HMRC’s Research and Development Tax Stats 2025 paint a picture of fewer claims but bigger values. Total support dipped slightly while claim volumes fell sharply, driven largely by SMEs stepping back. London and the South East continue to dominate by value. Below, we unpack the why, who’s affected, and what businesses should do next.
Research and Development Tax Stats 2025 - What changed in the 2023–24 data (at a glance)
Total R&D tax relief broadly flat to slightly down, despite a double digit fall in claim volumes.
SME scheme decreased markedly; RDEC rose and now accounts for the larger share of support by value.
Average claim values are up as many of the smallest claims fell away.
Regional concentration persists (London/SE), and activity remains dominated by Information & Communication, Manufacturing, and Professional/Scientific/Technical sectors.
Note: Figures in this commentary refer to HMRC’s September 2025 release covering accounting periods ending on or before 31 March 2024 and remain provisional.
Link: https://www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit/research-and-development-tax-credits-statistics-september-2025
Likely causes behind the shifts
1) Policy rate changes (effective from April 2023)
- SME scheme became less generous (reduced enhancement and payable credit rate), reducing headline benefits for loss making SMEs.
- SME scheme became less generous (reduced enhancement and payable credit rate), reducing headline benefits for loss making SMEs.
2) Compliance reforms and administrative friction
- The mandatory Additional Information Form (from August 2023) raised the bar on evidence and technical detail.
- Claim Notification requirement (for first time or returning claimants who haven't claimed in the prior 3 years): companies must notify HMRC within 6 months of the end of the accounting period or they cannot claim for that period. This likely suppressed new/returning claimant volumes and created additional process risk for SMEs.
- Expanded compliance activity and clearer guidance on eligibility and competent professional standards reduced marginal or weak claims.
3) Higher main rate of Corporation Tax
- A higher CT rate changes the effective value of relief (especially where benefits are realised as tax reductions rather than payables).
4) Market conditions and portfolio choices
- Many SMEs prioritised cash runway and core delivery over discretionary filings amid tighter funding conditions.
- Larger groups with embedded R&D processes continued to invest and claim, often with stronger documentation.
Likely causes behind the shifts
SMEs and early stage companies
- Reduced generosity and higher evidential requirements dampen the economics for micro and early stage claimants.
- Start ups without mature documentation/reporting felt the friction most.
Large companies and mature R&D teams
- Benefited from RDEC rate uplift and typically have internal capability to satisfy compliance standards.
- Consolidation of claim value in the >£1m band aligns with this trend.
Sectors
- The dominant sectors - Information & Communication, Manufacturing, Professional/Scientific/Technical - remain the primary users.
- Peripheral sectors saw steeper declines in claim counts versus 2021–22, suggesting a recalibration towards core R&D sectors.
If you’d like to know more about how Innovation Tax can help your business, please get in touch.
Our take: what this means for UK innovation
- Quality over quantity is now the policy reality. The system is rewarding well‑evidenced, technically robust claims. This can raise overall credibility of the relief but risks excluding smaller innovators unless support for evidence and process improves.
- SME pain is real but not uniform. R&D‑intensive SMEs still realise meaningful value, especially where projects are clearly novel, uncertainties are demonstrably scientific/technological, and evidence is planned from day one.
- Concentration isn’t all bad. Persistent London/SE dominance may reflect HQ locations as much as lab sites, but regional diffusion of R&D investment remains a policy goal. Clearer data on where the work happens would help policy targeting.
- A pivot point ahead with the merged regime (from April 2024). While not reflected in these stats yet, the merged scheme and the enhanced support for R&D‑intensive SMEs could partially rebalance incentives.
Practical recommendations for claimants
- Plan your evidence. Maintain contemporaneous records: hypotheses, technical uncertainties, experiments/iterations, and outcomes mapped to costs.
- Strengthen the competent professional role. Ensure decisions on scope/eligibility are made or overseen by individuals with direct technical expertise in the field.
- Segment projects early. Identify work that is routine/implementation vs eligible R&D; ring‑fence costs and time tracking accordingly.
What to watch in the next release
How Innovation Tax can help
We specialise in robust, defensible claims. Our approach combines:
Eligibility triage and risk assessment at project inception.
Evidence architecture (templates, experiment logs, decision trails).
Competent professional leadership and narrative drafting tied directly to the technical uncertainties.
Compliance ready submissions aligned to HMRC’s current expectations.
If you want a health check on a live or planned claim or to redesign your internal R&D evidence process, please get in touch.
We're here to help
Contact us to discuss how the merged R&D scheme and the enhanced R&D-intensive SME relief could impact your business. With expert guidance, you can confidently navigate the new R&D tax landscape and continue to claim with confidence and certainty.
