R&D Tax Credit Calculator 2026/27: Merged Scheme 20% and ERIS
R&D tax relief worked examples: the merged scheme 20% expenditure credit, ERIS for loss-making R&D-intensive SMEs, the PAYE cap and claim notification.
The two schemes
Merged R&D expenditure credit
20%
Any size of company. Taxable credit: worth 15.0% of spend after 25% Corporation Tax, 16.2% at the small profits rate or after notional tax for a loss-maker.
Enhanced R&D intensive support (ERIS)
up to 26.97%
Loss-making SMEs with R&D at least 30% of total spend. Extra 86% deduction, then a payable credit of 14.5% of the surrenderable loss. Not taxable.
Four worked company examples
Assumes a 12-month accounting period, no associated companies, a claim within the PAYE cap and no tax liability brought forward. The ERIS credit is 14.5% of the loss after the extra 86% deduction, limited to 186% of qualifying spend, so it falls short of the maximum when the loss is small.
| Company | R&D spend | R&D intensity | Profit or loss before relief | Scheme | Credit | Net benefit |
|---|---|---|---|---|---|---|
| Profitable software company, not R&D intensive | £150,000 | 18.8% | £200,000 | Merged RDEC | £30,000 | £22,050 (14.7%) |
| Loss-making deep-tech SME, R&D intensive | £500,000 | 41.7% | -£300,000 | ERIS | £105,850 | £105,850 (21.2%) |
| Larger profitable tech company | £750,000 | 18.8% | £1,200,000 | Merged RDEC | £150,000 | £112,500 (15.0%) |
| Pre-revenue biotech SME, R&D intensive | £400,000 | 80.0% | -£450,000 | ERIS | £107,880 | £107,880 (27.0%) |
What changed from April 2024
- One expenditure credit for most companies. The merged RDEC replaced the old RDEC and, for profitable SMEs, the 86% enhanced deduction. At the 25% main rate that deduction was worth 86% × 25% = 21.5% of spend; the merged credit is worth 15.0%.
- Lower intensity threshold. The intensive scheme for loss-makers needed R&D of at least 40% of total expenditure for periods beginning before 1 April 2024; ERIS needs 30%.
- Overseas restriction. Contracted-out R&D done abroad, and agency workers not on UK PAYE, no longer qualify unless the R&D needs conditions absent from the UK that it would be wholly unreasonable to replicate here (CTA 2009 s.1138A). Cost and the availability of workers are disregarded.
Claim notification: the deadline that voids a claim
For accounting periods beginning on or after 1 April 2023, a first-time claimant, or a company whose last claim was more than 3 years before the end of its claim notification period, must notify HMRC within that period. It runs from the first day of the period of account to 6 months after its end, so you can notify during the year. Without it the claim is invalid whatever the qualifying spend.
Every claim then needs the additional information form, submitted before or on the same day as the CT600 and before it. The CT600 itself is due 12 months after the end of the accounting period.
Related calculators and guides
- R&D tax credit guide - narrative guide to the merged scheme and ERIS.
- Corporation Tax calculator - the bill the merged credit is set against.
- SEIS & EIS guide - investor-side relief on early-stage equity investment.
- EIS / SEIS relief calculator - 30% / 50% upfront Income Tax relief.
- AIA calculator - Annual Investment Allowance for capital equipment.
- Capital allowances calculator - plant and machinery outside R&D relief.
- Employee share schemes - EMI and other tax-advantaged schemes.
- Optimum director salary 2026/27 - the PAYE bill that sets the PAYE cap.
Frequently asked questions
Which R&D relief applies to accounting periods in 2026/27?
For accounting periods beginning on or after 1 April 2024 the merged R&D expenditure credit (RDEC) and enhanced R&D intensive support (ERIS) replace the old RDEC and SME schemes. The merged RDEC is a taxable 20% credit open to companies of any size. ERIS is for loss-making R&D-intensive SMEs. A company eligible for ERIS can choose the merged RDEC instead, but cannot claim both on the same expenditure.
What is the 20% merged credit worth after tax?
The credit counts as trading income, so it is taxed. At the 25% main rate the net value is 15.0% of qualifying spend, and at the 19% small profits rate 16.2%. Inside the marginal relief band the effective rate on extra profit is higher than the main rate, so the net value is lower. A loss-making company with no tax to pay has notional tax deducted at the small profits rate before any payment, leaving 16.2%, subject to the PAYE cap.
How does ERIS work and who qualifies?
A loss-making SME deducts an extra 86% of qualifying costs (186% in total) and can surrender the loss for a payable credit of up to 14.5% of the surrenderable loss. The most this can return is 26.97% of qualifying spend, and only when the loss is at least 186% of that spend. The company must meet the intensity condition: relevant R&D spend of at least 30% of total expenditure, including connected companies, for periods beginning on or after 1 April 2024 (40% for the earlier intensive scheme).
What counts as an SME for ERIS?
HMRC uses fewer than 500 staff and either turnover under 100 million euros or a balance sheet total under 86 million euros, with linked and partner enterprises counted (CTA 2009 s.1119 and the CIRD91000 pages). A company is loss-making for ERIS only if it has a trading loss for tax purposes before the extra deduction.
How much of a subcontractor or agency worker cost can be claimed?
For an unconnected contractor, 65% of the relevant part of the payment is claimable (CIRD138000), and 65% of the qualifying-earnings part of a payment to an unconnected staff provider for externally provided workers (CIRD137000). Connected-party payments follow different rules. Payments for R&D done overseas, and for agency workers not on UK PAYE, are excluded unless the R&D needs conditions that are not present in the UK and would be wholly unreasonable to replicate here. Cost and worker availability do not count (CTA 2009 s.1138A).
Do I have to tell HMRC before I claim?
For accounting periods beginning on or after 1 April 2023, you must submit a claim notification form if this is your first claim, or your last claim was more than 3 years before the last date of the claim notification period. That period starts on the first day of the period of account and ends 6 months after it ends. Miss it and the claim is invalid.
What is the additional information form?
Every new claim needs an additional information form, mandatory from 8 August 2023, submitted before or on the same day as the Company Tax Return (CT600), and sent first. It asks for the main senior internal R&D contact, every agent involved in the claim, the R&D intensity details where relevant, and a description of each project. If the return goes first, HMRC removes the claim.
What is the PAYE cap?
Under both the merged RDEC and ERIS, the payable credit for a period cannot exceed £20,000 plus 300% of the company’s relevant PAYE and NIC liabilities (CTA 2009 s.1112B, CIRD140000). Under the merged RDEC the excess is carried forward; under ERIS a claim above the cap is invalid. A company is exempt if it creates or manages qualifying IP and its spend on connected subcontractors and connected agency workers is no more than 15% of its qualifying R&D spend.
What are the penalties for an inaccurate claim?
R&D claims fall under the general inaccuracy penalties. For a domestic matter the maximum is 30% of the potential lost revenue for careless errors, 70% for deliberate ones and 100% for deliberate and concealed ones (Finance Act 2007 Sch 24 para 4), with reductions for disclosure. HMRC can open an enquiry into an on-time company return within 12 months of delivery for most companies (FA 1998 Sch 18 para 24).