See how much you could save with our Research and Development tax relief calculator

How to use this R&D tax credit calculator

Enter your estimated R&D spend to get an instant estimate of your potential tax relief under the current rules. The calculator covers the merged RDEC scheme and the Enhanced R&D Intensive Support (ERIS) scheme for loss-making R&D-intensive companies, both of which apply to accounting periods beginning on or after 1 April 2024. You'll need two figures: your direct R&D staff and materials costs, and any amounts paid to subcontractors or agency workers.

R&D Tax Credit Rates (2024/25)

The R&D tax relief regime changed in April 2024. Most UK companies now claim under the merged RDEC scheme. Loss-making SMEs with high R&D intensity can claim under ERIS (Enhanced R&D Intensive Support) instead.

Current rates at a glance

The merged scheme credit is above the line — it appears as a credit in your accounts before corporation tax, then gets taxed at your company's CT rate. For most companies paying 25% CT, the net benefit works out to approximately 15% of qualifying spend.

Historical rates (pre-April 2024)

For claims covering accounting periods that ended before April 2024:

If your accounting period straddles April 2024, your claim will be apportioned between the old and new rules.

R&D Tax Credit Calculation Examples

These examples show how the merged scheme credit is calculated in practice. They use simplified figures for illustration — your actual benefit will depend on your specific costs, tax position, and whether any restrictions apply.

Example 1: Profit-making company (merged RDEC scheme)

A software company spends £150,000 on qualifying R&D in the year. It makes a profit and pays corporation tax at 25%.

• Qualifying R&D spend: £150,000
• Gross RDEC credit (20%): £30,000
• The credit is added to taxable profits, then taxed at 25%: £7,500 notional tax
• Net benefit: £30,000 − £7,500 = £22,500 (15% of qualifying spend)

The £22,500 reduces the company's corporation tax bill. If the company's CT liability exceeds £30,000, the full credit is set off. The remaining liability is reduced by £22,500 in net terms.

Example 2: Loss-making company (merged RDEC scheme)

An engineering startup spends £200,000 on R&D and makes a trading loss — it has no CT liability for the year.

• Qualifying R&D spend: £200,000
• Gross RDEC credit (20%): £40,000
• Notional tax deducted (25%): £10,000
• Payable credit: £30,000 cash repaid by HMRC

Even with no profits, loss-making companies receive a cash payment — subject to the PAYE/NIC cap.

PAYE/NIC cap: The payable credit is capped at £20,000 plus 300% of the company's total PAYE and NI liability for the year. For most trading companies with staff this cap won't bite, but pure holding companies or those with very low payroll should check.

Example 3: R&D-intensive loss-making SME (ERIS scheme)

A biotech startup spends £300,000 on R&D out of £600,000 total expenditure — 50% R&D intensity, well above the 30% threshold. It's loss-making.

• Qualifying R&D spend: £300,000
• 86% ERIS enhancement: £258,000 (added to the base spend)
• Total enhanced expenditure: £558,000
• Surrenderable loss (lower of enhanced expenditure or total loss available): £558,000
• Payable credit (14.5% × £558,000): £80,910 — approximately 27p per £1 of R&D spend

ERIS significantly outperforms the merged scheme for qualifying companies. The trade-off: you must be loss-making, and the 30% intensity condition must be met based on actual expenditure for the period.

Understanding your inputs

Will your company make a profit in this accounting period?

Your financial position determines the form your relief takes. Profit-making companies receive a reduction in their corporation tax liability through the merged RDEC scheme - roughly 15p per £1 of qualifying R&D spend after the 20% above-the-line credit is netted off at the 25% corporation tax rate. Loss-making companies can surrender losses for a cash payment direct from HMRC, which is particularly valuable for early-stage businesses with no tax bill to offset against.

Will your R&D spend account for 30% or more of your total expenditure?

If you're loss-making and your qualifying R&D expenditure represents 30% or more of your company's total expenditure for the period, you may qualify for the more generous ERIS scheme. ERIS provides an 86% uplift on qualifying costs and a 14.5% payable credit - worth up to 26.97p per £1 of R&D spend, compared with around 15p under the merged scheme. The 30% R&D intensity threshold was reduced from the previous 40% for accounting periods beginning on or after 1 April 2024.

Direct costs - payroll, consumables, software

Include salaries, employer National Insurance, and pension contributions for staff who worked directly on the R&D project, plus consumable materials used during R&D, software and cloud computing costs used in qualifying activities, and eligible data licence costs. See our RDEC cost categories guide for the full breakdown of what's included. Where an employee split their time between R&D and other work, apply the appropriate percentage of their total employment cost.

Third-party costs - subcontractors and agency workers

Payments to subcontractors and externally provided workers (EPWs) qualify at 65% of the amount paid under the merged scheme rules - the calculator applies this restriction automatically. Include only costs for contractors who worked directly on qualifying R&D activities. Under the merged scheme, the customer of contracted-out R&D is generally the party entitled to claim, subject to the specific contracting rules introduced in April 2024.

How the calculation works

The calculator follows the same steps HMRC uses for the merged scheme:

1. Identify qualifying spend — direct staff costs, consumables, software, and third-party costs. Subcontractors and externally provided workers are capped at 65% of the invoice amount.
2. Apply the 20% credit rate — the gross RDEC = qualifying spend × 20%.
3. Apply notional corporation tax — the credit is taxable, so a 25% notional tax charge is deducted to give the net benefit.
4. Check your tax position — if you have a CT liability, the credit offsets it. If you're loss-making, the net credit is paid as cash (subject to the PAYE/NIC cap).

If you're potentially eligible for ERIS (loss-making and spending 30%+ of total costs on R&D), the calculator shows both your merged scheme and ERIS estimates side by side.

Frequently Asked Questions

What costs qualify as R&D expenditure for this calculator?

Qualifying costs include staff costs (salary, employer NI, pension) for employees directly involved in R&D; consumable materials used up during R&D activities; software, cloud computing, and data licence costs used directly in the work; and subcontractor or externally provided worker payments at 65%. Capital equipment purchases don't qualify directly, though software and cloud costs for R&D purposes do. For the full list, see our RDEC cost categories guide - or for a quick sanity check on what's typically excluded, our what doesn't qualify page.

Is this calculator accurate for the current merged scheme?

The calculator reflects the merged RDEC rates (20% above-the-line credit, taxed at 25% corporation tax) and ERIS rates (86% uplift, 14.5% payable credit) for accounting periods beginning on or after 1 April 2024. It does not cover the legacy SME or pre-merger RDEC schemes that applied to earlier expenditure. If you're transitioning between accounting periods that straddle April 2024, claiming under ERIS for the first time, or unsure which scheme applies to your company profile, a tailored review will give you a more precise figure than any calculator can.

How do I know if my R&D spend actually qualifies?

Only expenditure on projects aimed at achieving a genuine advance in science or technology - overcoming uncertainty that a competent professional in the field couldn't easily resolve - qualifies for R&D tax relief. Routine development, incremental updates, and market research don't count. If you're unsure whether your work qualifies, book a free consultation below and we'll assess your activities against HMRC's BIS guidelines.

How do you calculate R&D tax credit in the UK?

For the merged scheme (April 2024 onwards): multiply your qualifying R&D spend by 20% to get the gross credit. The credit is taxable — so at 25% corporation tax, the net benefit is approximately 15% of your R&D spend. If you're loss-making, you receive this as a cash payment rather than a CT offset.

For ERIS (loss-making R&D-intensive SMEs): multiply qualifying spend by 186% to get the enhanced deduction figure, then apply 14.5% to calculate the payable credit. Effective rate is up to approximately 27%.

What are the most common R&D tax credit mistakes?

The most common errors we see: overclaiming staff time (you need to demonstrate time genuinely spent on R&D, not just estimate); including costs that don't qualify (routine testing, market research, social sciences); missing the claim notification deadline; and not submitting the Additional Information Form (AIF) before or on the same day as the CT return.

Can I claim R&D tax relief if my project failed?

Yes. HMRC's definition focuses on whether your company sought to resolve genuine scientific or technological uncertainty — not whether the project succeeded. A failed project that genuinely tackled technical uncertainty can still qualify. The key test is the nature of the work, not the outcome.

Do grants affect my R&D tax credit claim?

Under the merged scheme and ERIS, government grants no longer reduce the amount of R&D costs you can claim. This was an issue under the old SME scheme (where subsidised costs had to be excluded), but it no longer applies for accounting periods starting after 1 April 2024.

How far back can I claim R&D tax relief?

You can amend a Company Tax Return up to 24 months after the end of the relevant accounting period. So for a year ending 31 March 2024, the deadline to claim is 31 March 2026. Don't miss it — HMRC doesn't accept late claims.