What is R&D Tax Credits? UK Definition 2026/27
Quick Answer
Tax relief for companies investing in research and development activities.
Definition of R&D Tax Credits
R&D Tax Credits reward UK companies for innovation. The merged RDEC scheme gives a 20% tax credit on qualifying R&D expenditure. Loss-making companies can claim a cash credit. Qualifying activities include developing new products, processes, or services, or improving existing ones through technological advancement.
R&D Tax Credits — Key Facts for 2026/27
| RDEC rate | 20% |
| Effective relief | 15% (after CT) |
| Cash credit rate | 16.2% |
| Enhanced R&D Intensive | 27% (if 30%+ R&D) |
How R&D Tax Credits Works — Example
- 1Qualifying R&D spend: £100,000
- 2RDEC credit: £100,000 × 20% = £20,000
- 3Less CT on credit: £20,000 × 25% = £5,000
- 4Net benefit: £15,000
- 5Effective rate: 15%
How R&D Tax Credits Affects Your Tax
R&D credits can significantly reduce tax bills or provide cash for loss-making companies. The merged scheme from April 2024 simplified claims but changed rates. Proper documentation of qualifying activities is essential.
Official HMRC Guidance on R&D Tax Credits
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: R&D Tax ReliefFrequently Asked Questions about R&D Tax Credits
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.