What counts as R&D for tax purposes?

Work that seeks an advance in science or technology by resolving scientific or technological uncertainty — things a competent professional in the field could not readily deduce. Building a product is not automatically R&D; the qualifying part is the piece where the outcome was genuinely uncertain.

How much is R&D relief worth in 2026?

Under the merged scheme, qualifying expenditure earns a taxable expenditure credit at 20%, worth roughly 15-16p per £1 net for most companies. Loss-making, R&D-intensive SMEs — those spending at least 30% of total expenditure on R&D — can instead claim an enhanced payable credit worth up to about 27p per £1.

What evidence does HMRC expect for an R&D claim?

Contemporaneous records: who worked on what, when, what uncertainty they were resolving, and how costs were apportioned. Claims must be filed with an Additional Information Form naming projects and costs, and new claimants generally must notify HMRC in advance. Reconstructed narratives written a year later are the profile HMRC targets.

Can software development qualify for R&D relief?

Yes, where the work resolves genuine technological uncertainty — novel architectures, performance constraints beyond documented approaches, new algorithms. Routine development using established frameworks, however commercially valuable, does not qualify.

Startups8 min readJune 2026By Peter, Founder

R&D tax relief in 2026: what UK startups can actually claim

R&D relief is still one of the most valuable reliefs available to a UK startup — and it is also the most-checked. The regime tightened, the paperwork became mandatory, and the era of the optimistic claim written by a commission-only boutique is over. Here is where it stands in 2026.

What scheme are we actually in now?

For accounting periods beginning on or after 1 April 2024, the old SME scheme and RDEC merged into a single scheme: a taxable expenditure credit at 20% of qualifying spend, worth roughly 15–16p per £1 after tax for most companies. Alongside it sits the enhanced regime for loss-making, R&D-intensive SMEs — broadly, those spending at least 30% of total expenditure on R&D — which delivers a payable credit worth up to around 27p per £1.

What actually qualifies?

The definition did not change, but the scrutiny did. Qualifying R&D seeks an advance in science or technology by resolving uncertainty that a competent professional could not readily resolve. In software terms: a novel data architecture with real performance constraints may qualify; wiring together established frameworks — however hard or valuable — does not. The honest question is “what did we not know how to do, and what did we try?”, not “what did we build?”

What costs go in?

Staff costs — gross pay, employer NI and pension for time genuinely spent on qualifying work, apportioned honestly.
Subcontractors and externally provided workers — with new rules on who claims when work is contracted out: broadly, the party that decided to do the R&D.
Software, cloud computing and data licences — including compute used to run the R&D.
Consumables — materials and power used up in the work.

Overseas subcontractor costs are now largely excluded — R&D has to happen in the UK unless there is a genuine reason it cannot.

What does HMRC expect to see?

Three things, and all of them are procedural. First, new claimants (or those who have not claimed in three years) must notify HMRC within six months of the period end — miss it and the claim is dead regardless of merit. Second, every claim needs an Additional Information Form naming the projects, the uncertainties and the cost breakdown. Third, contemporaneous evidence: tickets, commit histories, design documents, timesheets. A claim assembled from memory twelve months later is precisely the profile compliance teams select.

What a defensible claim looks like

Projects identified while the work happens; engineers asked about uncertainty in their own words while they still remember; costs apportioned from payroll and tickets rather than a flat percentage; and a number you would be comfortable defending in an enquiry mid-fundraise — because that is exactly when an enquiry hurts most. We would rather file £40,000 that survives than £70,000 that unravels, and we tell clients so before the work starts, not after.

Is it still worth it?

Emphatically yes, for genuine R&D. A seed-stage company spending £400,000 a year on qualifying engineering can see a five-figure to low-six-figure benefit — material runway. The change is that the benefit now belongs to companies who treat the claim as an accounting exercise with evidence, rather than a marketing exercise with adjectives.

Rates and rules change. This article reflects the position as at June 2026 and is general guidance, not advice on your specific circumstances. We prepare claims as part of the finance function for venture-backed startups.