R&D Tax Credits in 2026: The Merged Scheme, ERIS and How to Claim

If your company spends money trying to solve a scientific or technological problem that a competent professional couldn't easily solve, R&D tax credits can return a meaningful slice of that cost. This guide is for owner-managed companies, start-ups and their finance teams claiming in 2026. It covers the merged R&D expenditure credit scheme that replaced the old SME and RDEC schemes, enhanced R&D intensive support (ERIS) for loss-making companies, what costs count, the claim notification and additional information forms that trip up first-time claimants, and worked examples in pounds.

Quick answer

For accounting periods beginning on or after 1 April 2024, most companies claim under the merged scheme: a taxable credit of 20% of qualifying R&D costs, worth roughly 15–16% after tax. Loss-making SMEs that spend at least 30% of their costs on R&D can choose ERIS instead: an extra 86% deduction and a 14.5% payable credit on the surrendered loss.

• First-time claimants must file a claim notification within 6 months after the end of the period of account

• Every claim needs an additional information form, sent before the Company Tax Return

• Cash credits are capped at £20,000 plus 300% of PAYE and NIC, unless exempt

• Most overseas contracted-out R&D no longer qualifies

What counts as R&D for tax purposes

R&D tax relief is a Corporation Tax relief, so only companies chargeable to UK Corporation Tax can claim; sole traders and partnerships can't. The work has to be part of a project that seeks an advance in overall knowledge or capability in a field of science or technology, not just in your own company's know-how. It must try to resolve scientific or technological uncertainty: something a competent professional in the field couldn't readily work out or deduce.

That definition comes from government guidelines on the meaning of R&D for tax purposes. Developing a new manufacturing process that doesn't yet exist, creating software that overcomes a genuine technical limitation, or formulating a new material with properties that aren't readily achievable can all qualify. Building a website on a standard platform, routine testing, cosmetic design changes, market research and applying existing technology in a known way don't. Since April 2023, advances in pure mathematics can count as science for these purposes.

The project boundary matters. Only activities that directly contribute to resolving the uncertainty, plus certain qualifying indirect activities, are R&D. Commercial work around the project, such as production, sales or general admin, isn't. Many rejected claims fail here because the business describes a commercially innovative product without identifying the technological uncertainty.

R&D tax relief at a glance (2026)

20%

Merged scheme credit

Taxable, any company size

186%

ERIS total deduction

Loss-making R&D-intensive SMEs

14.5%

ERIS payable credit

On the surrendered loss

30%

ERIS intensity threshold

Was 40%

The merged scheme explained

The merged scheme took effect for accounting periods beginning on or after 1 April 2024. It applies to companies of any size, so a small start-up and a multinational claim the same 20% credit on qualifying expenditure. Companies with ring-fenced oil and gas trades have a different rate. The old SME scheme's 130% additional deduction and the separate large-company RDEC no longer exist for new periods.

The credit is "above the line": it's treated as taxable trading income in your accounts and tax computation. That's why the headline 20% isn't the net benefit. A company paying the 25% main rate keeps about 15% of its qualifying costs after tax on the credit. A loss-maker or small profit-maker taxed at the 19% small profits rate keeps about 16.2%, because HMRC's payment steps use the lower rate for them.

HMRC pays the credit through seven steps set out in its manual at CIRD112100. First, the credit discharges your Corporation Tax for the period. Any remainder is reduced by a notional tax deduction, at the main rate for companies whose profits are taxed at the main rate before the credit and at the small profits rate for everyone else; the notional tax isn't lost, but carried forward against later tax bills or surrendered to a group company. The remainder is then tested against the PAYE cap, set against other periods' Corporation Tax, offered for group surrender, set against other HMRC debts such as VAT or PAYE, and only then paid out in cash. A cash payment needs the company to be a going concern, have no open enquiry, and be up to date with PAYE and VAT.

How a merged scheme credit turns into cash

Step 1

20% credit claimed

Step 2

Pays this period's Corporation Tax

Step 3

Notional tax deducted (25% or 19%)

Step 4

PAYE cap check

Step 5

Other periods, group, other HMRC debts

Step 6

Balance paid in cash

If going concern and up to date

ERIS for loss-making R&D-intensive SMEs

Enhanced R&D intensive support keeps something close to the old SME tax credit for the companies that rely on it most. It's only available to a small or medium-sized enterprise that has a trading loss for the period before the additional deduction, and that meets the intensity condition: relevant R&D expenditure of at least 30% of total relevant expenditure, including that of connected companies. The threshold was 40% for earlier periods.

Total relevant expenditure is based on the costs in your accounts under generally accepted accounting practice, plus some pre-trading costs, and excludes payments to connected companies. If your accounting periods don't line up with a connected company's, you apportion on a reasonable, consistent basis such as days.

A one-year grace period helps companies near the line. If you met the condition in your previous 12-month period and made a valid SME or ERIS claim there on spending from 1 April 2023, you can still claim ERIS for the current period even if a one-off cost pushes you below 30%.

Under ERIS you deduct an extra 86% of qualifying costs, so the total deduction is 186%. You can then surrender the lower of the enhanced expenditure (186% of costs) and the trading loss after the extra deduction, for a payable credit of 14.5% of the surrendered amount. The credit itself isn't taxable, but the loss you surrender is gone, so it can't reduce future profits. You can't claim ERIS and the merged scheme on the same expenditure, though an ERIS-eligible company can choose the merged scheme if it prefers.

Companies registered in Northern Ireland that claim ERIS have extra rules because of the Windsor Framework. They aren't subject to the overseas contractor and worker restrictions, and those with no trade in goods or electricity market activity can opt out of the related conditions on the additional information form.

Qualifying costs and restrictions

Both schemes use the same rules for which costs qualify; only the credit calculation differs. HMRC's list covers:

For connected subcontractors and staff providers, you claim the lower of what you paid and their own relevant costs. Contributions to independent R&D carried out by others can no longer be claimed for periods from 1 April 2024. Unlike the old SME scheme, subsidised costs, such as work part-funded by a grant, aren't restricted under the merged scheme, which matters if you've had an Innovate UK award; see our small business grants guide.

Two contracting rules introduced in 2024 change who can claim. First, only the company that decides R&D needs to be done can claim for it. If you're paid by a customer to do R&D that the customer initiated, or knew was needed to fulfil the contract, the customer claims, not you. Second, contracted-out R&D and externally provided workers abroad generally don't qualify, with limited exceptions set out in HMRC's guidance. A UK software company using an offshore development house is the classic case that lost relief.

The PAYE cap

The cash part of the credit is limited by the PAYE cap, which stops companies with few UK staff from claiming large payable amounts. The cap is £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities for the period, and some connected-company payroll can be included. Some companies are exempt from the cap, broadly those whose employees create or manage intellectual property and whose spending on connected subcontractors and workers is limited; check HMRC's guidance before relying on the exemption.

Under the merged scheme, any credit above the cap isn't lost: it's carried forward and treated as a credit for the next accounting period without a new claim. A company with £60,000 of PAYE and NIC liabilities has a cap of £200,000, which is far more than a typical small claim needs, so the cap mainly bites on early-stage companies paying founders through dividends or using contractors instead of employees.

Claim notification and the additional information form

These two forms cause more rejected claims than any technical point, and they have different deadlines.

Claim notification. For accounting periods beginning on or after 1 April 2023, you must tell HMRC in advance if you're claiming for the first time or if your last claim was made more than 3 years before the end of your notification period. The notification period starts on the first day of the period of account and ends 6 months after the end of the period of account. A December year-end company claiming for the first time for its year to 31 December 2025 had to notify by 30 June 2026. Miss it and the claim is invalid; there's no late-filing route.

The form asks for the company's UTR, a senior internal R&D contact such as a director, every agent involved, the accounting period and period of account dates, and a high-level summary of the planned R&D. You don't need to send evidence at this stage. The exemption from notifying doesn't apply if HMRC previously removed a claim from your return.

Additional information form. Every claim, for every accounting period, needs one. It must reach HMRC before or on the same day as the Company Tax Return; if the return gets there first, the claim is removed. The form asks for company details including the PAYE and VAT references and SIC code, contacts, qualifying expenditure by category, intensity details for ERIS, connected companies and PAYE cap answers. It also asks for project descriptions: all projects if you have one to three, or enough projects to cover at least half your qualifying spend (minimum three, maximum ten) if you have more.

Deadlines for a first claim (year ending 31 December 2025)

1 January 2025

Notification period opens

30 June 2026

Claim notification deadline (6 months after the end of the period of account)

Before the CT600

Additional information form submitted

31 December 2026

Company Tax Return due with CT600L

31 December 2027

Last date to make or amend the claim (2 years after the end of the accounting period)

The R&D claim itself goes on the Company Tax Return, with the CT600L supplementary page where you claim an expenditure credit or a payable ERIS credit. You can make, amend or withdraw a claim up to 2 years after the end of the accounting period, for periods of account of 18 months or less. Read our Corporation Tax guide for filing and payment dates.

Worked examples in pounds

Example 1 — profitable company, merged scheme. Fenwick Engineering Ltd makes taxable profits of £400,000 before its R&D claim, so it pays the 25% main rate. It has £200,000 of qualifying costs. Its credit is £40,000. The credit is taxable income, adding £10,000 of tax, so the net benefit is £30,000, or 15% of costs. In practice the £40,000 is first set against the Corporation Tax bill, reducing what Fenwick pays HMRC.

Example 2 — loss-making company, merged scheme. Aster Labs Ltd has a trading loss and £200,000 of qualifying costs, so it's entitled to a £40,000 credit. There's no Corporation Tax to discharge, so at step 2 the notional tax deduction uses the 19% small profits rate: £7,600 is held back and carried forward against future tax, leaving £32,400. Aster's PAYE and NIC liabilities are £60,000, so its cap is £200,000 and doesn't bite. Assuming no other HMRC debts, Aster receives £32,400 in cash and keeps its trading loss to use against future profits.

Example 3 — the same company under ERIS. Suppose Aster's total relevant expenditure is £500,000, so its £200,000 of R&D is 40%, above the 30% threshold. Its trading loss before the extra deduction is £150,000. The extra 86% deduction is £172,000, taking the loss to £322,000. The enhanced expenditure is £372,000 (186% of £200,000). Aster surrenders the lower figure, £322,000, for a credit of £46,690 (14.5%). That's £14,290 more cash than the merged scheme today, but Aster gives up £322,000 of losses that could have sheltered future profits. If it expects to be profitable soon, the merged scheme may be worth more over time.

Aster Labs — merged scheme vs ERIS on £200,000 of R&D

	Merged scheme	ERIS
Cash received now	£32,400	£46,690
Notional tax carried forward	£7,600	None
Trading loss kept for future years	£150,000	None (surrendered)
Best for	Near-term profits expected	Long runway of losses

Cash received now

Merged scheme

£32,400

ERIS

£46,690

Notional tax carried forward

Merged scheme

£7,600

ERIS

None

Trading loss kept for future years

Merged scheme

£150,000

ERIS

None (surrendered)

Best for

Merged scheme

Near-term profits expected

ERIS

Long runway of losses

Advance assurance and HMRC compliance

HMRC has stepped up checks on R&D claims in recent years, and a large share of enquiries look at whether the work is genuinely R&D and whether costs are apportioned properly. Keep contemporaneous records: project plans, technical notes showing the uncertainty, test results, timesheets or reasonable staff time estimates, and invoices.

Advance assurance lets you get HMRC's view before you claim. Full-claim advance assurance is for SMEs claiming for the first time and covers the whole claim for the first three accounting periods. In May 2026 HMRC added a targeted pilot, running until May 2027, for eligible SMEs wanting certainty on a specific complex or high-risk area. You can make up to two applications, each covering one project and one assurance area. Assurance isn't a claim: you still need to notify and file in the normal way.

If you realise you've over-claimed, HMRC has a disclosure route on GOV.UK, and acting before HMRC opens an enquiry usually reduces penalties. Be wary of advisers who charge a percentage of the credit and promise large claims without a technical review; HMRC's additional information form now records every agent involved.

Common mistakes

Missing the claim notification. The single biggest cause of lost claims for new claimants. Put the 6 months after the end of the period of account date in your calendar the day your year starts.

Filing the CT600 before the additional information form. The claim gets removed. Send the form first, even if only minutes earlier.

Counting the 20% as the net benefit. The credit is taxable. Budget on 15–16.2% of costs, and less if the PAYE cap or other HMRC debts absorb some of it.

Claiming for customer-initiated work. Under the contracting rules, R&D you do for a customer who decided it was needed is the customer's to claim.

Including overseas contractors. Unless an exception applies, payments for R&D done abroad no longer qualify.

Ignoring connected companies in the ERIS test. The 30% intensity calculation includes connected companies' spending, which can pull a group below the threshold.

What the Autumn Budget could change

The Autumn Budget is on 28 October 2026. Budget 2025 made no changes to eligibility, the merged scheme rate or ERIS, and the government consulted in 2025 on wider advance clearances, leading to the current pilot. Watch for any change to the 20% rate, the ERIS rates or intensity threshold, or a move towards mandatory clearance for some claimants. We'll update this page after the Budget.

Official links

• Merged scheme and ERIS guidanceRates, intensity, PAYE cap
• Work out your R&D tax reliefCalculation steps
• Check what R&D costs you can claimCost categories and restrictions
• Tell HMRC you want to claim (claim notification)6-month deadline
• Additional information formBefore the CT600
• R&D advance assuranceFull-claim and targeted pilot

What to do next

Map your projects against the R&D definition, check whether you need to file a claim notification and by when, and decide whether the merged scheme or ERIS gives the better result over the next few years, not just this one. If you're also investing in equipment, our capital allowances guide explains how plant used for R&D is relieved, and the ROI calculator helps you test a project's payback with the credit included.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How much are R&D tax credits worth in 2026?

Under the merged scheme, companies get a taxable expenditure credit of 20% of qualifying R&D costs. After tax that's worth about 15% of costs to a company paying the 25% main rate and about 16.2% to a loss-maker or small profit-maker. Loss-making R&D-intensive SMEs can instead claim ERIS, a 14.5% payable credit on a loss boosted by an extra 86% deduction.

What is the merged R&D scheme?

It's the single R&D expenditure credit scheme that replaced the old SME scheme and RDEC for accounting periods beginning on or after 1 April 2024. Any trading company paying Corporation Tax can claim a 20% credit on qualifying costs, whatever its size. The credit is taxable, reduces your Corporation Tax bill, and any excess can be paid in cash, subject to the PAYE cap.

Who qualifies for ERIS?

Enhanced R&D intensive support is for loss-making SMEs whose relevant R&D spending is at least 30% of their total relevant expenditure, including connected companies. They deduct an extra 86% of qualifying costs (186% in total) and can surrender the loss for a 14.5% payable credit. A one-year grace period helps companies that dip below the threshold.

Do I need to tell HMRC before claiming R&D tax relief?

Yes, if you're claiming for the first time or haven't claimed in the previous 3 years. You must submit a claim notification form within 6 months after the end of the period of account. If you miss it, the claim is invalid. Every claim also needs an additional information form, sent before or on the same day as the Company Tax Return.

What costs can I claim for R&D tax credits?

Staff costs for time spent on R&D, externally provided workers, subcontracted R&D, consumables used up in the project, software, data licences and cloud computing costs, and payments to clinical trial volunteers. Payments to unconnected subcontractors and staff providers are restricted to 65%. Since April 2024, most contracted-out work done overseas no longer qualifies.

How long do I have to make an R&D claim?

For a period of account of 18 months or less, you have 2 years after the end of the accounting period to make, amend or withdraw an R&D claim, through your Company Tax Return or an amended return. The claim notification deadline is shorter, at 6 months after the end of the period of account, so first-time claimants must act sooner.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 11 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Research and Development (R&D) tax relief: the merged R&D expenditure credit scheme and enhanced R&D intensive support — HMRC / GOV.UK · accessed 11 October 2026
2. 2.Work out your Research and Development tax relief — HMRC / GOV.UK · accessed 11 October 2026
3. 3.Check what Research and Development (R&D) costs you can claim — HMRC / GOV.UK · accessed 11 October 2026
4. 4.Tell HMRC you want to claim Research and Development (R&D) tax relief — HMRC / GOV.UK · accessed 11 October 2026
5. 5.Submit detailed information before you claim R&D tax relief — HMRC / GOV.UK · accessed 11 October 2026
6. 6.CIRD112100 — reformed reliefs: RDEC payment steps — HMRC · accessed 11 October 2026
7. 7.CIRD111000 — reformed reliefs: new RDEC overview — HMRC · accessed 11 October 2026
8. 8.Research and Development tax relief: advance assurance — HMRC / GOV.UK · accessed 11 October 2026
9. 9.Make a claim for R&D tax relief on your Company Tax Return — HMRC / GOV.UK · accessed 11 October 2026
10. 10.Summary of R&D tax relief changes — Price Bailey · accessed 11 October 2026