R&D Tax Relief: Fewer Claims, More Value, New Claimants Return

HMRC has published its latest R&D tax relief statistics, revealing a UK R&D tax relief market undergoing significant change.

The figures for 2024/25 show that businesses claimed an estimated £8.2 billion in R&D tax relief, an increase of 5% on the previous year. The qualifying R&D expenditure underpinning those claims increased even more strongly, rising 7% to £51.0 billion.

Yet behind those headline numbers lies a different trend: the overall number of R&D tax relief claims has fallen significantly. HMRC estimates that 40,325 R&D tax relief claims were made for 2024/25, 17% fewer than the previous year. Among SMEs, the number of claims fell by 19%.

At the same time, the average value of a claim increased by 27%. The result is an R&D tax relief landscape increasingly characterised by fewer, higher-value claims.

The shift to the new R&D tax relief regime

The 2026 statistics are particularly important because they are the first to include claims made under the Merged R&D Expenditure Credit (Merged RDEC) and Enhanced R&D Intensive Support (ERIS) schemes, introduced for accounting periods beginning on or after 1 April 2024.

The effect of the transition is already visible. The amount of relief claimed through RDEC and Merged RDEC increased by 29% to £5.9 billion. Meanwhile, relief claimed through the SME and ERIS schemes fell by 29% to £2.3 billion.

Importantly, Merged RDEC should not be seen simply as a large-company scheme. HMRC estimates that 91% of Merged RDEC claims in 2024/25 were made by SMEs.

Across all schemes, SMEs received approximately £3.6 billion of R&D tax relief, compared with £4.6 billion received by large companies.

Fewer claims, but more R&D expenditure

One of the most interesting findings is the contrast between the number of claims and the underlying expenditure. While claim numbers fell by 17%, qualifying R&D expenditure increased by 7% to £51.0 billion.

The change was not evenly distributed. Qualifying expenditure claimed by SMEs fell by 3% to £20.7 billion, while expenditure by large companies increased by 14% to £30.2 billion. The statistics therefore suggest that the reduction in claim numbers does not necessarily represent an equivalent reduction in UK R&D activity.

Instead, the market appears to be becoming more concentrated. Claims worth £500,000 or more represented only 6% of all claims but accounted for 69% of the total value of relief claimed. The number of claims worth more than £2 million increased by 13%, while their total value increased by 21%.

Manufacturing, technology and professional services continue to dominate

Three sectors continue to account for the majority of UK R&D tax relief activity:

• Manufacturing: 27% of claims and 27% of relief
• Information & Communication: 27% of claims and 20% of relief
• Professional, Scientific & Technical: 20% of claims and 24% of relief

Together, these sectors accounted for 75% of claims and 71% of the total value of relief claimed.

The longer-term reduction in claim numbers has nevertheless been seen across every industry sector. Since 2021/22, five sectors have experienced falls in claim numbers of more than 75%: Accommodation & Food; Real Estate; Education; Wholesale & Retail Trade and Repairs; and Health & Social Work.

Are first-time claimants beginning to return?

One of the more interesting signals in HMRC’s latest data is a potential change in the trend for businesses entering the R&D tax relief system for the first time. First-time applicants had fallen significantly over recent years. In 2023/24, the number dropped by 43% to 5,250, the fifth consecutive annual decline.

However, provisional figures for 2024/25 suggest that this trend may be beginning to reverse. HMRC’s detailed data tables show an estimated 5,850 first-time applicants in 2024/25, an 11% increase on 2023/24.

The make-up of these claims has changed substantially as businesses transition to the new R&D tax relief regime. First-time applicants under RDEC and Merged RDEC increased from 1,845 in 2023/24 to 4,530 in 2024/25. By contrast, first-time applicants under the SME Scheme, Intensives and ERIS fell from 3,405 to 1,320. An initial 11% increase is noteworthy after five consecutive years of declining first-time participation.

It will be important to see whether this develops into a sustained recovery as businesses become more familiar with the Merged RDEC and ERIS regimes.

A changing R&D tax relief market

The latest statistics present a more nuanced picture than the headline fall in claim numbers might suggest.

R&D tax relief continues to provide substantial support for UK innovation, with £8.2 billion of relief supporting £51 billion of qualifying R&D expenditure during 2024/25.

Overall claim numbers have fallen, particularly among SMEs, but average claim values are rising and provisional figures suggest that the number of businesses entering the R&D tax relief system for the first time may have started to increase again.

At the same time, successive reforms have fundamentally changed the way R&D tax relief operates. Companies need to understand not only whether their activities qualify as R&D, but which scheme applies, how the rules around subcontracted R&D affect them and what evidence is required to support their claim.

Against a backdrop of increased HMRC scrutiny, the quality and defensibility of claims has become increasingly important. For businesses undertaking genuine technological or scientific development, however, the latest figures demonstrate that R&D tax relief remains a significant source of financial support.

If your business is investing in developing new products, processes, software or technologies, ABGi can help you establish whether your activities qualify for R&D tax relief, identify the appropriate scheme and prepare a robust, evidence-based claim.