R&D Tax Credit Calculator

Use the R&D tax credit calculator

Enter your qualifying R&D costs in the tool above — staff time, subcontractors, software and consumables — and it will estimate your total qualifying expenditure and the indicative benefit. Treat the result as a starting point for a conversation with your accountant, not a figure to drop straight onto your tax return.

How the R&D tax credit calculator works

R&D tax relief rewards limited companies that try to make an advance in science or technology. The relief is delivered through your Corporation Tax return (the CT600), either as a reduction in tax due or, for loss-making companies, as a payable cash credit. The headline relief rate is set by HMRC and changes at fiscal events, so always confirm the current percentage on gov.uk before you rely on a number.

The plain-English formula the calculator follows is:

• Step 1 — identify qualifying activities. Only work that seeks a genuine scientific or technological advance, where the outcome was uncertain to a competent professional, counts.
• Step 2 — total your qualifying expenditure. Qualifying expenditure = apportioned staff costs + qualifying subcontractor/externally provided worker costs + consumables + software, data and cloud computing used directly in the R&D.
• Step 3 — apply the relief. Benefit = qualifying expenditure × the current relief rate, then adjusted for Corporation Tax because the expenditure credit is itself taxable.

Because the credit under the merged scheme is an "above the line" taxable amount, the cash you actually keep is lower than the headline rate suggests. That is the single biggest reason DIY estimates overstate the benefit.

What actually counts as qualifying R&D

HMRC uses the BEIS/DSIT Guidelines on the Meaning of R&D. The test is not "did you build something new for your business" — it is whether a competent professional in the field could not readily have known how to achieve the result. Routine software configuration, cosmetic design changes and applying existing techniques do not qualify; resolving genuine technical uncertainty does.

Qualifying cost categories typically include:

Worked example: building your qualifying expenditure

The hard part is not the rate — it is honestly apportioning what was spent on real R&D. Take TechCo Ltd, a small software company that spent a year developing a new way to sync data across unreliable mobile connections, where the right approach was genuinely uncertain at the start.

Their qualifying expenditure builds up like this:

• Lead developer on £55,000, spending 60% of her time on the uncertain elements: £55,000 × 0.60 = £33,000
• Second developer on £45,000, spending 40% of his time on R&D: £45,000 × 0.40 = £18,000
• Cloud computing and test data used directly in the project: £6,000
• Consumable materials used up in prototyping: £3,000

Total qualifying expenditure = £33,000 + £18,000 + £6,000 + £3,000 = £60,000.

The estimated benefit is then £60,000 multiplied by the current HMRC relief rate, reduced to reflect Corporation Tax on the taxable credit. The calculator does that final step for you using the rate in force; the point of the worked example is to show that a defensible claim starts with careful time apportionment, supported by timesheets or a project log, not a round-number guess.

The merged scheme and R&D-intensive SMEs

For accounting periods beginning on or after 1 April 2024, the old separate SME and RDEC schemes were brought together into a single merged R&D expenditure credit scheme for most companies. A separate route — enhanced support for R&D-intensive loss-making SMEs — gives a more generous outcome to smaller companies that spend a high proportion of their total costs on R&D. Which route applies, and the exact percentages, are set by HMRC and have moved several times, so check the current position on gov.uk rather than relying on older articles. You can read HMRC's overview at gov.uk's Corporation Tax R&D relief guidance.

Because the benefit lands on your Corporation Tax position, it is worth modelling alongside your wider company numbers. Our corporation tax calculator shows how a claim reduces tax due, and the limited company tax calculator helps you see the combined effect across the business.

How to claim, step by step

An R&D claim is made through your company tax return, but two extra steps now trip people up:

• Claim notification. Many companies must now pre-notify HMRC of an intention to claim within six months of the end of the accounting period. Miss it and the claim can be invalid, even if the work clearly qualifies.
• Additional Information Form (AIF). You must submit a digital AIF describing the projects, the technical uncertainties and the cost breakdown before you file the CT600 claim. A return filed without it can have the R&D claim removed.

Keep contemporaneous records: project descriptions written in technical terms, time apportionment evidence, and a clear cost schedule. If you also run capital projects, check whether some spend belongs in capital allowances instead, as the two reliefs cover different things.

Tips to get a stronger, safer claim

• Write the technical narrative from the perspective of "what did a competent professional not already know", not "what was new to us".
• Apportion staff time honestly — HMRC scrutiny has increased, and inflated percentages are a common reason claims are challenged.
• Capture employer NIC and employer pension on qualifying staff, not just salary, as these are often missed and increase the claim legitimately.
• Separate the genuinely uncertain development work from routine bug-fixing, testing and deployment, which usually do not qualify.
• If you extract profits as a director-owner, model the wider picture with our dividend vs salary calculator so the claim fits your overall plan.

Common mistakes to avoid

• Claiming for commercial novelty. A product that is new to your market is not automatically R&D — the advance must be in science or technology and technically uncertain.
• Forgetting the subcontractor restriction. Subcontractor and externally provided worker costs are usually restricted, and connected-party rules differ. Including 100% of these costs overstates the claim.
• Missing the notification or AIF deadlines. These procedural steps now invalidate otherwise-good claims more often than the technical test does.
• Ignoring grants and subsidies. Grant-funded or subsidised expenditure can change which scheme or how much you can claim.
• Treating the headline rate as cash. The expenditure credit is taxable, so the net benefit is lower than the rate alone implies.

These figures are estimates for guidance only and do not constitute personal tax or financial advice. R&D rules and rates change — confirm the current position with HMRC or a qualified adviser before you submit a claim.

Who should use this calculator

R&D tax relief rewards companies resolving genuine scientific or technological uncertainty. It is generous and widely under-claimed by companies who assume it is only for laboratories — software development, engineering and manufacturing process work all routinely qualify.

The benefit differs sharply between profitable and loss-making companies: profitable ones reduce their Corporation Tax bill, while loss-makers can surrender losses for a cash credit, which for an early-stage company is often the more valuable outcome.

What this calculator assumes

• Relief applies to qualifying R&D expenditure — staff costs, subcontractors, software and consumables used in the project.
• Profit-making companies obtain a Corporation Tax reduction; loss-making companies may claim a payable credit.
• The qualifying portion you enter is the share of spend genuinely attributable to R&D.
• The claim is made through the company’s Corporation Tax return.

Limitations — what it does not cover

• Whether your project qualifies at all, which is the difficult judgement — it must seek an advance in science or technology and resolve genuine uncertainty, not merely be new to your business.
• Scheme changes, including the merged scheme and enhanced support for R&D-intensive SMEs.
• Advance notification, now required for many first-time claimants before the claim.
• The additional information form, mandatory for all claims.
• Increased HMRC scrutiny following widespread abuse — claims need proper technical narratives.
• Subsidised and grant-funded work, which is treated differently.

Related calculators

To see the full company picture, try the corporation tax calculator to model the tax saving, the limited company tax calculator for total liabilities, and the self-employed tax calculator if you trade outside a company and want to compare structures.