Short answer
There is no single R&D rate, and the date that selects the rate is not the same for every scheme. For accounting periods beginning on or after 1 April 2024, the merged scheme and enhanced R&D intensive support (ERIS) rates are fixed by when the accounting period began, whatever date the expenditure was incurred. For earlier periods, the legacy SME and RDEC rates are fixed by when the expenditure was incurred, so a single accounting period straddling 1 April 2023 carries two rates.
Applies to
- Schemes
- Merged scheme · ERIS · Legacy SME · Legacy RDEC
- Periods
- 1 April 2015 onwards
- Claimants
- All
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.
| Trade | Credit rate | Applies to |
|---|---|---|
| Non-ring-fence | 20% of qualifying expenditure | Accounting periods beginning on or after 1 April 2024 |
| Ring-fence (oil and gas) | 49% of qualifying expenditure | Accounting periods beginning on or after 1 April 2024 |
The credit is taxable income, so the headline rate is not the benefit. What the company keeps depends on the notional tax deducted at step 2 of the payment steps:
| Claimant | Notional tax rate | Net value of a 20% credit |
|---|---|---|
| Pays the main rate, or is in marginal relief | 25% | 15.00% of qualifying expenditure |
| Pays the small profits rate, or is loss-making | 19% | 16.20% of qualifying expenditure |
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.
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.
| Component | Rate | Applies to |
|---|---|---|
| Additional deduction | 86% of qualifying expenditure, on top of the normal 100% | Expenditure incurred on or after 1 April 2023 |
| Payable tax credit | 14.5% of the surrenderable loss | Accounting periods beginning on or after 1 April 2024 |
| R&D intensity threshold | 30% of total relevant expenditure | Accounting periods beginning on or after 1 April 2024 |
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.
| Additional deduction | Expenditure incurred |
|---|---|
| 130% | On or after 1 April 2015 and before 1 April 2023 |
| 86% | On or after 1 April 2023 |
| Payable tax credit | Expenditure incurred |
|---|---|
| 14.5% | On or after 1 April 2014 and before 1 April 2023 |
| 10% | On or after 1 April 2023, where the intensity condition is not met |
| 14.5% | On or after 1 April 2023, where the intensity condition is met (40% threshold) |
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:
| Position | Net value |
|---|---|
| Loss-making, expenditure before 1 April 2023 (230% × 14.5%) | 33.35% |
| Loss-making, expenditure on or after 1 April 2023, not R&D intensive (186% × 10%) | 18.60% |
| Loss-making, expenditure on or after 1 April 2023, R&D intensive (186% × 14.5%) | 26.97% |
| Profitable, expenditure before 1 April 2023, corporation tax at 19% (130% × 19%) | 24.70% |
| Profitable, expenditure on or after 1 April 2023, corporation tax at 25% (86% × 25%) | 21.50% |
Legacy RDEC
For accounting periods beginning before 1 April 2024. The rate is set by the date the expenditure was incurred.
| Credit rate | Expenditure incurred |
|---|---|
| 11% | 1 April 2015 to 31 December 2017 |
| 12% | 1 January 2018 to 31 March 2020 |
| 13% | 1 April 2020 to 31 March 2023 |
| 20% | 1 April 2023 to 31 March 2024 |
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%.
PAYE and NIC caps
| Scheme | Cap | Applies to |
|---|---|---|
| Merged scheme (step 3) and ERIS | £20,000 plus 300% of the company’s relevant PAYE and NIC liabilities | Accounting periods beginning on or after 1 April 2024 |
| Legacy SME | £20,000 plus 300% of the company’s relevant PAYE and NIC liabilities | Accounting periods beginning on or after 1 April 2021 |
| Legacy RDEC (step 3) | The company’s total PAYE and NIC in respect of workers engaged in the R&D | Accounting periods beginning before 1 April 2024 |
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.
| Limit | Figure | Applies to |
|---|---|---|
| Staff headcount | Fewer than 500 | Expenditure incurred on or after 1 August 2008 |
| Annual turnover | €100 million or less | Expenditure incurred on or after 1 August 2008 |
| Balance sheet total | €86 million or less | Expenditure incurred on or after 1 August 2008 |
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.
| Related threshold | Figure | Applies to |
|---|---|---|
| Partner enterprise holding | 25% or more of capital or voting rights | All periods |
| Linked enterprise control | More than 50% of voting rights, or equivalent control | All periods |
| Business angel exception, aggregate investment | Below €1.25 million | All periods |
| R&D intensity condition, merged scheme era | 30% of total relevant expenditure | Accounting periods beginning on or after 1 April 2024 |
| R&D intensity condition, legacy SME | 40% of total relevant expenditure | Expenditure incurred on or after 1 April 2023 |
Corporation tax rates used in the net figures
| Rate | Financial years |
|---|---|
| 19% single rate on all non-ring-fence profits | Financial year 2022 (1 April 2022 to 31 March 2023) and earlier years back to financial year 2017 |
| Small profits rate 19% on profits up to £50,000; main rate 25% on profits over £250,000; marginal relief between the two at 3/200 | Financial year 2023 (from 1 April 2023) onwards |
The £50,000 and £250,000 limits are reduced proportionately for short accounting periods and divided by the number of associated companies.
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.
Worked example
Illustrative figures. An SME with a 31 December year end spends £500,000 on qualifying R&D each year and is loss-making throughout.
| Accounting period | Scheme | Rate applied | Benefit |
|---|---|---|---|
| Year to 31 December 2022 | Legacy SME | 230% × 14.5% | £166,750 |
| Year to 31 December 2023 | Legacy SME, split at 1 April 2023 | £125,000 at 230% × 14.5% and £375,000 at 186% × 10% | £41,688 + £69,750 = £111,438 |
| Year to 31 December 2024 | Legacy SME (period began 1 January 2024) | 186% × 10% | £93,000 |
| Year to 31 December 2025 | Merged scheme, or ERIS if 30% intensive | 20% net of 19% notional tax, or 186% × 14.5% | £81,000, or £134,850 under ERIS |
The year to 31 December 2024 is the one people get wrong. The period began before 1 April 2024, so it is a legacy period in full, even though three quarters of the spend falls after the merged scheme started.
Where claims go wrong
- Applying the merged scheme from 1 April 2024 regardless of year end. The commencement is by accounting period, not by expenditure date. Every company with a year end other than 31 March has at least one period where the two are out of step.
- Applying the 1 April 2023 legacy split by accounting period instead of by expenditure date. The opposite error, in the same claim history. The 2023 changes were expenditure-based; the 2024 change was period-based.
- Quoting a headline rate as the benefit. The merged scheme credit is taxable. Twenty per cent is not 20% in cash, and the net figure differs between a main-rate payer and a loss-maker.
- Using 25% notional tax for a loss-making merged scheme claimant. The small profits rate applies, which makes the claim worth more, not less. Understating it in a forecast is a real cost to the client.
- Taking SME status from the company law thresholds. The R&D limits are roughly double them, and a company that is medium-sized or large for accounts purposes can still be an SME here.
John Mapother
Founder & Director
Last reviewed 30 August 2026