R&D Tax Relief

R&D Tax Relief in 2026: The Merged Scheme Explained

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R&D tax relief is one of the most useful reliefs available to UK startups, and one of the easiest to get wrong. Here is how the merged scheme works in 2026, what actually counts, and what separates a claim that holds up from one that invites questions.

The schemes changed, the rules for claiming got tighter, and HMRC is looking far more closely at claims than it used to. R&D relief still returns real cash to the right companies, but a weak claim now costs you more than a rejection.

Here is how R&D tax relief works in 2026, in plain terms, and what separates a claim that holds up from one that invites questions.

What changed

For accounting periods beginning on or after 1 April 2024, the old SME and RDEC schemes were replaced by two routes:

• The merged scheme (RDEC). The default route for most companies.
• Enhanced R&D Intensive Support (ERIS). A more generous route, but only for loss-making SMEs that spend heavily on R&D.

If your accounts straddle the change, both sets of rules can be in play, which is one reason claims need care.

The merged scheme: how it works

Under the merged scheme, you claim an R&D expenditure credit at 20% of your qualifying R&D costs. The credit is taxable, so the net benefit after Corporation Tax works out at roughly 15% of qualifying spend. It shows up above the line, which means it also affects how your numbers read to investors.

So if a company spends £200,000 on qualifying R&D, the credit is around £40,000 before tax, and the net benefit is in the region of £15,000 for every £100,000 of qualifying spend. The exact figure depends on your tax position.

Enhanced support for R&D-intensive startups

ERIS is aimed at early-stage companies that are loss-making and spend a large share of their money on research. To use it, you have to be a loss-making SME and meet the intensity condition: qualifying R&D has to be at least 30% of your total expenditure, counting connected companies.

Where it applies, ERIS gives an 86% additional deduction on qualifying costs, and a loss-making company can surrender losses for a payable credit at 14.5%. For a research-heavy startup with little or no revenue, that can be worth up to around 27p of cash back for every £1 of qualifying spend.

This is the route that matters most to a pre-revenue or low-revenue tech company burning cash on product. The cash it returns can be a real part of your runway, so it is worth getting right.

Route	Who it is for	What it is worth
Merged scheme (RDEC)	The default for most companies, profitable or loss-making.	20% credit, roughly 15% of qualifying spend after tax. Taxable and above the line.
Enhanced R&D Intensive Support (ERIS)	Loss-making SMEs where R&D is at least 30% of total spend.	86% additional deduction plus a payable credit at 14.5%, up to around 27p per £1 of qualifying spend.

What actually counts as R&D

This is where most claims succeed or fail. R&D for tax is narrower than “we built something new”. It has to be work that seeks an advance in science or technology, where a competent professional could not easily work out how to achieve it, and you had to resolve genuine technical uncertainty.

For a software or SaaS business, that often means things like:

• Building capability that is not readily available and that your engineers were not sure could be done.
• Solving performance, scale or integration problems with no obvious off-the-shelf answer.
• Developing novel algorithms, data approaches or architecture, rather than standard configuration.

Routine development, cosmetic changes, and work that simply applies known techniques usually do not qualify, even when they are hard work. We see a lot of SaaS and tech companies leave good claims on the table because they undersell the genuinely uncertain engineering, and others overreach into work that will not stand up.

The compliance bar is higher now

HMRC has tightened the process around claims. In practice that means more documentation and more scrutiny, including an additional information form that has to be submitted before the claim, and for some companies a requirement to notify HMRC in advance that they intend to claim.

The practical takeaway: keep evidence as you go. Note the technical uncertainties, who worked on them, and what was tried. A claim built from contemporary records is far stronger, and far less stressful, than one reconstructed from memory months later.

How to build a claim that holds up

1. Identify the real R&D.Separate genuine technical uncertainty from routine build. This is the heart of a defensible claim.
2. Capture the right costs.Staff, subcontractors, software and consumables tied to the qualifying work, calculated correctly.
3. Document as you go.Short technical notes during the year beat a scramble at claim time.
4. File it properly.The additional information form and any advance notification, submitted correctly and on time.
5. Tie it to your accounts.The credit affects your reported numbers, so it should be reflected cleanly, not bolted on.

Frequently asked questions

Want a rough number first? Try our R&D tax credit estimator, or read more about our R&D tax support. When you are ready, book a call and we will tell you honestly whether you have a claim worth making.

Last updated: June 2026. General guidance for UK limited companies, not specific advice. For support scoped to your business, book a free intro call.