\/tr>\n
5<\/td>China<\/td>0.24%<\/td><\/tr>\n
6<\/td>Belgium<\/td>0.23%<\/td><\/tr>\n
7<\/td>Ireland<\/td>0.22%<\/td><\/tr>\n
8<\/td>South Korea<\/td>0.19%<\/td><\/tr>\n
9<\/td>Canada<\/td>0.19%<\/td><\/tr>\n
10<\/td>Austria<\/td>0.17%<\/td><\/tr>\n <\/tbody>\n<\/table>\n\n\n\n

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The UK\u2019s spending on R&D as a percentage of GDP is regularly cited in parliamentary papers (for example, Research & development spending<\/a>). The previous government<\/a> went as far as to say that \u201cthe UK has one of the most generous R&D tax relief systems in the world\u201d, although the Federation of Small Businesses (FSB)<\/a> pointed out that this wasn\u2019t down to the generosity of the scheme; it was simply because of the large quantity of companies that had applied for R&D tax relief in the UK. <\/p>\n\n\n\n

A more accurate measure of generosity is the OECD\u2019s Implied tax subsidy rates on R&D expenditures<\/a>, which shows the percentage of R&D costs that governments around the world effectively cover through tax incentives. An analysis from Tax Foundation Europe<\/a> ranked the UK as 14th<\/sup> based on its implied subsidy rate for large firms: <\/p>\n\n\n\n\n \n \n \n
Ranking<\/th>\n Country<\/th>\n Rate for profitable large firms<\/th>\n <\/tr>\n <\/thead>\n
1<\/td>Portugal<\/td>39%<\/td><\/tr>\n
2<\/td>France<\/td>36%<\/td><\/tr>\n
3<\/td>Poland<\/td>36%<\/td><\/tr>\n
4<\/td>Spain<\/td>33%<\/td><\/tr>\n
5<\/td>Lithuania<\/td>31%<\/td><\/tr>\n
6<\/td>Iceland<\/td>30%<\/td><\/tr>\n
7<\/td>Slovak Republic<\/td>28%<\/td><\/tr>\n
8<\/td>Ireland<\/td>27%<\/td><\/tr>\n
9<\/td>Greece<\/td>26%<\/td><\/tr>\n
10<\/td>Slovenia<\/td>26%<\/td><\/tr>\n
11<\/td>Czech Republic<\/td>24%<\/td><\/tr>\n
12<\/td>Germany<\/td>22%<\/td><\/tr>\n
13<\/td>Norway<\/td>22%<\/td><\/tr>\n
14<\/td>United Kingdom<\/td>18%<\/td><\/tr>\n <\/tbody>\n<\/table>\n\n\n\n

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Digging into the original OECD data, the UK is ranked 13th<\/sup> <\/sup> based on its implied subsidy rate for loss-making large firms, and 15th<\/sup> for both profitable and loss-making SMEs. <\/p>\n\n\n\n

The UK\u2019s implied tax subsidy rates are also behind those of China, which offers 32% for profitable SMEs and large firms, 25% for loss-making SMEs, and 24% for loss-making large firms. <\/p>\n\n\n\n

So, while the UK might rank highly for its R&D tax incentives as a percentage of GDP, it still has some distance to go before it can call itself one of the most generous systems in the world. <\/p>\n\n\n\n

What R&D tax incentives are available in the UK? <\/h2>\n\n\n\n

HMRC offers several types of R&D tax incentives in the form of R&D Tax Credits<\/a>. These include: <\/p>\n\n\n\n

For account periods starting before 1 April 2024: <\/p>\n\n\n\n