UK R&D spending reaches £51bn as tax relief claims fall 17%

UK companies claimed tax relief on £51 billion of research and development expenditure in 2024–25, a 7% increase on the previous year. But the number of claims fell by 17%, with small and medium-sized businesses accounting for much of the decline.

Figures published by HM Revenue & Customs (HMRC) on 29 September 2026 put the value of R&D tax relief claimed at an estimated £8.2 billion. That was 5% higher than the £7.8 billion recorded in 2023–24.

The figures point to two different trends. Qualifying R&D expenditure continued to grow, but fewer companies claimed support through the tax relief system. The gap is particularly important for smaller businesses, which remain a major part of the UK’s innovation economy.

Fewer Companies Are Claiming R&D Tax Relief

HMRC estimates that companies made 40,325 R&D tax relief claims in 2024–25, down 17% from the previous year.

The decline was not shared equally across businesses. Claims made by SMEs across all relevant schemes fell by 19%. Claims from large companies increased by an estimated 4%.

The average value of a claim also rose by 27%. HMRC says this increase was partly driven by claims worth more than £2 million. The number of claims in this group increased by 14%, while their total value rose by 21%.

This points to a greater concentration of relief among larger claims. HMRC found that just 6% of claims accounted for 69% of the total relief claimed in 2024–25.

That does not mean every smaller company has stopped investing in research. The figures cover companies claiming tax relief, not every business carrying out research and development.

Large Companies Account for Most of the Spending Growth

The gap between large businesses and SMEs is also visible in the expenditure figures.

Qualifying R&D expenditure claimed by large companies rose by 14% to £30.2 billion in 2024–25. The equivalent figure for SMEs fell by 3% to £20.7 billion, compared with £21.3 billion a year earlier.

Large companies received an estimated £4.6 billion in R&D tax relief, while SMEs received £3.6 billion.

The figures show that large businesses are driving much of the increase in qualifying expenditure. However, they do not show that smaller firms have stopped innovating. Some businesses may carry out research without claiming tax relief, while others may no longer qualify or may have changed how they claim.

For smaller companies, the cost of preparing a claim and meeting HMRC’s reporting requirements can also be an important consideration.

Why the Tax Relief Figures Need Careful Reading

The 2024–25 figures cover the first year of a major change to the UK’s R&D tax relief system.

For accounting periods beginning on or after 1 April 2024, most companies moved to the merged Research and Development Expenditure Credit (RDEC) scheme. A separate route, Enhanced R&D Intensive Support (ERIS), is available to qualifying loss-making SMEs that meet the research intensity test.

The previous SME and RDEC schemes were replaced for these accounting periods.

Under the new arrangements, some SMEs that previously claimed through the SME scheme now use the merged RDEC scheme. HMRC says this change is one reason the number of claims under the SME and ERIS schemes fell sharply.

The distinction matters. Claims through the SME and ERIS schemes fell by 36%, but that figure does not include SMEs that moved to the merged RDEC scheme. When claims by SMEs across all schemes are counted, the fall was 19%.

HMRC also reported that 91% of claims made through the merged RDEC scheme in 2024–25 came from SMEs.

The total relief claimed through the SME and ERIS schemes fell by 29% to £2.3 billion. Meanwhile, relief claimed through the RDEC and merged RDEC schemes increased by 29% to £5.9 billion.

These figures reflect changes to the system as well as changes in business activity. They should not be treated as a straightforward comparison of how much support each type of company received under an unchanged scheme.

HMRC Points to Additional Reporting Requirements

HMRC believes the Additional Information Form (AIF) has been an important factor behind the fall in claim numbers.

The form became mandatory for R&D tax relief claims submitted from 8 August 2023. It requires companies to provide further details about their projects and the costs included in a claim.

The requirement was introduced as part of wider efforts to improve compliance in the relief system.

HMRC has also changed the rules and rates applying to different types of claims. The latest figures therefore reflect several developments at once, rather than one single cause.

The number of first-time claimants has also been falling. In 2023–24, first-time applications decreased by 43% compared with the previous year. First-time SME applicants fell by 53% to 3,405.

HMRC has not included a complete first-time applicant figure for 2024–25, so the 43% fall should not be presented as a result for the latest tax year.

London Accounts for 30% of the Relief Claimed

The regional figures also provide an important picture of where companies claiming R&D tax relief are registered.

Businesses with registered offices in London accounted for 24% of claims and 30% of the total amount claimed in 2024–25.

The South East accounted for 15% of claims and 19% of the amount claimed. The East of England represented 10% of claims and 14% of the total value.

London’s share is significant, but there is an important qualification. HMRC records the registered office of each company, which may not be where its research and development work actually takes place.

The figures therefore show the concentration of claimants by registered business address, rather than the exact geographical distribution of research activity.

Technology and Manufacturing Lead the Claims

Three sectors accounted for 75% of all R&D tax relief claims in 2024–25: manufacturing, information and communication, and professional, scientific and technical services.

Manufacturing represented 27% of claims and 27% of the total relief value. Information and communication accounted for 27% of claims and 20% of relief. Professional, scientific and technical services made up 20% of claims and 24% of the total value.

Together, these sectors accounted for 71% of the relief claimed.

The figures underline the importance of technology, engineering and specialist services to the UK’s business research base. However, HMRC cautions that a company’s registered industry classification does not always reflect the sector in which all its research takes place.

What the Figures Mean for UK Businesses

The rise in qualifying R&D expenditure is a positive sign, particularly among large companies. But the fall in claims raises questions about access to tax relief for smaller businesses.

The distribution of claims is also worth watching. While 58% of claims were for amounts up to £50,000, they accounted for just 6% of the total relief. At the other end, 6% of claims were worth £500,000 or more and represented 69% of the relief claimed.

This shows how heavily the total value is concentrated among larger claims.

It is too early to conclude that the revised system is discouraging genuine innovation. The latest figures cover a period of major policy changes, and HMRC says the 2024–25 estimates remain provisional. Late claims may change the totals when the statistics are updated.

For now, the figures show that qualifying R&D expenditure is rising, but the benefits claimed through the tax relief system are becoming more concentrated. Whether smaller businesses can continue to access the support will remain an important issue for the UK’s innovation policy.

Source: HMRC, Research and Development Tax Credits Statistics, September 2026. Figures for 2024–25 are provisional and subject to revision. The statistics measure expenditure used to claim R&D tax relief, not all R&D spending by UK businesses.