What are the R&D tax relief rates and when did each one apply?

This page is the single source for figures across the knowledge bank. Other entries link here rather than restating rates and thresholds.

Merged scheme R&D expenditure credit

For accounting periods beginning on or after 1 April 2024.

The credit is taxable income, so the headline rate is not the benefit. Two separate mechanisms reduce it, and which one applies to you depends on whether you are profitable.

If the credit exceeds your corporation tax liability for the period — which is the position for a loss-making company, and for a small company with a large claim — the excess is reduced by a notional tax deduction at step 2 of the payment steps:

A company in marginal relief has profits charged at the main rate, so it falls in the first row. A company that would only reach the main rate once the credit is added falls in the second — the test ignores the credit.

The amount withheld at step 2 is not lost. It is carried forward and can be set against corporation tax of a later period, or surrendered to another group company.

If you are profitable and the credit is absorbed against the corporation tax of the period, step 2 never bites and the notional tax rate is irrelevant. What costs you money instead is that the credit is taxable trading income, so the cost of the claim is the extra corporation tax on it — charged at your marginal rate:

The 26.5% is flat across the whole band — it does not taper back towards 25% as profits approach the upper limit. The band, and how it moves with associated companies and short periods, is set out under corporation tax rates below.

So “the merged scheme is worth 15%” is true only of a company comfortably above the upper limit. See how an R&D claim is calculated for worked examples of each case, including where the credit itself moves the company across a limit.

Enhanced R&D intensive support (ERIS)

For accounting periods beginning on or after 1 April 2024. Available only to loss-making SMEs that meet the R&D intensity condition.

Net value where the whole 186% is surrendered: 26.97% of qualifying expenditure.

A company that fails the 30% test in a period is still treated as meeting it if it met the condition in its previous 12-month accounting period and claimed under ERIS or the legacy SME scheme for that period.

Legacy SME scheme

For accounting periods beginning before 1 April 2024. Both the additional deduction and the payable credit are set by the date the expenditure was incurred, not by the date the period began.

The surrenderable loss is capped at 230% of qualifying expenditure incurred before 1 April 2023, and 186% of expenditure incurred on or after that date.

Net values:

The last row assumes the deduction relieves profits taxed at the main rate. Where the deduction takes profits down through the marginal relief band it relieves tax at 26.5%, making it worth 22.79%; where it relieves profits under the small profits limit, 16.34%.

Legacy RDEC

For accounting periods beginning before 1 April 2024. The rate is set by the date the expenditure was incurred.

Notional tax at step 2 of the legacy steps is taken at the main rate of corporation tax for every claimant, so a legacy RDEC credit of 13% was worth 10.53% net while the main rate was 19%, and a credit of 20% was worth 15.00% net once the main rate reached 25%. As under the merged scheme, a profitable legacy RDEC claimant whose credit was absorbed at step 1 bore the cost of the credit at its own marginal rate, so a claimant in the marginal band from 1 April 2023 kept 14.70% rather than 15.00%.

PAYE and NIC caps

The £20,000 element is reduced proportionately for accounting periods shorter than 12 months. An exemption from the merged scheme and ERIS cap applies where the company creates or manages relevant intellectual property using its own employees and spends no more than 15% of its qualifying R&D expenditure with connected subcontractors and externally provided workers.

Under the merged scheme, credit restricted by the cap at step 3 carries forward to the next accounting period. Under ERIS there is no carry-forward: capped credit is lost.

Company size thresholds

These decide whether a company is an SME for R&D purposes. They are not the company law thresholds, which are lower. For how the test is applied — and it is applied to the company aggregated with its linked and partner enterprises, not to the company alone — see the SME size test.

A company is an SME if it is under the headcount limit and under either the turnover limit or the balance sheet limit. The financial limits are set in euros and have to be converted by a company reporting in sterling.

Before 1 August 2008 the limits were those of the Commission Recommendation itself — fewer than 250 staff, turnover of €50 million or less, or a balance sheet total of €43 million or less. The higher limits are deemed always to have applied for the purpose of determining the treatment of expenditure incurred on or after 1 August 2008.

Corporation tax rates used in the net figures

“Onwards” here means these figures are enacted and unchanged through financial year 2026, which is as far as the published rates table goes. Check the table before applying them to a later period.

Both limits are divided by one plus the number of associated companies, and reduced proportionately for accounting periods shorter than 12 months. A company with three associates is in the marginal band between £12,500 and £62,500 of augmented profits, so the 26.5% marginal rate reaches much further down than the headline limits suggest.

The test is on augmented profits, which are taxable total profits plus certain exempt distributions received from outside the group. Because the merged scheme and legacy RDEC credits are brought into account as trading income, they increase taxable total profits and so can move a company into, through or out of the band. The band that governs is the one the profits fall in after the credit is added.

Which date selects the rate

This is the point that produces most of the arithmetic errors we see.

• Merged scheme and ERIS: the accounting period start date. A period beginning on or after 1 April 2024 uses the 20% credit or the ERIS rates for all of its qualifying expenditure, whenever within the period that expenditure was incurred.
• Legacy SME and legacy RDEC: the date the expenditure was incurred. An accounting period beginning before 1 April 2024 uses legacy rules throughout — but if it straddles 1 April 2023, expenditure before that date takes 130% or 13%, and expenditure on or after it takes 86% or 20%.

So an accounting period from 1 July 2023 to 30 June 2024 is a legacy period from start to finish, at the post-April-2023 legacy rates. An accounting period from 1 January 2023 to 31 December 2023 is a legacy period split by expenditure date at 1 April 2023.