How much can a UK startup claim in R&D tax credits?

Under the merged scheme, UK startups claim a 20% credit on qualifying R&D expenditure. R&D-intensive SMEs — where qualifying R&D exceeds 30% of total expenditure — qualify for 27%. A loss-making startup spending £100,000 on qualifying R&D receives £20,000 as a cash payment from HMRC at the standard rate.

Does software development qualify for R&D tax credits?

Yes. Software development qualifies when it involves resolving scientific or technological uncertainty — meaning your engineers did not know the solution at the start and had to investigate or experiment to find it. Building novel algorithms, developing machine learning systems with uncertain performance characteristics, and creating new database architectures all commonly qualify. Configuring existing frameworks or building standard features does not.

How long does an R&D tax credit claim take?

HMRC's target processing time for straightforward R&D repayment claims is 28 days. Well-prepared claims submitted with a full technical narrative and accurate CT600L are typically processed within four to six weeks. Claims selected for compliance review take three to six months; formal enquiries can take 12 to 18 months.

Can a loss-making startup claim R&D tax credits?

Yes — under the merged scheme, loss-making companies receive the R&D credit as a direct cash payment from HMRC at 20% (or 27% for R&D-intensive SMEs) of qualifying expenditure. This payable credit is subject to a cap of £20,000 plus 300% of total PAYE and NIC liability for the period.

How to Register a Startup in the UK: Complete 2025–26 Guide | Ltd Company, SEIS Structuring & HMRC Setup

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What is the process for registering a startup in the UK?

Registering a UK startup involves incorporating a limited company with Companies House (£12 online, typically 24 hours), registering for Corporation Tax with HMRC within three months of starting to trade, registering for VAT if turnover will exceed £90,000, and setting up PAYE if hiring employees. For startups planning to raise investment, applying for SEIS advance assurance from HMRC before issuing any shares is an additional critical step.

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