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R&D Tax Credits, Explained

Research & Development Tax Credits are a tax incentive designed to encourage UK companies to invest in R&D. By using R&D Tax Credits, companies can reclaim up to 33% of the costs of their R&D projects.

In effect, R&D Tax Credits allow companies to reduce their corporation tax bill or claim payable cash credits as a proportion of their R&D spend. There are three things you need to consider before making an R&D claim, and they’re all covered below. You can use the buttons below to skip ahead.

To find out about the latest announcements go to R&D News →

Companies with over 500 staff, turnover over €100m, or a balance sheet over €86m, will need to apply using the Research and Development Expenditure Credit (RDEC). For specialist advice on RDEC, Get In Touch →

1. Is Your Business Conducting R&D?

You’d be surprised how much work qualifies. Check out some of the examples and case studies in the section below.

2. What Costs Do R&D Tax Credits Apply To?

How much you’ve spent on staff, subcontractors and other costs, will impact how much you’ll get back. Find out more below.

2. What Costs do R&D Tax Credits Apply To?

How much you’ve spent on staff, subcontractors and other costs, will impact how much you’ll get back. Find out more below.

3. What Reward Are You Entitled To?

You’ll need to show HMRC you’ve conducted R&D, and in return you could claim up to 33% of your costs back, depending on your financial situation.

3. What Reward Are You Entitled To?

You’ll need to show HMRC you’ve conducted R&D, and in return you could claim up to 33% of your costs back, depending on your financial situation.

Are you conducting R&D?

R&D tax credits don’t just apply to white coat or laboratory-based research. Companies in any industry may be eligible. If there was an attempt to advance the scientific or technical knowledge in your field of work – your project should qualify. Even if it wasn’t successful, you can still claim.

If you’re not sure whether your work qualifies, check out some of the examples and case studies below. Alternatively – book in a free consultation to find out in 15 minutes whether you’ve conducted R&D. Find Out in 15 Minutes →

Could you be conducting R&D without knowing it?

Scroll through to find out what type of projects might apply.

Developing a New Product, or Making Changes to an Existing One
Improving Business Processes or Supply Lines to Get Things Done More Efficiently
Running Informal Trials or Research to Understand Your Business or Customers Better
Testing or Developing New Technology to Improve Your Business Results
Developing New Software, Websites or Solutions for Your Business
Adaptions you make to existing products or services you are using
Developing or Improving a Service You Offer Your Customers

R&D Tax Credit Case Studies

Here are some examples of clients we’ve helped with R&D Tax Credits. Whether you’ve spent £10,000 or £10,000,000 on R&D, we can help you get the benefit you deserve. To see more examples – Case Studies →

Recycling specialist nets £250,000 in R&D Tax Credits

Discover how Green Steel, a recycling specialist secured an impressive £250,000 in Research & Development (R&D) Tax Credits.

R&D Tax Credits in Construction

Running a building project is never easy. In fact on many projects – builders, site managers, foreman, construction directors and draughtsman are involved in solving problems for their clients. And solving problems for their clients could mean that their company...

R&D Tax Credit Reviews for New Zest Clients Increase Previous Claims by 110%

Find out how Zests’ tax credit review process improves results for our new clients, increasing their claims by 110% of their previous value.

dairy feed trials

Dairy R&D | Farm Claims £145,000 using Tax Credits for On-Farm Research and Development

Find out how we saved our client £145,000 for on farm research they conducted to maximise their herds performance.

dairy farming R&D

£360,000 Farming R&D Tax Credit Claim | Innovative South Wales Farm Claims Money with Specialist Help from Zest R&D

Find out how Zest maximised our clients farming research and development tax credit claim.

software development R&D

Software Development R&D | Client Receives £50,000 in Tax Relief

This client reduced their corporation tax bill by £50k in a single year, through a Research and Development Tax Credit claim for their Software Development R&D.

Software R&D

£18,000 Saved With Software R&D Claim | Leading Laboratory Equipment Recycling Firm Claims R&D Tax Credits with Zest

Find out about how we saved this laboratory equipment recycling company £18,000 with an R&D tax credit claim.

Genuine Jay Jays Make a Substantial R&D Tax Credits Claim for Innovative Manufacturing Techniques

An example of a research and development tax credit claim for an innovative military equipment manufacturer.

RD in agriculture

Research and Development Tax Credits in Agriculture

Could your farming business be claiming under the Research and Development Tax Credit scheme?

Electrical Engineering company in Wales saves over £23,000 with Zest R&D

Here’s an example of a client we’ve helped re-claim costs on electrical engineering R&D work.

What Costs Can You Claim R&D Tax Credits On?

You can’t claim for all of your R&D expenditure. For example – costs that don’t directly relate to the R&D project, such as payroll or accounting, can’t be included. Here are the types of costs you can claim.

For more detail on each of these costs – read this article: R&D Tax Credits – Claimable Costs → 

Staff costs for any time spent on the R&D projects, including any National Insurance and Pension contributions.
65% of any costs related to freelancers or companies subcontracted to help with the R&D.
Consumable items, including any materials used within the R&D for prototyping.
The cost of any software used as part of the R&D process.
The relevant proportion of water, fuel or power consumed as part of the R&D.

What Costs Can You R&D Tax Credits On?

You can’t claim for all of your R&D expenditure. For example – costs that don’t directly relate to the R&D project, such as payroll or accounting, can’t be included. Here are the types of costs you can claim.

For more detail on each of these costs – read this article: R&D Tax Credits – Claimable Costs →

Staff costs for any time spent on R&D projects, including any National Insurance and Pension contributions.
65% of any costs related to freelancers or companies subcontracted to help with the R&D.
Consumable items, including any materials used within the R&D.
The cost of any software used as part of the R&D process.
The relevant proportion of water, fuel or power consumed as part of the R&D.

What Reward Are You Entitled To?

There are two ways of benefiting from the R&D Tax Credit. Either way – you’ll need to ask your accountant to submit or amend your corporation tax return for the year you did your R&D.

1. A reduction or refund in corporation tax

A profit making company can receive up to 25% of its Research & Development costs back, by reducing its corporation tax liability. This amount will reduce to 21% for expenditure from 1/4/2023.

2. A payable tax credit

A loss making company can receive up to 33% of its Research & Development costs back, by surrendering losses related to their trade. This amount will reduce to 19% for expenditure from 1/4/2023 onwards. Alternatively – they could carry their losses forward and benefit from corporation tax reductions in future accounting periods.

If you’ve only paid a modest amount of corporation tax – you could qualify for both of these.

Now to the important part – how much could you get back. Try our calculator to give you an estimate.

How much could you claim back →

Blog: how are your returns calculated →

What Reward Are You Entitled To?

There are two ways of benefiting from the R&D Tax Credit. Either way – you’ll need to ask your accountant to submit or amend your corporation tax return for the year you did your R&D.

1. A reduction or refund in corporation tax

A profit making company can receive up to 25% of its Research & Development costs back, by reducing its corporation tax liability. This amount will reduce to 21% for expenditure from 1/4/2023.

2. A payable tax credit

A loss making company can receive up to 33% of its Research & Development costs back, by surrendering losses related to their trade. This amount will reduce to 19% for expenditure from 1/4/2023 onwards. Alternatively – they could carry their losses forward and benefit from corporation tax reductions in future accounting periods.

If you’ve only paid a modest amount of corporation tax – you could qualify for both of these.

Now to the important part – how much could you get back. Try our calculator to give you an estimate.

How much could you claim back →

Blog: how are your returns calculated →

Find Out How Much You Could Claim

Use our calculator to estimate your tax credits.

What is the financial position of your company?

What is your estimated spend on R&D per year?

We estimate you could receive up to

£6,175

as a tax credit.

Show how this example is calculated

To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.

£25,000 x 130% (enhancement rate) = £32,500

x 19% (Corporation Tax rate) = £6,175

£6,175 / £25,000 = 25%

We estimate you could receive up to

£30,875

as a tax credit.

Show how this example is calculated

To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.

£125,000 x 130% (enhancement rate) = £162,500

x 19% (Corporation Tax rate) = £30,875

£30,875 / £125,000 = 25%

We estimate you could receive up to

£61,750

as a tax refund or reduced tax liability.

Show how this example is calculated

To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.

£250,000 x 130% (enhancement rate) = £325,000

x 19% (Corporation Tax rate) = £61,750

£61,750 / £250,000 = 25%

We estimate you could receive up to

£247,000

as a tax refund or reduced tax liability.

Show how this example is calculated

To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.

£1,000,000 x 130% (enhancement rate) = £1,300,000

x 19% (Corporation Tax rate) = £247,000

£247,000 / £1,000,000 = 25%

What is your estimated spend on R&D per year?

We estimate you could receive up to

£16,675

as a tax credit.

Show how this example is calculated

To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.

£50,000 x 130% (enhancement rate) = £65,000

£50,000 + £65,000 (enhancement) = £115,000 (enhanced expenditure)

£115,000 x 14.5% (surrender rate) = £16,675

£16,675 / £50,000 = 33.35%

We estimate you could receive up to

£83,375

as a tax credit.

Show how this example is calculated

To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.

£250,000 x 130% (enhancement rate) = £325,000

£250,000 + £325,000 (enhancement) = £575,000 (enhanced expenditure)

£575,000 x 14.5% (surrender rate) = £83,375

£83,375 / £250,000 = 33.35%

We estimate you could receive up to

£166,750

as a tax credit.

Show how this example is calculated

To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.

£500,000 x 130% (enhancement rate) = £650,000

£500,000 + £650,000 (enhancement) = £1,150,000 (enhanced expenditure)

£1,150,000 x 14.5% (surrender rate) = £166,750

£166,750 / £500,000 = 33.35%

We estimate you could receive up to

£333,500

as a tax credit.

Show how this example is calculated

To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.

£1,000,000 x 130% (enhancement rate) = £1,300,000

£1,000,000 + £1,300,000 (enhancement) = £2,300,000 (enhanced expenditure)

£2,0,300,000 x 14.5% (surrender rate) = £333,500

£333,500 / £1,000,000 = 33.35%