The R&D Tax Relief Estimator

This calculator gives startups an estimate using 2026/27 tax rates.

Qualifying R&D spendMostly staff costs, meaning the share of salary, employer National Insurance and pension that went into the R&D, plus subcontractors and externally provided workers at restricted rates, consumables used up, software, data licences and cloud computing.

Total relevant expenditure for the periodThe costs in the profit and loss account, leaving out payments to connected companies and adding in connected companies' own costs. This decides the 30% intensity test.

PAYE income tax and National Insurance for the periodIncome tax deducted through payroll plus employee and employer National Insurance for the period. This sets the cap, which is low when most of the people doing the work are contractors.

Tax positionA loss-making SME whose R&D is at least 30% of total relevant expenditure can choose ERIS, which pays more.Trading loss before the extra R&D deduction (optional)For loss-making companies: the trading loss for tax after the normal deduction for R&D costs and before the extra 86%. Leave blank to assume the loss is large enough for the most ERIS allows.

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This is an estimate based on 2026/27 rates and standard assumptions. Your exact position depends on your circumstances, and the result is not personal tax advice.

A loss-making small or medium-sized company (SME) whose qualifying R&D is at least 30% of its total relevant expenditure can choose Enhanced R&D Intensive Support (ERIS), worth up to about 27p per £1 of qualifying spend when its trading loss is large enough. Every other claim uses the merged R&D expenditure credit at 20%, which is itself taxable and leaves about 15p to 16p after tax. Both routes cap the payable credit at £20,000 plus 300% of your PAYE and National Insurance for the period.

The merged scheme and Enhanced R&D Intensive Support

There are two ways to claim. The merged R&D expenditure credit is 20% of qualifying spend. The credit is itself taxable, so what you keep is about 15p for each £1 at the main rate, about 14.7p in the marginal relief band and 16.2p for a loss-making company or one paying the small profits rate.

Enhanced R&D Intensive Support (ERIS) is the alternative. It is optional, and it is only for an SME (fewer than 500 staff, and turnover up to €100m or a balance sheet up to €86m, counting linked and partner businesses) that makes a trading loss and whose R&D is at least 30% of its total relevant expenditure. The company deducts an extra 86% of qualifying costs and can surrender the lower of its trading loss and 186% of qualifying spend for a payable credit at 14.5%. That comes to at most 26.97p per £1, and less when the loss is smaller. In HMRC's example, £100,000 of qualifying spend and a £50,000 loss before the extra deduction give a £136,000 loss to surrender and a credit of £19,720. The most that spend could produce is £26,970. On £220,000 of qualifying spend, ERIS pays at most about £59,000 and the merged scheme about £36,000.

The 30% test uses the costs in the profit and loss account, leaves out payments to connected companies and adds in the connected companies' own costs. A company below 30% can still use ERIS for one year if it claimed ERIS, or SME relief on spending from 1 April 2023, for its most recent previous 12-month accounting period and met the 30% test for that period.

The PAYE cap

Both routes cap the payable credit at £20,000 plus 300% of the company's PAYE and National Insurance liabilities for the period. It is meant to stop companies with few UK employees claiming large cash credits, and it limits claims most where engineers invoice through their own limited companies or founders take dividends instead of salary.

What happens above the cap depends on the route. Under the merged scheme, credit above the cap is carried forward to the next accounting period. Under ERIS the credit cannot be more than the cap, so the company surrenders only the loss needed to produce the capped credit and carries the rest of the loss forward as an ordinary trading loss. For example, with £500,000 of qualifying spend and £30,000 of PAYE and National Insurance, the ERIS credit before the cap would be £134,850. The cap is £110,000, so the company receives £110,000, surrenders £758,621 of loss and carries the rest forward.

A company is exempt from the cap only if it meets two conditions. First, it is creating intellectual property, or managing intellectual property it owns, and that work is done wholly or mainly by its own employees. Second, its qualifying spending on subcontractors and externally provided workers from connected companies is no more than 15% of its qualifying R&D spending. Contractors who invoice through their own companies are normally not connected to the company, so a team made up mostly of contractors usually meets the second condition and fails the first.

What counts as qualifying spend

Mostly staff costs: the proportion 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 (generally 65% for unconnected parties), consumable items used up, software licences, data licences and cloud computing, and payments to clinical trial subjects.

Rent, marketing, patent filing and the founders' time spent fundraising do not qualify.

Cloud computing and data licence costs have qualified since April 2023. For an AI or data-heavy company, leaving them out can halve the claim.

Two deadlines for making a claim

If this is your first claim, or you have not claimed in the previous three years, you must send HMRC a claim notification within six months of the end of your period of account. A company tax return can be amended for up to two years after the end of the accounting period, but the notification deadline falls eighteen months earlier. If you miss it, the claim is invalid.

The additional information form must also reach HMRC before, or on the same day as, the company tax return (CT600). If the return arrives first, HMRC removes the claim from it and writes to tell you.

What the estimate does not check

This tool does the arithmetic. It cannot tell you whether your project qualifies. The test is whether the work sought an advance in science or technology by resolving uncertainty that a competent professional could not readily resolve, and it is a technical test. HMRC opened compliance checks on 17% of claims in 2023-24, and 77% of those checks ended in an adjustment.

We prepare and file R&D claims for a fixed fee agreed before we start and set by your qualifying spend, with any HMRC enquiry into the claim included.

Common questions

How much is R&D tax relief worth?

Under the merged R&D expenditure credit it is 20% of qualifying spend, but the credit is taxable, so you keep about 15p in the pound at the main rate, about 14.7p in the marginal relief band and 16.2p if you are loss-making or on the small profits rate. A loss-making SME whose R&D is at least 30% of total relevant expenditure can choose Enhanced R&D Intensive Support instead, worth up to 26.97p per £1 when its trading loss after the extra deduction is at least 186% of qualifying spend. On £200,000 of qualifying spend that is roughly £32,000 under the merged scheme and up to roughly £54,000 under ERIS.

What is the 30% R&D intensity test?

It decides whether a loss-making SME can choose Enhanced R&D Intensive Support. Divide the R&D spending by total relevant expenditure for the period: the costs in the profit and loss account, leaving out payments to connected companies and adding in the connected companies' own costs. At 30% or above, the route is open. A company below 30% can still use it for one year if it claimed ERIS, or SME relief on spending from 1 April 2023, for its most recent previous 12-month accounting period and met the 30% test for that period.

What is the PAYE and National Insurance cap on R&D claims?

The payable credit is limited to £20,000 plus 300% of the company's PAYE income tax and employee and employer National Insurance for the period. It limits claims most for companies whose engineers are contractors instead of employees. Under the merged scheme, credit above the cap is carried forward to the next period. Under Enhanced R&D Intensive Support the credit is limited to the cap, and the company surrenders only the loss needed for that credit and carries the rest of the loss forward as an ordinary trading loss. A company is exempt from the cap only if its own employees do most of the work of creating intellectual property or managing intellectual property it owns, and no more than 15% of its qualifying spending goes on subcontractors and externally provided workers from connected companies.

Do cloud computing costs qualify for R&D relief?

Yes. Cloud computing and data licence costs have qualified since April 2023. Computing costs behind qualifying development work go into the claim, and hosting for a live product does not, so you need to be able to justify the split. For an AI or data-heavy company these costs can be half the claim.

Does grant funding stop us claiming?

No. Neither the merged scheme nor Enhanced R&D Intensive Support has a subsidised-expenditure restriction, so an Innovate UK or similar grant does not reduce the qualifying spend or change which scheme you claim under. A revenue grant is taxable income, which reduces the trading loss and can therefore reduce an ERIS credit.

How accurate is this calculator?

The calculator applies the rules to the figures you enter, so the result is only as accurate as those figures. It cannot judge whether your projects qualify, which is a technical test about advances in science or technology. Use the result as an indication of what each route is worth, and have the qualifying work assessed before anything is filed.

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