R&D Tax Credit Eligibility Checker

How R&D Tax Credits Are Calculated Under the Merged Scheme

Since accounting periods beginning on or after 1 April 2024, the UK's separate SME and RDEC schemes have merged into a single R&D relief with a 20% above-the-line credit on qualifying expenditure. "Above the line" means the credit is calculated on qualifying spend and treated as taxable income, then the company's normal corporation tax rate is applied to that credit. For a profitable company paying the 25% main rate of corporation tax, the arithmetic works out at approximately 15p of net benefit for every £1 of qualifying spend (20% credit, less 25% tax on that credit).

Worked example (illustrative, not a real company): a profitable engineering firm with £300,000 of qualifying R&D expenditure for the year receives a gross credit of £300,000 × 20% = £60,000. After corporation tax at the 25% main rate is applied to that credit, the net cash benefit is approximately £300,000 × 15% = £45,000.

Loss-making companies that are R&D-intensive, meaning qualifying R&D expenditure is at least 30% of total expenditure, can instead claim under Enhanced R&D Intensive Support (ERIS) at a higher net rate of up to approximately 27p per £1. Worked example (illustrative): a loss-making SME with £200,000 total expenditure and £80,000 of qualifying R&D spend has an R&D intensity of £80,000 / £200,000 = 40%, above the 30% ERIS threshold. Its indicative credit is £80,000 × 27% = £21,600, potentially receivable in part as a cash payment from HMRC, subject to the PAYE cap and standard statutory adjustments.

These figures are the same rates this calculator uses to produce your indicative range. The precise result for your company depends on the exact split of qualifying spend across HMRC's eight cost categories (see below) and whether your accounting period straddles the 1 April 2024 transition, which only a full review by an HMRC-registered specialist can confirm.

What Spend Qualifies for R&D Tax Credits?

HMRC recognises eight categories of qualifying R&D expenditure. This calculator's questions map to these categories; a full explanation of each, including common apportionment errors and what is excluded, is on our qualifying expenditure guide.

• Staffing costs. Gross salary, employer National Insurance and employer pension contributions for staff working directly on qualifying R&D, apportioned by time spent.
• Externally provided workers. Agency or contracted staff working under your direction on qualifying R&D, at a statutory restricted rate.
• Subcontractors. Payments to unconnected UK subcontractors for qualifying R&D work, claimable at the 65% statutory rate under the merged scheme; overseas subcontractor cost is generally excluded, with a narrow statutory exception.
• Software. Licences for software used directly in qualifying R&D activity.
• Consumables. Materials and utilities consumed (not sold on) in qualifying R&D, such as prototype materials, test specimens and lab consumables.
• Data and cloud costs. Cloud computing and licensed datasets used directly in R&D, qualifying since April 2023.
• Clinical trial volunteer costs. Payments to volunteers in clinical trials, relevant to life sciences and medtech claimants.
• Prototypes. Costs of building and testing a prototype where it is not intended for sale, distinct from commercial production costs.

Spend that does not resolve a genuine scientific or technological uncertainty, such as routine testing, project management, marketing or standard compliance work, is excluded regardless of which category it might otherwise fall into.