R&D tax relief · Director guide · Updated May 2026

R&D tax credits UK explained: how they work in 2026.

Written by Iftikhar Rashid FCCA — Managing Partner, RR Accountants. 16 years in practice.

What are R&D tax credits?

R&D tax relief allows UK limited companies to deduct qualifying research and development expenditure at an enhanced rate — or claim a cash credit if loss-making. The activity must advance science or technology and involve genuine technical uncertainty. Since April 2023, relief rates have changed significantly and HMRC enquiry rates have risen sharply. Claims must now be supported by contemporaneous technical evidence and an Additional Information Form (AIF). [VERIFY: gov.uk]

⚠️ Post-2023 landscape: HMRC increased R&D enquiries significantly from 2023. Claims without proper technical documentation are at high risk. We only claim where activity genuinely qualifies.

Does your activity qualify for R&D relief?

Likely to qualify

  • ✓Building software that solves a previously unsolved technical problem
  • ✓Developing new manufacturing processes or materials
  • ✓Creating novel algorithms where existing solutions don't exist
  • ✓Medical device or diagnostic technology development
  • ✓Engineering solutions involving genuine technical uncertainty
  • ✓Biotech, pharma, or life sciences research

Does NOT qualify

  • ✕Routine software development using existing frameworks
  • ✕Building a website or app using established technology
  • ✕Market research or feasibility studies
  • ✕Aesthetic design and UX work
  • ✕Adapting an existing product for a new market
  • ✕Business process improvements without technical innovation

The test is not "did we develop something?" — it is "did we face and overcome a scientific or technological uncertainty that a competent professional could not resolve without research?"

What changed since April 2023

SME enhanced deduction rate reduced

Before April 2023: SMEs could deduct 230% of qualifying R&D spend (130% enhancement). After April 2023: reduced to 186% (86% enhancement). Loss-making SME tax credit rate also reduced. [VERIFY current rates at gov.uk]

RDEC rate increased

The Research and Development Expenditure Credit rate increased for large companies and some SMEs. [VERIFY current RDEC rate at gov.uk]

Merged scheme from April 2024

From April 2024, a merged RDEC-style scheme applies to most R&D claims. The SME scheme still exists for 'R&D intensive' loss-making SMEs. [VERIFY current merged scheme rules at gov.uk]

Additional Information Form (AIF) required

From August 2023, all R&D claims require an AIF filed online before the CT600. The AIF requires project descriptions, qualifying cost breakdowns, and named responsible individuals. Missing AIFs result in claims being rejected.

Advance registration for some claimants

First-time claimants must notify HMRC in advance that they intend to claim R&D relief. This is filed separately before the return. [VERIFY current advance notification rules at gov.uk]

R&D tax credits — FAQs

What are R&D tax credits?

R&D (Research and Development) tax relief allows UK limited companies to claim additional tax relief on qualifying R&D expenditure. The relief works either as an enhanced deduction from taxable profits or, for loss-making companies, as a cash repayment. The activity must advance science or technology and involve genuine technical uncertainty — not routine development work. [VERIFY: current R&D relief rates at gov.uk/guidance/corporation-tax-research-and-development-rd-relief]

What qualifies as R&D for HMRC purposes?

HMRC's definition is specific. Qualifying R&D must: (1) seek to advance overall knowledge or capability in science or technology; (2) involve overcoming scientific or technological uncertainty that could not be resolved by a competent professional in the field; (3) be directly related to the company's trade. Routine software development, aesthetic design work, and market research do not qualify. The activity must involve genuine technical uncertainty — not just business uncertainty.

What changed with R&D relief from April 2023?

Two significant changes: (1) The SME R&D enhanced deduction rate was reduced from 130% to 86%; the SME tax credit rate was reduced. (2) The RDEC (R&D Expenditure Credit) rate was increased. From April 2024, a merged RDEC scheme applies to most companies. The changes mean many SMEs receive less R&D relief than before 2023. [VERIFY: current scheme rates and transition rules at gov.uk/guidance/corporation-tax-research-and-development-rd-relief]

What costs qualify for R&D tax relief?

Qualifying costs include: staff costs (salaries, employer NI, pension contributions) directly engaged in R&D; subcontractor costs (with restrictions); consumable materials used in R&D; software costs; and some utility costs. Since 2023, data and cloud computing costs became eligible in some circumstances. [VERIFY current qualifying cost categories at gov.uk]

Why has HMRC increased scrutiny of R&D claims?

HMRC identified widespread abuse of R&D relief from 2020–2023 — particularly in software development, where claims were made for routine development work that did not meet the technical uncertainty test. HMRC now requires an Additional Information Form (AIF) with all R&D claims, requires pre-registration for some claimants, and is conducting more aspect enquiries into R&D returns. Claims without contemporaneous technical evidence are highly vulnerable.

What is the Additional Information Form (AIF) for R&D?

Since August 2023, all R&D claims must be accompanied by an Additional Information Form (AIF) filed online before the CT600 is submitted. The AIF requires: contact details for the agent making the claim; a description of the R&D activities (project-by-project for larger claimants); the qualifying cost breakdown; and identification of the named individuals responsible. Missing or inadequate AIFs result in HMRC rejecting the claim. [VERIFY: current AIF requirements at gov.uk]

Should we use a specialist R&D claims firm or our accountant?

Your accountant should handle R&D as part of the CT600 — not outsourced to a third-party R&D advisory firm that charges contingency fees. Third-party R&D firms have been central to the abuse of the scheme. HMRC is sceptical of claims prepared by contingency-fee firms. A well-documented claim prepared by your regular accountant, based on contemporaneous records, is more defensible than one maximised by a specialist but unsupported by evidence.

Related guides

Source: gov.uk — R&D relief. Not personalised advice.

R&D claims

We only claim R&D where it genuinely qualifies.

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Iftikhar Rashid FCCA · 16 years · Specialist in limited company directors