R&D Tax Credits UK: 2026 SME Claims Guide

R&D tax credits help UK limited companies reduce Corporation Tax or receive a payable credit when they spend money solving genuine scientific or technological uncertainty. For UK SMEs, the key question is not whether your work looks “high-tech,” but whether your company tried to create or improve a product, process, service, material, or software in a way that was not straightforward to a competent professional.

TL;DR Summary

R&D tax credits are for UK companies that take technical risks to solve real science or technology problems. They are claimed through your Company Tax Return, supported by an additional information form submitted to HMRC before or on the same day as the CT600.

For accounting periods beginning on or after 1 April 2024, most companies use either the merged R&D expenditure credit scheme or Enhanced R&D Intensive Support, known as ERIS, for qualifying loss-making SMEs.

The safest approach is to document the project, the uncertainty, the work done, the costs claimed, and why the work qualifies under HMRC R&D tax credits rules.

What are R&D tax credits?

R&D tax credits are a UK Corporation Tax relief for companies working on innovative projects in science or technology. HMRC says a project must seek an advance in a field of science or technology and resolve scientific or technological uncertainty. Only companies chargeable to UK Corporation Tax can qualify.

That means you do not need to be wearing lab coats or building rockets.

You may be doing qualifying work if your company is trying to:

• Build software where the technical route is uncertain
• Improve a manufacturing process beyond routine upgrades
• Develop a new product where existing methods do not solve the problem
• Reduce waste or improve performance through genuine technical experimentation
• Create a new technical capability that is not publicly available or obvious

The founder-friendly test is simple: were you trying to solve a technical problem where the answer was not obvious at the start?

Why R&D tax credits matter for SMEs 

R&D tax credits UK claims can improve cash flow, reduce Corporation Tax, and make innovation less financially painful. For small companies, the value is often not just the tax saving. It is the discipline of tracking innovation properly.

HMRC estimated 46,950 R&D claims for the 2023 to 2024 tax year, including 36,885 SME scheme claims and 10,065 RDEC scheme claims. The estimated total value of relief claimed was £7.6 billion.

Those figures show the scheme is widely used, but they also show why HMRC expects claims to be well supported.

A good claim should not sound like a marketing brochure. It should explain the real technical problem, the uncertainty, the attempts made, and the cost evidence behind the claim.

What changed from April 2024? 

For accounting periods beginning on or after 1 April 2024, the old SME and RDEC schemes were replaced by the merged scheme and ERIS. The merged scheme is a taxable expenditure credit. ERIS is for loss-making R&D intensive SMEs that meet the conditions.

Under ERIS, qualifying loss-making R&D intensive SMEs can deduct an extra 86% of qualifying costs and may claim a payable tax credit worth up to 14.5% of the surrenderable loss.

Under the merged scheme, the expenditure credit rate is 20%. The credit is taxable, so the net benefit depends on the company’s Corporation Tax position. 

What costs and activities can qualify? 

A company can claim R&D tax relief if it is chargeable to UK Corporation Tax and has qualifying R&D activity. The work must aim to create an advance in science or technology, not just a commercial improvement for your own company.

A project may qualify even if it fails.

That is important.

HMRC is not asking, “Did this project become profitable?” HMRC is asking, “Was there genuine scientific or technological uncertainty, and did your company work to resolve it?”

Common qualifying signs

You may have a stronger case if:

• A competent professional could not easily solve the issue
• Your team tested more than one possible route
• You had to overcome technical constraints
• Existing tools, platforms, methods, or suppliers did not provide a clear answer
• You kept records of experiments, failures, iterations, or design decisions

Common weak signs

A claim may be weaker if the work was mainly:

• Routine design
• Standard website development
• Cosmetic improvement
• Market research
• Commercial strategy
• Normal configuration of existing software
• Work in the arts, humanities, or social sciences, including economics, which HMRC says does not qualify for this relief

R&D tax credits for small businesses: What counts as qualifying work?

R&D tax credits for small businesses usually apply when a limited company spends money on staff, subcontractors, software, consumables, or other allowable costs linked to qualifying R&D work. The exact cost treatment depends on the accounting period, the scheme, and who decided to undertake the R&D.

HMRC guidance for accounting periods beginning on or after 1 April 2024 says that, where R&D is carried out under a contract, the right to claim usually depends on which company decided to undertake the R&D. A company may be able to claim contracted-out R&D costs where it made the decision to carry out and plan the R&D, even if another party performed the work.

Contracted-out R&D can be complex, so companies should check who initiated the R&D, what the contract says, and whether any transitional rules apply.

Simple example of an R&D tax relief claim

Imagine a UK SME spends £50,000 on qualifying R&D staff, software, and consumable costs during the accounting period.

If the company is a qualifying loss-making R&D intensive SME, it may be able to use ERIS. Under ERIS, qualifying companies can claim an additional deduction of 86% of qualifying R&D costs and may be able to surrender eligible losses for a payable tax credit.

If the company falls under the merged R&D expenditure credit scheme instead, the claim is calculated differently. The merged scheme gives a taxable expenditure credit, currently at 20% of qualifying R&D expenditure.

This example is simplified. The actual benefit depends on the company’s tax position, accounting period, qualifying costs, loss position, contracts, and whether the company meets the scheme conditions.

The best records are created during the project, not months later when the tax return deadline is close.

How to claim R&D tax credits 

How to claim R&D tax credits starts with identifying the qualifying project, separating eligible costs, submitting the additional information form, and including the claim in the Company Tax Return. HMRC requires the additional information form before or on the same day as the CT600. If the CT600 is submitted first, the claim can be rejected.

Use this simple process:

1. Identify the project

Write one clear paragraph answering:

• What were you trying to improve or create?
• What science or technology field was involved?
• What uncertainty stopped this from being routine?

2. Explain the uncertainty

A good uncertainty statement is practical.

For example:

“Our team needed to reduce processing time without losing accuracy, but existing tools could not meet the required performance under the expected data load.”

That is clearer than:

“We built an innovative platform.”

3. Record the work done

List the attempts, tests, prototypes, failures, changes, and decisions.

This is where many claims become weak. The project may be genuine, but the evidence is too thin.

4. Calculate the qualifying costs

Separate R&D costs from general business costs. Do not include everything linked to the product unless it directly relates to the qualifying R&D activity.

5. Submit the required forms in the right order

For HMRC R&D tax credits claims, the additional information form is not optional for new claims. It must be submitted before or on the same day as the Company Tax Return.

Do you need to notify HMRC before claiming?

Some companies need to tell HMRC in advance that they plan to claim R&D tax relief. This is done through a claim notification form.

This usually matters if your company is claiming R&D tax relief for the first time, or if it has not made an R&D claim in the last three years.

The claim notification deadline is normally six months after the end of the relevant period of account. If a company misses this step when it is required, the R&D claim may not be valid.

This is separate from the additional information form. The claim notification form tells HMRC that you plan to claim. The additional information form gives HMRC the detail behind the claim.

If you are not sure whether claim notification applies, check before submitting the CT600.

What HMRC is really looking for 

The R&D tax credit scheme is designed to support companies that invest in solving scientific or technological problems where the outcome is uncertain. It is not a reward for being busy, creative, or ambitious. It is support for technical problem-solving.

A useful way to think about it is:

Goals describe what you wanted. Evidence proves what you actually did.

HMRC will care more about the second part.

This is why founders should avoid vague phrases like:

• “We created a unique solution”
• “We developed a market-leading platform”
• “We improved customer experience”

Those phrases may be true, but they do not prove R&D.

Instead, use plain evidence:

• What technical problem existed?
• Why was it uncertain?
• What options did you test?
• What failed?
• What changed?
• What was the outcome?

Common mistakes UK SMEs should avoid

The biggest R&D tax credits mistake is treating the claim like a sales pitch instead of a technical explanation. HMRC does not need hype. HMRC needs a clear link between the qualifying uncertainty and the costs claimed.

Avoid these mistakes:

Claiming routine work

Not every improvement is R&D. A normal software update, standard integration, or design change may not qualify unless it involved genuine technical uncertainty.

Claiming the whole project cost

Only the qualifying R&D part should be claimed. Commercial rollout, sales, marketing, admin, and routine delivery are usually outside the claim.

Weak evidence

If your team solved the problem but kept no notes, the claim becomes harder to defend.

Missing the additional information form

HMRC says claims will not be accepted if the additional information form is not submitted correctly and on time.

Assuming old rules still apply

The rules changed from April 2024 for accounting periods beginning on or after that date. Always check the correct scheme for your accounting period.

What should founders do before claiming?

Before claiming, UK SME founders should review eligibility, gather evidence, and confirm the correct scheme.

Here is a simple checklist:

1. Confirm your company pays UK Corporation Tax.
2. Identify projects involving science or technology.
3. Write down the advance you were seeking.
4. Explain the uncertainty a competent professional faced.
5. Separate qualifying costs from general project costs.
6. Keep technical records and cost records together.
7. Submit the additional information form before or on the same day as the CT600.
8. Get professional review if the claim is material, complex, or close to the rules.

This is where AMS can help.

AMS supports UK SMEs with tax planning, Corporation Tax, compliance, bookkeeping, payroll, and financial management, which means your R&D claim can sit within a wider, joined-up view of your accounts rather than being handled in isolation.

Clear takeaway

R&D tax credits are valuable, but only when the claim is accurate, evidenced, and tied to real scientific or technological uncertainty. The safest claims are not the loudest claims. They are the clearest ones.

For UK SME founders, the practical rule is simple:

If the project involved real technical uncertainty, document it early, cost it carefully, and claim it properly.

Useful HMRC guidance

For the latest official rules, check HMRC guidance on:

- What qualifies as R&D for tax relief

- The merged R&D expenditure credit scheme and ERIS

- The additional information form

- The claim notification form

- Corporation Tax R&D relief statistics

R&D tax relief rules can change, so always check the current HMRC guidance before preparing or submitting a claim.

Important note

This guide is for general information only and is not tax advice. R&D tax relief rules are complex and can depend on your company’s accounting period, contracts, costs, claim history, and filing position.

Before submitting a claim, consider getting advice from a qualified accountant or tax adviser.

FAQs

Do I need to notify HMRC before making an R&D claim? 

Some companies do, especially first-time claimants or companies that have not claimed recently. The claim notification deadline is usually six months after the end of the period of account.

What is ERIS? 

ERIS is Enhanced R&D Intensive Support for qualifying loss-making R&D intensive SMEs for accounting periods beginning on or after 1 April 2024.

Can software development qualify for R&D tax credits? 

Yes, but only where the work seeks an advance in science or technology and involves genuine technical uncertainty. Routine configuration, standard integrations, or normal website builds usually do not qualify.