UK R&D Tax Relief for Startups, Explained

Last updated: 2 November 2026

UK R&D tax relief is a tax relief or payable credit claimed through the company tax return by companies chargeable to UK Corporation Tax, under either the merged RDEC scheme or ERIS for loss-making, R&D-intensive SMEs.

What are UK R&D tax credits?

The merged R&D expenditure credit (RDEC) scheme and Enhanced R&D Intensive Support (ERIS) apply to accounting periods beginning on or after 1 April 2024. Only companies chargeable to UK Corporation Tax can claim. This is a structural point, not a formality: if a business is not within the Corporation Tax charge, this relief is not available to it.

There are two routes in the current regime. The merged scheme (RDEC) is the route for most claimants. ERIS is for loss-making, R&D-intensive small and medium-sized companies. The relief is a tax relief or payable credit claimed through the company tax return, not a grant, so it sits inside the tax computation rather than outside it.

What counts as R&D for tax purposes?

HMRC’s test is that the project must seek an advance in science or technology by resolving scientific or technological uncertainty. Uncertainty exists when an expert “cannot say if something is technologically possible, or how it can be done, even after referring to all the available evidence.” That wording matters because it frames the claim around genuine technical doubt, not commercial difficulty.

The advance must be in overall knowledge or capability in the field, not just the company’s own state of knowledge. Software development falls within computer science and information technology under the guidelines; where uncertainty cannot be readily resolved by a competent professional, hardware and software methods are equally R&D.

Routine work, such as applying known methods or configuring existing tools with no technical uncertainty, is unlikely to meet the test. In plain terms, if a competent professional could resolve the issue by routine reference to existing knowledge, the work probably does not qualify. Startups should be careful not to label ordinary product development as R&D unless the technical uncertainty is real and recorded.

How does the merged scheme (RDEC) work?

The merged scheme gives a rate of 20% of qualifying expenditure. That rate is applied to qualifying expenditure to produce the credit. For example, £200,000 of qualifying expenditure gives a £40,000 credit before the credit is taxed. The arithmetic is straightforward: 20% multiplied by £200,000 equals £40,000.

This expenditure credit is liable to Corporation Tax as it is classed as trading income. So the benefit after tax is smaller than 20%. The exact post-tax value depends on the company’s tax position. The key point is that the headline 20% is not the final cash benefit.

What is ERIS and who qualifies?

ERIS gives an extra deduction of 86% of qualifying costs when calculating the adjusted trading loss, on top of the 100% deduction already in the accounts, for a total of 186%. It also gives a payable tax credit, not liable to tax, worth up to 14.5% of the surrenderable loss. The two parts work together: the enhanced deduction increases the loss, and the payable credit can turn part of that loss into cash.

To qualify, the SME must be loss-making, making a trading loss for tax purposes before the additional deduction is made, and R&D intensive, with relevant R&D expenditure at least 30% of total expenditure. Both conditions matter. A company that is profitable, or that spends too small a share of its total expenditure on R&D, will not qualify for ERIS even if its projects are genuinely innovative.

In a simplified example, £100,000 of qualifying costs gives an extra deduction of £86,000, for a total of £186,000. If the whole £186,000 were surrenderable loss, 14.5% would be £26,970, about 27p per £1 of qualifying spend. The arithmetic is: £100,000 times 86% equals £86,000; £100,000 plus £86,000 equals £186,000; £186,000 times 14.5% equals £26,970; £26,970 divided by £100,000 is 0.2697, or about 27p. Actual figures depend on the company’s tax computation, so the example is illustrative rather than a promise of cash.

How do you make a claim?

For accounting periods of 18 months or less, the claim deadline is 24 months from the last day of the period of account. For longer periods, it is 42 months from the first day. These are different starting points and different durations, so the correct deadline should be checked against the actual period of account rather than assumed.

A claim notification form is needed for periods beginning on or after 1 April 2023 if you are claiming for the first time or your last claim was more than 3 years earlier. It is due by 6 months after the end of the period of account. No notification form is needed for claims made on or after 1 April 2027. The notification needs the UTR, the main senior internal R&D contact, agent contact details, accounting period dates, and a summary of the high-level planned activities.

You also need an additional information form and the CT600L supplementary form. The company return has tick-boxes confirming both were submitted. In practice, that means the claim is not just a number in the tax return; it must be supported by the required forms and information.

Checklist before you claim (our list, from the rules above)

The company pays UK Corporation Tax.
The project seeks a technological advance.
You can name the uncertainty and how you tried to resolve it.
You have records of staff time and costs.
Notification is filed on time if it is a first claim.
Check HMRC guidance or take advice.

Item	Figure
Merged RDEC rate	20%
ERIS extra deduction	86%
ERIS total deduction	186%
ERIS payable credit	up to 14.5%
ERIS R&D intensity threshold	30%
Claim deadline, short period	24 months
Claim deadline, long period	42 months
Notification due	6 months

Frequently asked questions

Can a profitable startup use RDEC?

Yes. The merged RDEC scheme is the route for most claimants, and it is not limited to loss-making companies. The credit is liable to Corporation Tax, so the benefit after tax is smaller than 20%.

Who can claim ERIS?

ERIS is for loss-making, R&D-intensive SMEs. The SME must make a trading loss for tax purposes before the additional deduction is made, and its relevant R&D expenditure must be at least 30% of total expenditure.

Is R&D relief a grant?

No. It is a tax relief or payable credit claimed through the company tax return. You should check HMRC guidance or take advice before claiming.

When is the claim notification form due?

The notification form is due by 6 months after the end of the period of account where it is needed. If you are unsure whether it applies, check HMRC guidance or take advice.

Sources

Figures and prices were checked on 2 November 2026; check the linked sources before relying on them. This article is general information, not tax, legal or investment advice.