22OCT

HMRC: R&D tax relief rises as claims fall 17%

3 min read

16:30UTC

Provisional HMRC figures for 2024-25 show about 8,000 fewer R&D claims but £8.2bn of relief, more of it flowing to fewer, larger claimants.

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Key takeaway

R&D tax relief is flowing to fewer, larger claims after the two schemes merged.

HM Revenue and Customs (HMRC) published provisional figures on 29 September showing research and development (R&D) tax credit claims fell 17% to 40,325 in 2024-25, while total relief rose 5% to £8.2bn on £51bn of R&D spending⁠¹. It is the first official count for the year in which the small-company and large-company reliefs merged into one credit for most firms.

Relief through the small-company scheme and enhanced R&D intensive support (ERIS), the strand meant for loss-making research-heavy small firms, fell 29% to £2.3bn. Relief through the R&D expenditure credit (RDEC) and its merged successor rose 29% to £5.9bn. Roughly 8,000 fewer claims came in, most of them from small companies, and 6% of claims took 69% of the value, so relief is concentrating in fewer, larger claims. HMRC warns that its small-company figures for 2024-25 do not compare cleanly with earlier years because of the scheme change.

Venture money shows the same top-heavy shape: the ten largest life-sciences raises took three quarters of the sector's capital in the first half. The Budget on Wednesday 28 October is the next point at which the scheme can change. Chancellor John Healey has ruled out raising capital gains tax, according to the founder lobby group Startup Coalition⁠².

Deep Analysis

In plain English

R&D tax relief is a tax break for companies that spend money on research and development, such as building new products or testing new science. Companies claim it from HM Revenue and Customs, the tax office. New figures show fewer companies claimed it in 2024-25, but the total money handed out rose. That means bigger firms are getting more and smaller firms less, after the government merged two schemes into one in 2024.

Deep Analysis

Root Causes

The 2024 merger folded most firms into one expenditure credit and kept enhanced support only for loss-making small companies above an R&D intensity threshold. Firms below that threshold moved to a less generous credit, which may explain part of the fall in small claims.

HMRC also tightened compliance from 2023, with advance notification and extra information forms. Those steps raise the cost of a small claim relative to its value.

What could happen next?

Consequence
Small research companies that dropped out of the scheme lose a source of cash that often funded early hiring.
Risk
HMRC's warning that small-company figures for 2024-25 do not compare cleanly with earlier years limits any firm conclusion before revised figures arrive.

Source Landscape

This story draws on mixed-leaning sources from United Kingdom

United Kingdom

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Primary parallel: France rebuilt its Crédit d'Impôt Recherche in 2008 around a flat credit on R&D volume. The cost of the scheme rose sharply and large groups took most of its value.

Counter-parallel: Britain's own small-company scheme, launched in 2000 with a payable credit for loss-making firms, was built for the opposite effect. Small claimant numbers grew for about two decades before the 2024 merger narrowed it.

London accounts for 24% of claims and 30% of value, and the South East for 15% and 19%, according to HMRC. Relief therefore leans towards the regions where large R&D spenders cluster.

The Budget on 28 October is the next chance to change the rate or threshold for enhanced support. The Growth Beyond Limits campaign is separately asking for the Enterprise Investment Scheme lifetime company limit to rise to £30m, or £40m for knowledge-intensive companies.

Consensus view: HMRC's own release shows the merged scheme working as designed for large claimants: claims over £2m rose 14% in number and 21% in value, and average claim value rose 27%. HMRC's figures show relief concentrating in the largest R&D spenders.

Counter-view: Startup Coalition, the founder lobby group, argues the Budget should give founders reasons to stay, asking for a 0% Founder's Relief on the first £1m of gains. Its survey found 42% of founders said a rate well below the standard one would most change their reinvestment decisions, a sign that small firms judge the tax system by exit taxes as much as by R&D credits.

Key tension: Whether the fall in small-company claims reflects fraud and error removed from the old scheme or genuine research firms giving up on relief.

Sources:HM Revenue and Customs·Politics.co.uk

Mentions:HMRC →Research and Development Expenditure Credit →Enhanced R&D Intensive Support →John Healey →Startup Coalition →France →Enterprise Investment Scheme →London →

First Reported In

Update #16 · Stryker agrees option to buy CMR Surgical

HM Revenue and Customs· 22 Oct 2026

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Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.