R&D tax relief: does your startup qualify?

By Buzz Accounting · 5 August 2026

R&D tax relief is available to companies in any sector, as long as the work tries to resolve scientific or technological uncertainty. HMRC has put substantial resources into checking claims in recent years because of high levels of error and fraud in past claims, so a claim needs to meet the test and be well documented.

For accounting periods beginning on or after 1 April 2024, the old scheme for small and medium-sized companies and the old expenditure credit used mainly by large companies were replaced by a single merged R&D expenditure credit at 20%. Alongside it is a more generous route, Enhanced R&D Intensive Support, for loss-making small and medium-sized companies whose qualifying R&D is at least 30% of their total relevant expenditure. This post covers whether your work qualifies, what a claim is worth in pounds, and the two deadlines that decide whether you can claim.

How HMRC decides whether work is R&D

A project qualifies if it seeks an advance in science or technology by resolving scientific or technological uncertainty. The uncertainty has to be something a competent professional working in the field could not readily resolve from existing knowledge. Two points follow from that wording.

First, the advance has to be an advance in the field as a whole. Solving a problem that is new to your team does not count if a senior engineer in that discipline could readily work out the answer. Second, commercial novelty does not count. A new kind of product or service can be a strong business idea without involving any technological uncertainty, and HMRC's test is a technical one.

For software startups:

Usually qualifies: algorithms with no published solution; making a system perform at a scale where the standard architecture demonstrably falls over; getting systems to interoperate where the integration itself required experiment, failure and redesign; machine learning work where whether the approach would function at all was unknown at the start.
Usually does not: building a standard web or mobile app with mature frameworks; interface design and styling; configuring off-the-shelf software; API integrations that worked as documented; data migration; and testing and bug-fixing where the difficulty was the amount of work involved.

A useful question to ask your technical lead is: on this project, was there a point where nobody knew whether it could be done at all, and you had to run experiments to find out? If the answer is yes, and someone recorded what was tried and what failed, the project may qualify. If the only difficulty was the amount of work, the project does not qualify.

What a claim is worth

The two routes pay very different amounts.

The merged scheme

The merged R&D expenditure credit is 20% of qualifying expenditure. The credit is itself taxable, so what you keep depends on your corporation tax position. A company paying the 25% main rate nets 15p per £1 of qualifying spend. A company on the 19% small profits rate nets 16.2p, and so does a loss-making company, because its credit is restricted using the small profits rate.

Enhanced R&D Intensive Support

If your company is a loss-making small or medium-sized company and qualifying R&D is at least 30% of total relevant expenditure, it can claim Enhanced R&D Intensive Support instead. You deduct an extra 86% of qualifying costs (186% in total), surrender the loss, and take a payable credit at 14.5%. That comes to up to 26.97p per £1 of qualifying spend if the trading loss is at least 186% of that spend, and the credit is capped at £20,000 plus 300% of the company's PAYE and National Insurance. There is also a year of grace. A company that claimed this support for its previous 12-month period, and met the 30% test then, can claim it for the next period even if it falls below 30%.

Worked example — illustrative figures. A pre-revenue software company, loss-making, year ended 31 March 2027. Total expenditure £400,000, of which £180,000 is qualifying R&D. PAYE and National Insurance for the year: £30,000.

Intensity: £180,000 ÷ £400,000 = 45%, above the 30% threshold, so the intensive support route is available.
Enhanced deduction surrendered: £180,000 × 186% = £334,800.
Payable credit at 14.5%: £48,546 in cash.
Cap check: £20,000 + (300% × £30,000) = £110,000. The claim sits well under it, so it pays out in full.
The identical spend under the merged scheme: £180,000 × 20% = £36,000, worth £29,160 after the credit is taxed.

Difference: £19,386 on the same work, depending on which route the company claims under.

Qualifying costs are mostly people: the share of each person's salary, employer National Insurance and pension that went into the R&D itself. Then externally provided workers and subcontractors at restricted rates, consumables genuinely used up, software licences, and cloud computing and data costs. Rent, marketing, patent filing and the founders' time spent fundraising do not qualify.

The cap linked to PAYE and National Insurance

Both routes cap the payable credit at £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities for the period. It is meant to stop companies with little UK employment claiming large cash credits. It reduces the credit most for startups whose engineers invoice through their own limited companies, or whose founders take dividends instead of a salary. If your PAYE and National Insurance bill is small and your R&D spend is large, work out the cap before you include the credit in a cashflow forecast. How you pay yourself affects the cap, and our guide to paying yourself as a founder covers that decision.

The two deadlines

Both deadlines apply even when the work clearly qualifies.

Claim notification — six months after the end of the period of account. For accounting periods beginning on or after 1 April 2023, a company claiming for the first time, or whose last claim was made more than three years before the notification window closes, must submit a claim notification form. The window opens on the first day of the period of account and closes six months after it ends. For a year ended 31 March 2027, that is 30 September 2027. If the form is late, the claim for that period is invalid.
Additional information form — before, or on the same day as, the CT600. Mandatory for claims submitted on or after 8 August 2023. Send the tax return first and HMRC writes to confirm it has removed the R&D claim from your return. The form asks for your UTR, PAYE reference, VAT number and SIC code, the accounting period dates, the senior internal contact responsible for the R&D, details of every agent involved, a breakdown of qualifying costs, and written project descriptions.

How many projects you must describe depends on how many you have: with one to three, describe all of them; with four to ten, describe at least three covering 50% or more of the qualifying spend; with more than ten, describe at least three covering 50% or more of the qualifying spend, and if that would take more than ten, describe the ten largest. The claim itself must be made within two years of the end of the accounting period, and a company that needs to notify must still send the notification form on time.

Who is responsible if HMRC checks a claim

The company is responsible for its claim. If HMRC opens an enquiry, your company repays any credit that should not have been paid, with interest and any penalty, even if an adviser wrote the claim. HMRC's compliance teams recognise claims written from standard templates. A claim is easiest to defend when it is based on discussions with your engineers and on notes made while the work was done.

What to do this week

Put both deadlines in the calendar now. Take your accounting period end, add six months for the notification date, add two years for the claim deadline. Set reminders three months before each.
Open a project log. One page per R&D project: what you were trying to achieve, why the answer was not already known, what you tried, what failed, what you learned. Update it every fortnight.
Record engineer time against projects. Use whatever tracker you already have. Working out a year later how much of each salary went on R&D gives a smaller and less reliable claim than recording time as you go.
Run the intensity number. Qualifying R&D divided by total expenditure. If it is close to 30%, work out the claim under both routes, because the difference can be large.
Check the cap arithmetic. £20,000 plus three times your PAYE and National Insurance. If that is lower than your expected credit, reduce the credit in your cashflow forecast.

How we help with R&D claims

For a loss-making startup, R&D relief can pay up to 26.97p for each £1 of qualifying spend, and the company gives up no shares for it. Our funding guide compares it with other ways to raise money, and our post on SEIS and EIS for founders covers the equity schemes. We check whether the work qualifies, write the project descriptions with your technical lead, and file the claim with your corporation tax return. Our guide to corporation tax for startups covers the wider tax picture. If your company is working on hard technical problems, get started.

We charge a fixed fee for an R&D claim, agreed before we start, and the fee includes any HMRC enquiry into the claim. See how we handle R&D claims.

Common questions

Does my software startup qualify for R&D tax relief?

It depends on whether the work resolved genuine technological uncertainty. How hard the work was, or how new it felt to your team, does not decide it. Building a standard app with mature frameworks, styling interfaces, configuring off-the-shelf tools and integrating APIs that worked as documented do not qualify. Novel algorithms, making a system work at a scale where the standard architecture fails, and machine learning where nobody knew whether the approach would function at all usually do. The test to apply is whether a competent professional in your field could have readily deduced the solution. If your technical lead had to experiment, fail and iterate to find out whether something was even possible, you probably have a claim worth documenting.

How much is an R&D tax credit worth in 2026?

Under the merged R&D expenditure credit the headline rate is 20% of qualifying expenditure, but the credit is taxable, so a company paying the 25% main rate keeps 15p per pound of qualifying spend and one on the 19% small profits rate, or loss-making, keeps 16.2p. Loss-making companies where qualifying R&D is at least 30% of total expenditure can instead claim Enhanced R&D Intensive Support. They receive an extra 86% deduction, which they surrender for a payable credit at 14.5%, worth up to 26.97p per pound. On £180,000 of qualifying spend that is £48,546 in cash, against £29,160 under the merged scheme.

What is the R&D claim notification deadline?

For accounting periods beginning on or after 1 April 2023, a company claiming R&D relief for the first time, or whose last claim was made more than three years before the notification window closes, must send HMRC a claim notification form. The window opens on the first day of the period of account and closes six months after that period ends, so a year ended 31 March 2027 must be notified by 30 September 2027. If the form is late, the claim for that year is invalid.

Can a loss-making startup get cash from an R&D claim?

Yes. A loss-making small or medium-sized company whose qualifying R&D is at least 30% of total relevant expenditure can claim Enhanced R&D Intensive Support and surrender its loss for a payable credit worth up to 26.97p per pound of qualifying spend, paid in cash. The main limit is the cap. The payable credit cannot be more than £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities, which reduces the credit if your team invoices through their own companies instead of being on the payroll.

Do I need a specialist R&D firm to make a claim?

No. Your accountant can prepare the claim. HMRC's compliance teams recognise claims written from templates, and if HMRC opens an enquiry, your company pays back any overclaimed credit with interest and any penalty, whoever wrote the claim. The best protection is evidence recorded at the time: a project log showing what was uncertain, what was tried and what failed, and engineer time recorded against each project as it is spent.