Key takeaway: HMRC estimates 40,325 claims for 2024–25, down 17%, while qualifying R&D expenditure rose 7% to £50.97bn and total support increased 5% to £8.20bn. The market is becoming smaller by claim count, but larger and more concentrated by claim value.
HM Revenue & Customs published its latest annual R&D Tax Credit Statistics 2026 on 29 September 2026, providing the first official picture of R&D tax relief claims covering the introduction of the new Merged R&D Expenditure Credit (Merged RDEC) and Enhanced R&D Intensive Support (ERIS).
At first sight, the headline figures appear contradictory. The estimated number of R&D tax relief claims fell substantially during 2024–25, yet both the amount of qualifying R&D expenditure reported through the schemes and the total value of tax relief increased.
That combination tells an important story about how the UK R&D tax relief market is changing. HMRC estimates that 40,325 R&D tax relief claims were made for 2024–25, down 17% from 48,610 in the previous year. However, the total amount of support claimed increased by 5%, from approximately £7.8 billion to £8.2 billion, while qualifying R&D expenditure increased by 7% to approximately £51.0 billion.
The latest figures therefore do not indicate that UK companies have stopped investing in R&D. Instead, they point towards a smaller claimant population, greater concentration of relief amongst larger claims and a significant structural change in where claims are being made following the reforms introduced from April 2024.
The headline figures - R&D Tax Credit Statistics 2026
| Measure | 2023–24 | 2024–25 | Change |
|---|---|---|---|
|
Total R&D tax relief claims |
48,610 |
40,325 |
-17% |
|
Estimated support claimed |
£7.795bn |
£8.200bn |
+5% |
|
Qualifying R&D expenditure |
£47.820bn |
£50.970bn |
+7% |
|
Approximate average relief per claim |
£160,000 |
£203,000 |
+27% |
|
SME qualifying R&D expenditure |
£21.3bn |
£20.7bn |
-3% |
|
Large company qualifying R&D expenditure |
£26.5bn |
£30.2bn |
+14% |
The most striking statistic is arguably the divergence between claim numbers and claim values. There were approximately 8,285 fewer claims than in 2023–24, yet the value of support increased by around £405 million.
Based on HMRC’s published totals, average support per claim increased from approximately £160,000 to £203,000 - around 27%. HMRC specifically attributes the increase in average claim value to larger claims, particularly those exceeding £2 million.
This represents a material change in the shape of the R&D tax relief population.
Claim volumes continue their long-term decline
The 17% year-on-year fall is not an isolated movement. HMRC recorded 87,180 claims in 2020–21. The provisional estimate of 40,325 claims for 2024–25 is around 54% lower.
Some caution is needed when interpreting this longer-term comparison because the schemes, rates, administrative requirements and claimant populations have changed considerably during this period. Nevertheless, there has clearly been a major contraction in the number of claims entering the system.
HMRC believes a key contributor to the recent fall has been the Additional Information Form, which became mandatory for claims submitted from 8 August 2023. The requirement was introduced alongside wider administrative reforms intended to improve compliance.
The decline is also visible in the number of businesses entering the R&D regime for the first time. For 2023–24, the latest year for which HMRC considers the data sufficiently mature for this analysis, there were 5,250 first-time applicants, down 43% from 9,280 a year earlier. This was the fifth consecutive annual decline in first-time applications. SME scheme first-time applicants fell particularly sharply, from 7,280 to 3,405.
The initial 2024–25 first-time applicant data should not yet be used to infer a reversal of this trend because HMRC specifically states that it remains incomplete and is expected to increase as further returns are received.
But qualifying R&D expenditure has reached almost £51 billion
The fall in claims should therefore not be interpreted simply as a corresponding fall in R&D activity. HMRC estimates that companies claimed relief against £50.97 billion of qualifying R&D expenditure in 2024–25, compared with £47.82 billion in 2023–24. That represents growth of approximately 7%.
HMRC itself suggests that qualifying expenditure may currently provide a more meaningful measure of underlying trends than the amount of relief claimed because the rates and structure of the schemes changed significantly between 2022–23 and 2024–25.
However, the growth was not evenly distributed. Large companies accounted for approximately £30.2 billion of qualifying R&D expenditure, an increase of 14%. SMEs accounted for approximately £20.7 billion, down 3% from £21.3 billion.
This distinction is important. Overall qualifying expenditure increased strongly, but the increase was driven predominantly by larger companies.
2024–25 marks the beginning of the Merged RDEC era
These statistics are particularly significant because they are the first HMRC publication to include claims under the Merged R&D Expenditure Credit and Enhanced R&D Intensive Support regimes.
For accounting periods beginning on or after 1 April 2024, the previous SME R&D relief and RDEC regimes were replaced by Merged RDEC, available to most companies undertaking qualifying R&D, and ERIS, available to qualifying loss-making R&D-intensive SMEs.
Merged RDEC provides a taxable expenditure credit at 20%. ERIS allows qualifying loss-making R&D-intensive SMEs an additional 86% deduction and a payable credit of up to 14.5% of the surrenderable loss. The ERIS R&D intensity threshold is currently 30% of relevant total expenditure.
The 2024–25 statistics therefore contain a mixture of claims arising under the previous and new regimes because the new schemes apply according to when a company’s accounting period begins.
This is why HMRC specifically warns that SME scheme-level figures for 2024–25 are not directly comparable with earlier years. Many SMEs that would historically have appeared in the SME relief statistics now appear within Merged RDEC.
The apparent 29% fall in SME/ERIS relief needs careful interpretation
Claims under the old SME scheme and ERIS generated approximately £2.275 billion of support in 2024–25, compared with £3.190 billion through the SME schemes in 2023–24 - a reduction of approximately 29%. Conversely, RDEC and Merged RDEC support increased by approximately 29%, from £4.605 billion to £5.925 billion.
It would be misleading, however, to conclude from these figures that SME participation simply fell by 29%. A substantial number of SMEs migrated into Merged RDEC.
HMRC estimates that 91% of Merged RDEC claims made during 2024–25 came from SMEs. Across all schemes, HMRC estimates that the total number of claims made by SMEs fell by approximately 19%, while claims by large companies increased by around 4%.
The underlying tables also show that approximately £3.6 billion of the £8.2 billion of relief went to SMEs, compared with around £4.6 billion received by large companies.
Our analysis of HMRC’s tables indicates that total relief attributable to SMEs across all schemes fell from approximately £4.07 billion in 2023–24 to approximately £3.60 billion in 2024–25, whereas relief attributable to large companies increased from approximately £3.73 billion to approximately £4.61 billion.
This reinforces the broader picture: growth in the total cost of the R&D relief regime during 2024–25 was disproportionately driven by larger businesses and larger claims.
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Large claims now account for an extraordinary proportion of total relief
The distribution by claim value is perhaps the clearest evidence of the increasing concentration within the scheme. HMRC reports that 58% of claims were worth £50,000 or less, yet collectively those claims accounted for only 6% of the total value of relief.
At the other end of the distribution, only 6% of claims were worth £500,000 or more, but they accounted for 69% of all relief claimed. The equivalent figure was 62% a year earlier.
The underlying cost-band tables provide an even more striking statistic. There were only 560 claims worth more than £2 million during 2024–25. These represented approximately 1.4% of all claims, yet accounted for approximately £4.03 billion of relief - almost half of the entire £8.2 billion programme.
This helps explain why HMRC can simultaneously report a 17% fall in overall claim numbers and a 5% increase in the total cost of the schemes. The R&D tax relief population is becoming smaller by number but more concentrated by value.
Manufacturing, technology and professional/scientific businesses continue to dominate
| Sector | 2024–25 claims | Relief claimed |
|---|---|---|
|
Manufacturing |
11,090 |
£2.235bn |
|
Information & Communication |
10,920 |
£1.630bn |
|
Professional, Scientific & Technical |
8,195 |
£1.960bn |
Together these sectors accounted for approximately 75% of all claims and 71% of the value of relief claimed.
The supplementary HMRC tables provide further insight. Within Information & Communication, computer programming, consultancy and related activities alone accounted for approximately 8,680 claims, £1.295 billion of relief and £7.965 billion of qualifying expenditure.
Interestingly, claim numbers in this subsector fell by around 11% from 2023–24, while qualifying expenditure increased by approximately 9%.
Within Professional, Scientific & Technical activities, businesses classified specifically under scientific research and development accounted for around 2,385 claims, £1.055 billion of relief and £6.06 billion of qualifying expenditure. Compared with 2023–24, claim numbers increased by around 5%, relief increased by approximately 13% and qualifying expenditure increased by more than 20%.
Architectural and engineering activities, including technical testing and analysis, accounted for approximately 2,865 claims and £2.03 billion of qualifying expenditure.
The pattern within several innovation-intensive industries is therefore similar to the national picture: fewer or relatively stable numbers of claims accompanied by higher levels of qualifying R&D expenditure.
Some industries have seen dramatic reductions in claim numbers
The longer-term sector statistics also reveal substantial changes in participation. HMRC reports that claims fell across every industry sector between 2021–22 and 2024–25.
Five sectors experienced falls exceeding 75%: Accommodation & Food; Real Estate; Education; Wholesale & Retail Trade and Repairs; and Health & Social Work. HMRC notes that these tend to be relatively small sectors by R&D claim volume.
For comparison, the three dominant claiming sectors were considerably more resilient. Our analysis of HMRC’s tables shows that between 2021–22 and 2024–25 claim numbers fell by approximately 43% in Manufacturing, 41% in Information & Communication and 39% in Professional, Scientific & Technical activities. Construction experienced a much larger decline of approximately 70%.
These figures may reflect several factors rather than a single cause, including changes in relief rates, tighter administrative requirements, HMRC compliance activity, changes to adviser behaviour and businesses reconsidering whether projects or costs genuinely satisfy the R&D criteria.
London and the South East remain dominant but regional statistics require caution
The geographical distribution of claims remains heavily concentrated. Companies with registered offices in London accounted for 24% of claims and 30% of relief, while the South East accounted for 15% of claims and 19% of relief. The East of England represented a further 10% of claims and 14% of relief.
Combined, these three regions therefore represented approximately 49% of all claims and 63% of the total value of R&D tax relief.
However, HMRC makes an important qualification: its regional analysis uses the company’s registered office. This may not be the location where the underlying R&D activities actually take place. Regional statistics should therefore not be interpreted as a precise geographical measure of where UK R&D investment occurs.
HMRC’s compliance reforms appear to be changing the claimant population
The reduction in claim volumes needs to be considered alongside HMRC’s wider compliance strategy. Mandatory digital claims, the Additional Information Form and claim notification requirements have introduced significantly more information and procedural requirements into the R&D claim process.
For accounting periods beginning on or after 1 April 2023, companies making their first R&D claim and certain companies that have not claimed recently must notify HMRC of their intention to claim. The notification period generally ends six months after the end of the relevant period of account. Failure to notify where required can make the subsequent claim invalid.
HMRC’s latest Annual Report provides further evidence that these measures are having an effect. HMRC estimates error and fraud in the R&D relief schemes for 2023–24 at 6.4%, or £493 million, comprising an estimated 11.1% within the SME scheme and 3.2% within RDEC.
HMRC says these rates are lower than estimates since 2020–21 and attributes this partly to legislative and operational changes, including digital claims and additional information requirements. For 2024–25 and 2025–26, HMRC’s illustrative assessment is that the overall error and fraud rate could reduce further to approximately 5.3%.
That does not mean compliance activity is likely to disappear. Quite the opposite: HMRC states that the additional information now collected allows it to identify and target risk more effectively and that it has significantly increased the resources devoted to R&D compliance activity.
What is the outlook for R&D tax relief?
The scheme remains financially significant
Despite several years of reform, the total level of support has not contracted. At approximately £8.2 billion, the estimated cost of R&D relief is now higher than in any of the preceding years shown in HMRC’s latest tables.
Similarly, qualifying expenditure approaching £51 billion demonstrates that R&D tax relief remains an important component of the UK’s business innovation ecosystem. The programme is therefore not disappearing. It is changing.
Claim numbers may remain below their historic peak
The combination of the Additional Information Form, claim notification, stronger compliance activity and tighter scrutiny has materially changed the process of making an R&D claim.
The decline in first-time claimants is especially significant because it suggests that the future claimant population may remain considerably smaller than the levels seen around 2019–20 and 2020–21. Whether claim volumes stabilise after the full transition to Merged RDEC and ERIS will become clearer in future statistical releases. The 2024–25 figures represent only the beginning of that transition.
Merged RDEC means SMEs need to rethink the economics of their claims
For many SMEs, R&D tax relief is no longer operating under the familiar enhanced-deduction model of the historic SME scheme. Profit-making SMEs and loss-making SMEs that do not qualify for ERIS generally fall within Merged RDEC.
This changes how the benefit appears in the accounts, how the benefit is calculated and, importantly, how certain subcontracted R&D arrangements are treated. HMRC has also introduced restrictions on certain overseas contractor and externally provided worker costs.
Businesses should therefore avoid assuming that expenditure treated as qualifying in historic claims will automatically receive the same treatment under the reformed regime.
Early planning is becoming increasingly important
The administrative changes also mean that R&D tax relief is becoming less suitable for companies to consider only when their Corporation Tax return is about to be filed.
- Claim notification deadlines can arise months before the ultimate R&D claim deadline.
- Companies using overseas contractors may need to consider the location and nature of R&D activities before contracts are signed.
- Contracted-out R&D arrangements need to be considered carefully to establish which party is entitled to claim under the new rules.
- ERIS eligibility may depend on whether a loss-making SME satisfies the 30% R&D intensity threshold, including the effect of connected companies.
The direction of travel is therefore towards earlier consideration of R&D relief as part of a company’s tax, finance and project planning rather than treating it solely as a retrospective tax exercise.
What should businesses take from the 2026 statistics?
The principal message is not simply that R&D claims are falling. A more accurate interpretation is that the claimant population is shrinking while qualifying expenditure and the overall value of relief continue to grow.
At the same time, relief is becoming increasingly concentrated amongst larger claims and larger companies.
For SMEs, the transition to Merged RDEC means the old SME scheme statistics are no longer an appropriate benchmark in isolation. More than nine out of ten Merged RDEC claims in 2024–25 came from SMEs, demonstrating how substantially the statistical population has shifted.
The fall in first-time claimants and HMRC’s improving error-and-fraud estimates also suggest that the compliance reforms introduced over the past several years are having a material effect.
For genuine innovators, R&D tax relief remains a valuable source of support. But the standard required to prepare a robust claim is increasingly important.
Businesses should be able to identify the technological or scientific baseline, clearly articulate the advance being sought, explain the technological uncertainties involved, demonstrate how competent professionals attempted to resolve those uncertainties and maintain appropriate evidence supporting the qualifying expenditure included within the claim.
They should also establish early whether claim notification is required, whether Merged RDEC or ERIS applies, whether subcontractor arrangements affect entitlement to claim and whether overseas expenditure restrictions apply.
A more mature R&D tax relief regime?
Taken together, the September 2026 statistics suggest that the R&D tax relief regime is undergoing a significant structural adjustment rather than simply contracting.
There are far fewer claims than only a few years ago. Yet businesses are reporting more qualifying R&D expenditure and the Exchequer cost of the relief has increased.
Large claims now dominate the value of the programme. Manufacturing, technology and professional/scientific businesses continue to account for the majority of activity. Large-company R&D expenditure has risen strongly, while SME expenditure has softened. At the same time, HMRC believes the level of error and fraud is falling.
The next important question will be what happens once the transition to Merged RDEC and ERIS is fully reflected across complete accounting periods. The September 2027 statistics should provide a considerably clearer indication of the steady-state position.
For now, the 2026 figures point towards a smaller, more concentrated and more compliance-driven R&D tax relief market but one which continues to provide substantial support to UK business investment in innovation.
Sources
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