R&D tax credits for UK startups: the merged scheme and ERIS (2026/27)

Two schemes now

For accounting periods beginning on or after 1 April 2024, the older SME relief and RDEC schemes have been replaced by the merged scheme and enhanced R&D intensive support, known as ERIS. HMRC's guidance sets out both.

The merged scheme is an expenditure credit of 20%, open to trading companies subject to corporation tax that carry out qualifying R&D. ERIS is for loss-making R&D-intensive SMEs.

This is general information, not tax or legal advice. Check HMRC guidance or speak to a qualified adviser before you make a claim.

How ERIS works

ERIS gives an additional 86% deduction on qualifying costs, which takes the total deduction to 186% with the standard 100%. Loss-making companies can receive a payable tax credit of up to 14.5%.

To qualify, relevant R&D expenditure must be at least 30% of total expenditure, including that of connected companies. HMRC applies the test to the accounting period of the claim, with some exceptions for companies that met it in the prior 12-month period and have valid earlier claims.

If you qualify for ERIS you can still choose the merged scheme. You cannot claim under both for the same expenditure.

What counts as R&D

Your project has to seek an advance in a field of science or technology by resolving scientific or technological uncertainty. HMRC describes uncertainty as something an expert cannot say is possible, or how to do, even after looking at all the available evidence.

Arts, humanities and social sciences, including economics, do not qualify. Mathematical advances qualify from 1 April 2023. Many software companies do qualify for part of their work, but routine development is a different matter. Keep notes on what you tried and what failed.

Costs you can include

HMRC's cost guidance covers staff costs including salary, bonuses, pension contributions and National Insurance, with a time share for supporting roles. Consumables, software licences and, for periods from 1 April 2023, data licences and cloud computing costs can also count.

Externally provided workers and subcontractors are capped at 65% of payments when the provider is unconnected. The rules on who can claim for contracted-out R&D changed for accounting periods beginning on or after 1 April 2024, so check HMRC's guidance if you use subcontractors or work as one.

Capital expenditure, land, patents, trademarks, rent and production or distribution costs unrelated to R&D are not claimable.

The PAYE cap

Credits cannot exceed £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities unless an exemption applies. A pre-revenue startup with a small payroll can hit this cap quickly.

Look at it before you forecast what the claim will bring in. Ask your accountant to work out the cap alongside the credit.

Notification and the additional information form

You must send a claim notification form if this is your first R&D claim, or if your last claim was more than three years before the end of the notification period. The period ends six months after the end of your accounting period, and a missed deadline invalidates the claim.

Companies claiming also have to submit an additional information form before, or on the same day as, the Company Tax Return. If the return arrives first, HMRC will remove the R&D claim. The form asks for your projects, the baseline knowledge, the uncertainties and how you tackled them.

Making the claim

You claim on your Company Tax Return. Mark boxes 656 and 657 to confirm the notification and additional information forms, complete form CT600L and give your bank details for payment.

For an accounting period of 18 months or less, the claim deadline is 24 months from the end of the period. Treat that as the last date and aim to file well before it. Earlier filing helps your cash flow.

R&D credits and your raise

Investors read R&D credit income as part of your runway, and some will ask whether the claim is likely to be paid. Keep records that would stand up if HMRC asked questions.

When your accountant has your numbers, you can build a realistic investor list. InvestorUniverse ranks UK investors by stage, sector and cheque size, so you can match your raise to the people who fund companies like yours.