R&D tax credits explained

Research and Development (R&D) tax credits are a UK government incentive that rewards companies of all sizes and sectors for investing in innovation. The relief is given as a cash payment or a reduction in corporation tax, supporting growth and reinvestment.

To qualify, your project must meet HMRC’s definition of R&D: it must seek to make an advance in science or technology by resolving scientific or technological uncertainty. This means going beyond routine improvements—work must push the boundaries of current knowledge and be led by competent professionals.

Recent changes to HMRC R&D tax credits have made the incentive even more valuable for innovative UK businesses. While compliance requirements have tightened, the scope for eligible activities remains broad – rewarding companies that are pushing for technological or scientific advancement.

This shift means that partnering with experienced R&D tax credit specialists is more important than ever. The right advisor will help you navigate updates to the R&D tax credit scheme, maximise your claim, and ensure it aligns with HMRC’s evolving criteria.

Despite greater scrutiny, the potential returns – from reducing corporation tax liabilities to improving cash flow – make it a worthwhile opportunity. With the right support, claiming R&D tax relief can unlock vital funding for growth, reinvestment, and long-term innovation.

R&D doesn’t mean reinventing the wheel: it’s solving problems in a new way or having to overcome a challenge that doesn’t have a straightforward solution. Examples of R&D tax credits UK might include creating new products, processes, devices or services, or modifying existing ones. What’s more, you can even claim HMRC R&D tax credits if your project was unsuccessful.

If your company is a UK-registered limited business subject to Corporation Tax and is investing in innovation, your projects may qualify for HMRC R&D tax credits.

Eligibility is based on whether your work seeks to achieve an advance in science or technology by resolving scientific or technological uncertainties – even if the project does not succeed.

Qualifying activities are not limited to traditional research labs. They span a wide range of sectors, from software development and engineering to manufacturing, construction, and beyond. Whether you are improving existing products or developing new processes, if your work involves tackling technical challenges, it could fall within the scope of the R&D tax credit scheme.

Given HMRC’s increased scrutiny and evolving guidance, working with trusted R&D tax credit specialists can help ensure your claim is both robust and compliant. Expert advice will support you in identifying eligible activities and navigating the complexities of the claim process – helping you determine your eligibility and maximise the benefits available.

R&D tax credits are calculated based on the qualifying expenditure your business has invested in innovation. The level of relief depends on which part of the R&D tax credit scheme your business falls under, with different rates applying in each case.

The table below outlines the current rates available.