{"id":1860,"date":"2025-05-01T08:57:42","date_gmt":"2025-05-01T08:57:42","guid":{"rendered":""},"modified":"2026-07-26T19:02:00","modified_gmt":"2026-07-26T17:02:00","slug":"the-rd-paye-nic-cap-explained","status":"publish","type":"article","link":"https:\/\/leyton.com\/uk\/insights\/articles\/the-rd-paye-nic-cap-explained\/","title":{"rendered":"The R&D PAYE NIC cap explained"},"content":{"rendered":"\t\t
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R&D tax relief is a government incentive that rewards companies who invest in innovative projects in a field of science or technology. But the amount that companies can claim is subject to a PAYE NIC cap.<\/p>\n\n\n\n

Essentially, for any one year, the PAYE NIC cap limits the amount of payable R&D Tax Credit to \u00a320,000 plus three times your company\u2019s total National Insurance Contributions (NICs) and Pay as you Earn (PAYE) liabilities (although the cap\u2019s rules are different for businesses claiming RDEC – please see below for more information).<\/p>\n\n\n\n

In its current form, HMRC introduced<\/a> the PAYE NIC cap for accounting periods starting on or after 1 April 2021 as a way of targeting abuse and fraud. Today, the cap applies to all R&D Tax Credits<\/a> schemes, including the new merged R&D scheme and the enhanced R&D intensive support scheme (ERIS).

In this article, we explain how the R&D PAYE NIC cap works, including how it applies to all of the different R&D Tax Credits schemes.<\/p>\n\n\n\n

How the R&D PAYE NIC cap applies to the different schemes<\/h2>\n\n\n\n

For accounting periods starting before 1 April 2024:<\/h3>\n\n\n\n

R&D SME scheme<\/h4>\n\n\n\n

The cap for R&D SME scheme<\/a> claimants is \u00a320,000 plus 300% of your company\u2019s total PAYE and NIC contributions.<\/p>\n\n\n\n

RDEC<\/h4>\n\n\n\n

For the Research and Development Expenditure Credit (RDEC)<\/a>, the cap is purely based on the PAYE and NIC of the employees directly working on your R&D projects (i.e., not your company\u2019s total PAYE and NIC liabilities).<\/p>\n\n\n\n

For accounting periods starting from 1 April 2024:<\/h3>\n\n\n\n

Merged R&D scheme<\/h4>\n\n\n\n

The merged R&D scheme<\/a> adopts the broader PAYE and NIC cap calculation used for the old SME scheme (\u00a320,000 plus 300% of your company\u2019s total PAYE and NIC contributions).<\/p>\n\n\n\n

One new benefit of the merged R&D scheme is that if your calculated benefit exceeds the cap, the excess amount isn’t lost. Instead, it can be carried forward to become part of your R&D relief claim for the following accounting period.<\/p>\n\n\n\n

ERIS<\/h4>\n\n\n\n

As with the old SME scheme, the cap for ERIS<\/a> is \u00a320,000 plus 300% of total PAYE and NIC contributions.<\/p>\n\n\n\n

Unlike the new merged R&D scheme, if your claim goes over the cap then unfortunately, you\u2019re not able to claim for the extra amount in the following accounting period.<\/p>\n\n\n\n

Working out PAYE & NIC liabilities<\/h2>\n\n\n\n

Your total PAYE and NIC liabilities include:<\/p>\n\n\n\n