R&D Tax Credits Calculator UK 2025 — SME Scheme, RDEC & Merged Scheme
Research and Development (R&D) tax credits allow UK companies to reduce their corporation tax bill — or receive a cash payment — for qualifying R&D expenditure. From April 2024, the SME and RDEC schemes have merged into a single scheme. This calculator estimates your R&D tax credit claim and the cash benefit to your business.
Merged R&D scheme (from April 2024): 20% RDEC on qualifying spend. R&D-intensive loss-making SMEs (40%+ R&D/total costs): 27% payable credit. Advance notification required for first-time claimants. Claim via CT600. HMRC scrutiny has increased significantly — always use a qualified R&D tax specialist for submissions over £10,000.
The Merged R&D Scheme (April 2024 Onwards)
From 1 April 2024, the previous SME and RDEC schemes were merged into a single unified R&D scheme. The merged scheme applies to all companies regardless of size. Key features:
- 20% RDEC credit rate on qualifying expenditure. The credit is above-the-line (included in profits) and then taxed at the company’s CT rate — giving a net benefit of 15% (for 25% CT payers) or 16.2% (for 19% CT payers).
- 27% enhanced credit for R&D-intensive SMEs: SMEs where at least 40% of total expenditure is qualifying R&D can access a higher 27% payable credit if loss-making.
- Payable credits: loss-making companies can receive a cash payment from HMRC, subject to PAYE/NIC cap rules.
- Subcontractor costs: only 65% of payments to unconnected subcontractors are qualifying expenditure in the merged scheme (down from 100% under old SME rules).
What Qualifies as R&D?
HMRC uses the BEIS Guidelines on R&D for Tax Purposes. The key test is whether the project sought to achieve an advance in overall knowledge or capability in science or technology, and whether it involved the resolution of scientific or technological uncertainty. Crucially, this does not need to be blue-sky research — many practical software development projects, engineering improvements, and new product development activities qualify.
Common qualifying activities include: developing novel software features or algorithms that overcome technical obstacles; creating new manufacturing processes or materials; adapting existing technology for novel applications; and resolving engineering problems where the solution was not apparent. What does NOT qualify: market research, aesthetic design work, routine testing, and activities that simply apply existing knowledge.
Qualifying Costs
| Cost type | Qualifying? | Notes |
|---|---|---|
| Directly employed staff costs (salary, ER NI, pension) | Yes — 100% | Only the time spent on R&D activities |
| Externally provided workers (EPW) | Yes — 65% | Individuals provided by staffing companies |
| Subcontractor costs (unconnected) | Yes — 65% | Reduced from 100% in old SME scheme |
| Consumables & materials used in R&D | Yes — 100% | Must be consumed or transformed in the process |
| Cloud computing & data costs | Yes (from April 2023) | Costs must directly support R&D activity |
| Capital expenditure | No | Claim capital allowances separately |
| Rent, marketing, admin | No | Must be directly attributable to R&D |
Frequently Asked Questions
Legally no — your accountant can include the R&D credit in your CT600. However, HMRC scrutiny of R&D claims has increased dramatically since 2022, with compliance checks (enquiries) rising sharply. For claims over £10,000–£20,000, using a specialist R&D tax consultant who understands both the technical and HMRC compliance requirements significantly reduces enquiry risk. Be very wary of R&D claim companies that work on a percentage-of-credit basis and promise unusually large claims — these have been a major source of incorrect claims.
Yes — you can amend a CT600 within 12 months of the filing deadline for that accounting period to add or increase an R&D claim. So for a year ending 31 March 2023, the CT600 deadline was 31 March 2024, meaning amendments can be made until 31 March 2025. You can typically go back 2 accounting years to claim R&D credits you missed. After the amendment window closes, you would need to claim via HMRC error or mistake relief (strict conditions apply).