{"id":1898,"date":"2023-02-15T08:34:40","date_gmt":"2023-02-15T08:34:40","guid":{"rendered":""},"modified":"2026-07-26T19:02:03","modified_gmt":"2026-07-26T17:02:03","slug":"how-to-calculate-rd","status":"publish","type":"article","link":"https:\/\/leyton.com\/uk\/insights\/articles\/how-to-calculate-rd\/","title":{"rendered":"How to calculate R&D Tax Credits"},"content":{"rendered":"\t\t
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R&D Tax Relief is an HMRC incentive for businesses that invest in research and development – aiding the advancement of knowledge and economic productivity across the UK.<\/p>\n\n


Understanding how much tax relief you\u2019re eligible for may seem complex, especially when tax relief rates are changing with the government reforming<\/a> how much you\u2019re able to claim. In this blog we explain the fundamentals of how to calculate R&D Tax Credit<\/a> benefits, with tax credit rates for pre and post-April 2023 expenditure.<\/p>\n\n

Your R&D Tax Credits estimate will depend on whether you use the SME R&D Relief<\/a> scheme or Research & Development Expenditure Credit (RDEC)<\/a>. Essentially, the SME scheme is for businesses that employ fewer than 500 staff and have a turnover of under \u20ac100m (or \u20ac86m net assets) while RDEC is for large businesses or subcontracted companies that carry out R&D. You can find out more by reading our article on The Differences Between The SME & RDEC R&D Tax Credit Schemes<\/a>.<\/p>\n\n

Calculating SME R&D Relief using R&D Tax Credit rates<\/h2>\n\n

UK R&D Tax Credit rates for pre-April 2023 expenditure<\/h3>\n\n

SME R&D Relief helps businesses reduce their taxable profits. HMRC allows businesses to deduct an extra 130% on qualifying R&D expenditure costs from the annual profits on their corporation tax bill.<\/p>\n\n

This means profitable companies can claim up to 24.70p of every \u00a31 spent on R&D activities, allowing your business to increase investment in R&D further.<\/p>\n\n

For example, if you have spent \u00a3100 on qualifying R&D your additional enhancement would uplift this to an extra \u00a3130. Corporation tax in the UK is currently 19%, meaning that you would receive an extra \u00a324.70 through R&D Tax Credits.<\/p>\n\n

SME R&D Relief also helps loss-making companies, who can surrender their losses in exchange for a cash payment worth \u00a333.35, based on a credit rate of 14.5%.<\/p>\n\n

Loss-making businesses can claim 230% of their qualifying R&D expenditure. For example, for \u00a3100 spent on R&D costs you\u2019d get an extra \u00a3130 uplift, resulting in \u00a3230 of enhanced expenditure. When the 14.5% credit is applied to this enhanced expenditure you’d receive \u00a333.35 through R&D Tax Credits.<\/p>\n\n

UK R&D Tax Credit rates for expenditure from April 2023<\/h3>\n\n

For expenditure from 1st April 2023, the additional deduction for SMEs will decrease from 130% to 86%, and the SME credit rate will reduce from 14.5% to 10%. On top of this, corporation tax is changing to 25% for all companies with over \u00a3250,000 in profits.
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Profitable businesses can therefore claim up 21.50p of every \u00a31 spent on R&D Activity. For example, if you spend \u00a3100 spend on eligible R&D, your additional uplift would now be \u00a386. If your company pays the 25% corporation tax rate, you\u2019d receive \u00a321.50 through R&D Tax Credits.<\/p>\n\n

Loss-making businesses will be able to claim 186% of qualifying R&D expenditure. The 10% credit rate will result in \u00a318.60 of R&D Tax Credits for every \u00a3100 spent.<\/p>\n\n

Calculating R&D Expenditure Credit (RDEC)<\/h2>\n\n

RDEC rates for March 2023 expenditure<\/h3>\n\n

For RDEC claims, the tax credit itself is taxable as trading income. Regardless of whether you are profitable or making a loss, it reduces your corporation tax liability. <\/p>\n\n

Large companies, or SMEs using the RDEC scheme, can claim 13% back in tax relief on qualifying R&D expenditure. This means that for every \u00a3100 you spend on eligible R&D activity, you receive \u00a313 R&D Expenditure Credit (provided as a cash payment). As this is taxable, your net benefit would be \u00a310.53.<\/p>\n\n

Find out more about RDEC, including what HMRC classes as qualifying expenditure, by reading our blog RDEC Explained: Everything You Need To Know About The R&D Expenditure Credit Scheme<\/a>.<\/p>\n\n

RDEC rates for expenditure from April 2023<\/h3>\n\n

For expenditure from 1st April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%. So, for every \u00a3100 spent on eligible R&D activity, you will receive \u00a320 R&D Expenditure Credit. After tax, this is a net benefit of \u00a315.<\/p>\n\n

Calculating R&D Tax Credits explained<\/h2>\n\n

The following table shows example estimates for calculating R&D Tax Credits for the SME Relief Scheme and RDEC using the rates for pre-April 2023 expenditure and for expenditure from after April 2023.<\/p>\n\n

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Get your R&D Tax Relief estimate today<\/h2>\n\n

R&D Tax Credits are a valuable way of recouping the costs associated with developing innovative products or services. If you would like a quick estimate of what you can claim, use our free R&D Tax Credit calculator.<\/a><\/p>\n\n

To reap the full benefits of R&D Tax Credits, it is recommended that you work with an expert R&D Tax Specialist team. They can help you identify your eligible expenditure as well as ensure that your claim is fully compliant with HMRC rules.<\/p>\n\n

11% of UK R&D Tax Relief claims are submitted by Leyton. We\u2019re trusted by our clients to help them unlock the full value of what they\u2019re eligible for. Speak to a specialist today<\/a> to find out how much your business can claim. Already claiming? Our consultants are highly experienced in uncovering additional value from existing R&D Tax Credit claims. Maximise your R&D Tax Relief<\/a>.<\/p>\n\n

If you enjoyed reading this article, you may also like our blog on How R&D Tax Credits Are Changing From April 2023<\/a>.




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