R&D Intensity Calculator 2025/26

Check if your SME qualifies as R&D intensive for the enhanced 27% credit rate under the merged R&D scheme.

Calculate R&D Intensity & Credit

R&D Intensity
Intensity threshold met (≥30%)?
Qualifying status
Applicable credit rate
Gross R&D credit
PAYE/NIC cap (£20,000 + 3× PAYE/NIC)
Net cash benefit (capped)
Standard 20% RDEC gross credit (comparison)
Additional benefit from 27% vs 20%

Based on merged R&D scheme for accounting periods beginning on or after 1 April 2024. Qualifying R&D expenditure must meet HMRC's definition. Seek specialist advice for your actual claim.

Merged R&D Scheme from April 2024

From 1 April 2024, the old SME and RDEC schemes merged into a single scheme. All companies receive a standard 20% above-the-line credit. However, loss-making R&D intensive SMEs (spending 30%+ of total costs on R&D) receive the enhanced 27% rate.

What is R&D Intensity?

R&D intensity measures how central research and development is to your business. It is calculated as: qualifying R&D expenditure ÷ total company expenditure × 100. Under the merged scheme, the 30% intensity threshold is critical for SMEs wanting the enhanced credit rate.

Total expenditure means all costs charged to the profit and loss account — not just R&D costs. This is a high bar: to reach 30% intensity, nearly a third of every pound your business spends must be on qualifying R&D.

The Enhanced 27% Rate — Three Conditions

All three conditions must be met. Profitable SMEs and large companies receive the standard 20% merged RDEC rate regardless of their intensity ratio.

The PAYE/NIC Cap

Loss-making companies receiving R&D credits as cash are subject to a cap: the maximum payable credit is £20,000 plus three times the company's total PAYE and employer NIC payments for the period. This cap was introduced to prevent abuse by shell companies with no genuine employment activity.

If your R&D credit exceeds this cap, you can carry the excess forward against future CT liabilities rather than receiving it as cash immediately.

Frequently Asked Questions

What is R&D intensity? +
R&D intensity is the ratio of qualifying R&D expenditure to total company expenditure, expressed as a percentage. Under the merged R&D scheme, an SME with R&D intensity of 30% or more that is also loss-making qualifies for the enhanced 27% credit rate rather than the standard 20% RDEC rate.
What is the merged R&D scheme? +
The merged R&D scheme replaced the previous SME and RDEC schemes for accounting periods beginning on or after 1 April 2024. Under the merged scheme, all claimants receive a 20% above-the-line credit. Loss-making R&D intensive SMEs get a higher 27% rate.
What is the 30% intensity threshold? +
The 30% intensity threshold means your qualifying R&D expenditure must be at least 30% of your total company expenditure. This is calculated as: (qualifying R&D expenditure / total expenditure) × 100. If this equals or exceeds 30%, you meet the intensity condition.
Who qualifies for the enhanced 27% rate? +
To qualify for the 27% enhanced rate under the merged scheme, a company must: (1) be an SME — fewer than 500 employees and either annual turnover under €100 million or balance sheet under €86 million; (2) be loss-making in the period; and (3) have R&D intensity of 30% or more.
What counts as total expenditure for intensity purposes? +
Total expenditure for R&D intensity purposes is all costs incurred by the company in the accounting period — staff costs, materials, overheads, finance costs, and any other expenditure charged to the profit and loss account. It is the total cost base, not just operating costs.
What is qualifying R&D expenditure? +
Qualifying R&D expenditure under the merged scheme includes staff costs (salaries, employer NIC, pension contributions) for employees directly engaged in R&D; subcontractor costs (65% of payments); consumable materials; software costs; and data and cloud computing costs. It must relate to work that seeks to advance science or technology by resolving a scientific or technological uncertainty.
What is the PAYE/NIC cap? +
The PAYE/NIC cap limits the R&D credit that a loss-making company can receive as a cash payment to £20,000 plus three times the company's total PAYE and NIC liability for the period. This prevents abuse by companies with no real employment activity.
How does the 20% standard RDEC work for profitable companies? +
For profitable companies, the 20% RDEC is an above-the-line credit. The credit reduces the CT liability. The net benefit after CT is approximately 15% of qualifying expenditure (20% credit minus 25% CT on the credit itself). Loss-making companies can receive the credit as a cash payment subject to the PAYE/NIC cap.
Can a company transition from SME enhanced to standard RDEC? +
Yes. If a company grows beyond SME thresholds (over 500 employees or over €100m turnover / €86m balance sheet), it moves to the standard 20% merged RDEC rate. Similarly, if it becomes profitable or its R&D intensity drops below 30%, it loses the 27% enhanced rate.
What is the net cash benefit of the 27% enhanced rate? +
For a loss-making SME, the 27% credit is paid as cash (subject to the PAYE/NIC cap). The gross credit is 27% of qualifying expenditure. For example, £1,000,000 qualifying spend gives a £270,000 cash credit. Unlike the standard RDEC for profitable companies, the SME enhanced credit is not itself taxable income.
Are there sector restrictions on R&D relief? +
R&D relief applies to companies undertaking qualifying R&D in science and technology. It cannot be claimed for activities in social sciences, arts, or humanities. The advance must genuinely seek to resolve a scientific or technological uncertainty that could not be readily resolved by a competent professional in the field.
Do I need to notify HMRC before claiming R&D relief? +
Yes. From 1 April 2023, companies must notify HMRC of their intention to make an R&D claim within 6 months of the end of the accounting period for new claimants (or those who have not claimed in the past 3 years). This notification is submitted online through HMRC's digital service.