Spring Statement 2025: No change to R&D and grant funding

The Chancellor, Rachel Reeves, delivered her first SpringStatement today on 26 March 2025.  

Her main priorities were addressing the vanishing fiscal headroom, which, since the Autumn, had reversed from +£9.9 billion by the end of parliament to -£4.1 billion, as well as house-building and increased defence spending.

As this was not billed as a major fiscal event, few were expecting dramatic tax rises or cuts, and her speech bore that out.

2025 Spring Statement impact on R&D and grants

As was the case back in October last year, the R&D tax credit system and broader areas of innovation funding were left alone. This, as you may know, was in stark contrast to significant changes made in the preceding years.

The lack of any major developments provides welcome continuity for businesses planning their own finances and operations relating to innovation.

In fact, in the accompanying literature to the Chancellor’s speech, there was confirmation that the government will consult on widening the use of advance clearances in R&D tax credits. This, they state, is to provide certainty to businesses on their R&D claims, as well as reducing error and fraud.

It shows the government’s intention to  provide greater clarity to businesses during the R&D claim experience. The mention of “reducing error and fraud” picks up on the HMRC report from 2024 which uncovered widespread abuse of the R&D system.

On this point, while not R&D-specific, measures were announced to help close “the tax gap”. This included investing £100 million to recruit an additional 500 HMRC compliance staff. We may see this have some impact on R&D tax credit claims, adding further rigour or speeding up bottlenecks.

Further innovation funding in the 2025 Spring Statement

There was no mention of specific grant funding, but the Chancellor did announce ring-fenced budgets for innovation within defence spending, as well as making it easier for SMEs to join the defence supply chain. The two specific innovation ring-fences were:

• From next year, at least 10% of the MOD’s equipment procurement budget will be spent on novel technologies like unmanned autonomous systems and AI capabilities
• The setup of UK Defence Innovation (UKDI), which will align the MOD with structures for innovation. UKDI will be operational by July, with an initial annual budget of £400 million – a figure set to rise in future years

The term “defence industrial superpower” was used, and if this is achieved, it will provide a rich environment for R&D and innovation.

Spring Statement 2025 R&D FAQs

Did the 2025 Spring Statement make any changes to R&D tax relief?

No, the Spring Statement 2025 kept the R&D tax relief schemes unchanged.

Did the 2025 Spring Statement contain any news about R&D grants?

No specific mention of R&D grants was made, although the government announced a prioritisation of innovative technologies within the defence supply chain.

Was Patent Box mentioned in the 2025 Spring Statement?

No, Patent Box was not mentioned directly in the Spring Statement 2025. However, back in the Autumn Budget, the government committed to maintaining the Patent Box scheme.

Kene’s views on the Spring Statement 2025

Building on the continuity provided in the 2024 Autumn Budget, we welcome the fact that the R&D tax relief and grant regimes were left untouched in the 2025 Spring Statement.

This gives much needed stability to the UK companies taking a risk with innovation – the engine room of growth in the economy. We hope some of the announcements in defence will have a positive impact on companies operating in this sector – particularly SMEs.

We will wait with interest to see how the investment in HMRC compliance plays out. We are all for reducing error and fraud, but also hope it will lead to a smoother claims process for the majority of companies which claim R&D tax credits in a professional manner and with respect.

If you have any questions relating to the 2025 Spring Statement and R&D tax relief, grants or Patent Box, please do not hesitate to contact our team of experts and we can help you understand your position. Or Book a free consultation today.