R&D tax relief changes

R&D tax relief has changed more in the past three years than in the previous decade, and as the role of the UK’s technology industry continues to grow, the pace shows no sign of slowing. This page tracks those changes as they happen, from the 2024 merger of the SME and RDEC schemes through to the latest Budget announcements, so you always have one place to check what applies to your claim.

Entries are listed most recent first. If you’re claiming for the first time, start with what the merged R&D scheme means below; if you’re catching up on a specific announcement, the dated headings will take you straight there. For a working estimate of what your business could claim under the current rules, try our R&D tax credit calculator.

2025 Update: Autumn Budget and Advanced Assurance Service

Autumn Budget update 2025

Mohammed Mogra, a Tax Director at Price Bailey, shares his surprise at the lack of R&D policy changes in the Autumn Budget below. We also briefly provide an update on what SMEs can expect in 2026.

It’s surprising how little attention R&D incentives received this time around. Aside from a small technical tweak to payment mechanisms within groups, there’s nothing new on eligibility or the merged scheme.

Claimants had hoped for changes to the claim notification rules to make the process fairer, but no amendments have been made.

As a result, genuine businesses continue to miss out on relief due to timing issues or lack of awareness of the requirement. It feels like the major reforms are now bedded in, but we’re still waiting on the outcome of the advance assurance consultation for SMEs . More news to come Spring 2026.

R&D: Advance Assurance for SMEs and new payment mechanism update

From spring 2026, a new Advance Assurance Service will give smaller businesses upfront guidance on whether their innovation projects qualify for relief. Alongside this, legislation taking effect from 26 November 2025 will clarify how intra-group payments linked to R&D-style credits (RDEC, AVEC and VGEC) should be treated for Corporation Tax, reducing ambiguity for groups.

Fresh investment and talent initiatives

£130m through the Innovate UK Growth Catalyst to help frontier-stage companies expand
£500m via the UKRI Missions Accelerator to reduce major infrastructure costs
£25m to enhance doctoral training with an entrepreneurship focus
£4.5m to continue supporting women-led innovation through dedicated awards

2024 Update: Merged R&D Scheme (MRDEC)

From 1 April 2024, the UK government has merged the previous SME scheme and R&D Expenditure Credit (RDEC) into a single, streamlined merged scheme.

If you’re already claiming R&D tax relief, this may affect how much relief you’re entitled to — and how you claim it. The changes apply for accounting periods beginning on or after 1 April 2024.

What is the merged R&D scheme (MRDEC)?

The merged scheme largely follows the old RDEC rules but is open to companies of all sizes, including SMEs.

Key features:

Taxable above-the-line credit of 20% of qualifying expenditure
Net cash benefit is typically around 15% after corporation tax
Works whether you’re profit-making or loss-making
Relief is processed through the tax return, with the credit included in taxable profits
Changes to subcontracted expenditure rules
Subcontracted expenditure rules have changed
New restriction of overseas expenditure

What are the new rules on subcontractors?

The treatment of subcontracted R&D is one of the biggest changes under the merged scheme.

If you subcontract a part of your own R&D project or are subcontracted to work on someone else’s R&D project, only one party is able to claim R&D tax relief.
Broadly, the company that intends to undertake the R&D and bears the risk of that R&D gets the relief.
Relief for overseas subcontractors is also now restricted (see below).

This change mainly affects SMEs who previously claimed under the old SME scheme. However, those previously claiming the RDEC may find that they are now able to include some subcontractor costs which they couldn’t before, or conversely, may find that they are no longer able to make a claim.

As the rules are complex and the impact will vary depending on your circumstances, we recommend seeking professional advice to ensure your claim is accurate and compliant.

Can I still claim for overseas R&D work?

Only in limited cases. For accounting periods beginning on or after 1 April 2024, overseas expenditure is generally excluded, unless:

It would be wholly unreasonable to replicate the work in the UK (e.g. due to physical conditions or lack of expertise).
The necessary conditions for R&D to take place are not present in the UK (geographical, environmental or social factors).
The necessary conditions for R&D to take place are present where the R&D takes place (legal or regulatory requirements).

Lower cost or limited availability of workers does not fall within the definition of necessary conditions, so cannot be used as the reason for carrying out R&D overseas.

This restriction applies to:

Subcontracted R&D
Externally provided workers

It’s a significant change, especially for companies with global R&D teams. You’ll need to carefully document your reasoning if claiming overseas costs.

Are there any special rules for loss-making SMEs? (ERIS)

Yes. A separate R&D-intensive SME scheme has been introduced for small and medium-sized companies that are heavily focused on R&D., known as ERIS*.

You may qualify if:

Your R&D spend is at least 30% of total costs (lowered from 40% for accounting periods commencing pre-1 April 2024),
and you’re a loss-making SME that meets the definition of an SME for R&D tax purposes (this is broader than the general definition of a small or medium sized enterprise).

If eligible, you can claim an enhanced tax credit worth up to £27 for every £100 of R&D spend — similar to the old SME scheme.

This is designed to support early-stage, innovative companies that aren’t yet profitable.

How does the merged scheme compare to the R&D-intensive SME scheme?

The financial benefit you receive depends on which scheme you qualify for. Here’s how the two schemes compare using the same £100,000 of qualifying R&D spend:

	Merged R&D Scheme (MRDEC)	R&D-Intensive SME Scheme (ERIS)
Qualifying expenditure	£100,000	£100,000
Credit/deduction rate	20% taxable credit	86% enhanced deduction
Gross benefit	£20,000 taxable credit	£86,000 additional deduction
Corporation tax impact	Taxed at 25% = £5,000 Taxed at 19% = £3,800	N/A – benefit taken as repayable tax credit
Net benefit	£15,000 (at 25% rate) £16,200 (at 19% rate)	£26,970 repayable credit (at 14.5%)
Type of benefit	Taxable credit (RDEC-style)	Cash repayment (if loss-making)

*ERIS = Enhanced R&D-intensive Support scheme (for loss-making SMEs with at least 30% R&D intensity)

Closing thoughts

If you’re not sure which scheme applies to you, whether your overseas or subcontracted costs still qualify, or how the changes above affect a claim you’re already planning, our R&D tax relief team can talk you through it. We’ll keep updating this page as further announcements land, so it’s worth bookmarking if R&D forms part of your ongoing tax planning.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information on this page is intended as a general guide only. While we work to keep our content accurate and up to date, we cannot guarantee that it reflects the position at the time you are reading it. No responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm. For more information on our editorial process, click here.

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