The Merged R&D Relief Scheme: What Changed in April 2024

The merged R&D relief scheme replaced the separate SME and RDEC schemes for accounting periods beginning on or after 1 April 2024, giving almost all companies a single 20% above-the-line expenditure credit on qualifying research and development costs. For R&D tax credits SME UK 2026 claims, this is the biggest structural change in a decade: the old, more generous SME deduction is gone for most businesses, and loss-making, research-intensive SMEs are instead supported through a separate scheme called ERIS. Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice, helps limited company owners work out which route applies and how much relief they can claim. This article explains what changed, how the 20% credit works, who qualifies for enhanced intensive support, the eligible costs, and the HMRC claim process including advance assurance.

Key Takeaways

• The merged R&D scheme applies to accounting periods beginning on or after 1 April 2024 and covers companies of all sizes with a single 20% expenditure credit.
• The merged scheme's 20% expenditure credit is taxable, giving a net cash benefit of about 15% for a company paying the 25% main rate of Corporation Tax.
• Enhanced R&D Intensive Support (ERIS) is available to loss-making SMEs whose qualifying R&D is at least 30% of total expenditure, offering an 86% additional deduction and a 14.5% payable credit.
• ERIS can deliver a net benefit worth up to around 27% of qualifying R&D spend for eligible loss-making, research-intensive SMEs.
• Every R&D claim must be supported by a mandatory Additional Information Form submitted to HMRC before the Corporation Tax return.
• Advance Assurance remains available to many first-time SME claimants and gives HMRC agreement in principle for the first three accounting periods.

What changed in the merged R&D scheme from April 2024?

The main change from April 2024 is that the old SME R&D scheme and the RDEC scheme were combined into one merged scheme using a single 20% expenditure credit for accounting periods beginning on or after 1 April 2024. Before this, SMEs claimed an enhanced deduction worth up to 186% of qualifying costs with a separate payable credit, while larger companies used the Research and Development Expenditure Credit (RDEC scheme) run by HMRC at a lower headline rate. The merged scheme brings the two together and applies the RDEC-style mechanism to nearly everyone.

For most SMEs, this is less generous than the old regime, because the headline relief is now the 20% credit rather than the former enhanced deduction. The credit is treated as taxable income, so the net benefit depends on your Corporation Tax rate. The one exception is loss-making, research-intensive SMEs, who keep more generous treatment through ERIS. Understanding which scheme applies to your accounting period is now the first question in any research and development tax relief claim.

How is the 20% merged scheme credit calculated?

The 20% merged scheme credit is calculated as 20% of your qualifying R&D expenditure and is then treated as taxable trading income, so the after-tax value is lower than the headline rate. Because the credit is above the line, a company paying the 25% main rate of Corporation Tax keeps a net benefit of about 15% of qualifying spend, while a company on the 19% small profits rate keeps about 16.2%.

Consider a profitable limited company with £100,000 of qualifying R&D costs in 2026/27. The gross expenditure credit is £20,000. That £20,000 is taxable, so at the 25% main rate the company pays £5,000 of Corporation Tax on it, leaving a net benefit of £15,000. The credit is first used to settle the company's Corporation Tax liability, and any surplus can, after a set order of priorities, be paid out to the company. This RDEC-style flow is a significant change for SME owners used to receiving a simple cash credit under the old scheme.

The credit is taxable and lands inside the company's tax computation, so it is best read alongside our guide to the corporation tax computation.

Who qualifies for Enhanced R&D Intensive Support (ERIS)?

Enhanced R&D Intensive Support is available to loss-making SMEs whose qualifying R&D expenditure is at least 30% of their total expenditure for the period. An SME that meets this intensity test claims outside the merged scheme and instead deducts an extra 86% of qualifying costs from its trading profit, giving a 186% total deduction, then surrenders the resulting loss for a payable tax credit worth 14.5%.

For a loss-making software start-up with £100,000 of qualifying R&D and total costs that make it research-intensive, the additional 86% deduction creates an £86,000 extra loss. Surrendering the qualifying loss at 14.5% can produce a cash credit worth up to around £27,000, materially more than the merged scheme would give the same company. ERIS is only for SMEs that are loss-making before the extra R&D deduction, so profitable companies and larger businesses use the 20% merged scheme instead. For a full overview of how these schemes fit together, see our guide to R&D tax credits for small businesses.

What costs qualify and how do you claim from HMRC?

Qualifying R&D costs include staff salaries, employer National Insurance and pension contributions, agency workers, consumables such as materials and utilities used in the R&D, software, data and cloud computing costs, and a proportion of subcontractor payments. The work itself must seek an advance in science or technology by resolving scientific or technological uncertainty that a competent professional could not readily deduce, which is the same qualifying test across both the merged scheme and ERIS.

Claims are made through the company's Corporation Tax return, but two extra steps now apply. First, an Additional Information Form must be submitted to HMRC before the return, setting out the projects, costs and the technical narrative; a claim filed without it is invalid. Second, some companies must file a Claim Notification Form in advance if they are new claimants or have not claimed recently. Advance Assurance remains available to many first-time SME claimants and, where granted, gives HMRC agreement in principle for the first three accounting periods, reducing the risk of a later enquiry.

Frequently Asked Questions

What is the merged R&D scheme rate for 2026?

The merged R&D scheme gives a 20% expenditure credit on qualifying R&D costs for accounting periods beginning on or after 1 April 2024, and it continues to apply in 2026. Because the credit is taxable, the net cash benefit is about 15% for a company paying the 25% main rate of Corporation Tax and about 16.2% at the 19% small profits rate.

Is the SME R&D tax credit scheme still available in 2026?

The old SME R&D tax credit scheme has been replaced by the merged scheme for accounting periods beginning on or after 1 April 2024, so most SMEs now claim the 20% expenditure credit. The exception is loss-making, research-intensive SMEs, who instead claim Enhanced R&D Intensive Support with an 86% additional deduction and a 14.5% payable credit.

What makes a company R&D intensive for ERIS?

A company is R&D intensive for ERIS purposes when its qualifying R&D expenditure is at least 30% of its total expenditure for the accounting period, and it is loss-making before the additional R&D deduction. Meeting both conditions lets the company claim the more generous intensive support rather than the standard 20% merged scheme credit.

Do I need to notify HMRC before making an R&D claim?

Many companies must submit a Claim Notification Form to HMRC in advance, particularly first-time claimants or those who have not claimed in the previous three years. In addition, every R&D claim now requires a mandatory Additional Information Form filed before the Corporation Tax return. Missing either step can make an otherwise valid claim invalid.

How long does an R&D tax credit claim take to be paid?

HMRC aims to process most R&D tax credit claims within around 40 working days, though enquiries can extend this. Submitting a complete Additional Information Form with a clear technical narrative and accurate cost breakdown reduces the chance of delay. Advance Assurance, where granted, gives agreement in principle for the first three accounting periods and can smooth the process for new claimants.

How Blue Tick Can Help

Blue Tick Accountants helps limited company owners identify qualifying research and development, calculate the right relief under the merged scheme or ERIS, and prepare robust claims that stand up to HMRC scrutiny. The team handles the Additional Information Form, the technical narrative and the Corporation Tax return so your claim is both maximised and compliant. Head to our website and book a meeting now.

Conclusion

The merged R&D scheme means almost every company now claims a single 20% expenditure credit, worth around 15% net after Corporation Tax, while loss-making research-intensive SMEs keep more generous support through ERIS. The most important step for any claimant in 2026 is to confirm which scheme applies to your accounting period and to file the mandatory Additional Information Form, because a well-prepared claim protects both the relief and your position if HMRC asks questions.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps limited company owners, landlords and the self-employed across the UK. It was last reviewed for the 2026/27 tax year.

This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change and their application will depend on your individual circumstances. You should always seek advice from a qualified professional before taking action. Blue Tick Accountants accepts no liability for decisions made on the basis of this content.

Related reading: Qualifying Costs for R&D Tax Relief: Staff, Consumables and Subcontractors.

Related reading: R&D Tax Credit Claims: How to Prepare a Robust Technical Narrative.