Calculate your RDEC credit under the merged scheme for accounting periods starting on or after 1 April 2024. 20% above-the-line credit for all companies.
Calculate Your R&D Tax Credit
Total qualifying R&D expenditure
Credit rate applied
RDEC credit (above-the-line)
CT on the credit (taxable income)
Net cash benefit after CT
Effective rate of relief on R&D spend
CT saving / cash payment
Old SME scheme comparison (net benefit)
Merged scheme applies to accounting periods starting on or after 1 April 2024. EPW costs use 65% qualifying fraction. Seek specialist R&D tax adviser for complex claims.
What is the Merged R&D Scheme?
The merged scheme came into force for accounting periods beginning on or after 1 April 2024. It replaces both the SME R&D relief and the large company Research and Development Expenditure Credit (RDEC) with a single system. All qualifying companies — regardless of size — now claim a 20% above-the-line credit on their qualifying R&D expenditure.
The credit is "above-the-line" because it is recognised as income before arriving at the operating profit figure, improving the apparent profitability of R&D-intensive businesses. This is particularly attractive for companies that need to present their EBITDA to investors or lenders.
Net Benefit Rates Under the Merged Scheme
Scenario
Credit Rate
CT Rate
Net Benefit
Standard company, profitable
20%
25%
15.0% of R&D spend
Standard company, profitable
20%
19%
16.2% of R&D spend
R&D-intensive SME, profitable
27%
25%
20.25% of R&D spend
Standard company, loss-making
20%
0%
Up to 20% cash (subject to PAYE cap)
Qualifying R&D Expenditure
Qualifying R&D must be work that seeks to advance science or technology by resolving a genuine area of scientific or technological uncertainty. Routine work, market research, and social science research do not qualify. The main categories of qualifying cost are:
Staff costs: Salaries, wages, employer NI, employer pension contributions for employees directly engaged in R&D.
Externally provided workers (EPW): 65% of the gross cost of workers provided through a third party who are directly engaged in R&D.
Software costs: Software licences and development tools used in R&D activities.
Cloud computing: Compute and storage costs directly used in R&D processes (from April 2023).
Consumables: Materials and utilities consumed in the R&D process.
Subcontractors: Payments to qualifying bodies (universities), individuals, and charities for R&D work. Corporate subcontractors generally do not qualify under the merged scheme.
R&D-Intensive SME Enhanced Rate (27%)
SMEs spending at least 30% of their total expenditure on qualifying R&D, and with fewer than 500 employees, can claim the enhanced credit rate of 27% rather than 20%. This provides a net benefit of 20.25% at 25% CT. This enhanced rate is designed to recognise genuinely research-focused companies, particularly early-stage tech and biotech businesses.
PAYE/NIC Cap for Loss-Making Companies
For companies with no CT liability, the RDEC credit can be paid as cash. However, a PAYE/NIC cap limits the payable amount to £20,000 plus three times the company's total PAYE and National Insurance liability. This cap prevents abuse by companies with minimal UK payroll. Most companies with genuine R&D staff will not be affected.
Frequently Asked Questions
What is the merged R&D scheme? +
The merged scheme is the new single R&D tax relief regime applying to accounting periods starting on or after 1 April 2024. It replaces the separate SME and RDEC schemes with a single 20% above-the-line credit rate for all companies, with an enhanced 27% rate for R&D-intensive SMEs.
What is the RDEC credit rate under the merged scheme? +
The merged scheme provides a 20% above-the-line credit on qualifying R&D expenditure. This credit is taxable, so net benefit is 15% for a 25% CT taxpayer (20% × 0.75) or 16.2% for a 19% CT taxpayer. R&D-intensive SMEs get 27% credit, giving a 20.25% net benefit at 25% CT.
What qualifies as R&D expenditure? +
Qualifying R&D must seek an advance in science or technology by resolving genuine scientific or technological uncertainty. Qualifying costs include: staff costs, EPW at 65%, software, cloud computing, consumables, and payments to qualifying subcontractors (individuals, charities, qualifying bodies).
What is the 65% rule for externally provided workers? +
When R&D workers are provided through an agency rather than employed directly, only 65% of the cost is qualifying R&D expenditure under the merged scheme. Enter the gross cost; the calculator applies the 65% automatically.
What happens if the company is loss-making? +
For loss-making companies, the RDEC credit can be paid as cash after offsetting against CT liabilities. The payable credit is subject to a PAYE/NIC cap of £20,000 plus three times the company's total PAYE and NIC liability for the year.
How does the merged scheme compare to the old SME scheme? +
The old SME scheme gave a 186% deduction (extra 86%), providing about 21.5% net benefit at 25% CT. The merged scheme at 15% net is slightly less generous for profitable SMEs. However, the old enhanced SME scheme for loss-makers gave 27% cash — now limited by the PAYE/NIC cap under the merged scheme.
Which companies qualify for the enhanced 27% R&D-intensive rate? +
R&D-intensive SMEs spending 30% or more of total expenditure on qualifying R&D, with fewer than 500 employees, qualify for the 27% enhanced credit rate. This is designed for genuinely research-focused smaller businesses.
Are subcontractor costs qualifying in the merged scheme? +
Payments to individual subcontractors, qualifying bodies (universities, research institutions), and charities for R&D work are qualifying. Payments to other companies for subcontracted R&D are generally NOT qualifying under the merged scheme — unlike the old SME scheme which allowed them.
Is cloud computing qualifying expenditure? +
Yes. From April 2023, cloud computing costs (compute and storage) directly used in R&D activities are qualifying expenditure. Pure data subscription costs that are not consumed in the R&D process do not qualify. Apportion cloud costs appropriately between R&D and non-R&D use.
What is the notification requirement for R&D claims? +
From 1 August 2023, first-time claimants (or those with a 3-year gap) must notify HMRC within 6 months of the accounting period end. An Additional Information Form (AIF) must be submitted with all claims for periods starting on or after 1 April 2023. This is submitted online via the HMRC portal.
Can R&D credits be claimed alongside other reliefs? +
Yes. R&D credits can be claimed alongside capital allowances, patent box, creative industry reliefs, and other reliefs. The above-the-line nature of the RDEC credit means it affects the profit figure for patent box calculations, so specialist advice is recommended for companies using both reliefs.
What is the deadline for making an R&D claim? +
R&D claims must be made within 2 years of the end of the accounting period. Late claims cannot be accepted. For the merged scheme, the AIF must be submitted before or at the same time as the amended CT600 is filed.