R&D Tax Relief: What the latest 2025 HMRC statistics mean for innovative businesses

The data comes from HMRC’s September 2025 publication on R&D Tax Credits, the most recent dataset covering claims up to the 2023-24 tax year.

While the total value of R&D relief dipped only slightly to £7.6 billion, the shape of those claims has changed significantly:

• SME claims fell sharply, down 29% to £3.15 billion, reflecting both reduced rates and tighter compliance requirements.
• RDEC claims grew by 36%, reaching £4.41 billion which means large-company style claims have overtaken SME claims in value.
• Claim volumes dropped by 26%, yet the average claim value increased by a third as smaller claims disappeared and higher-value claims dominated.

For businesses, the message is clear: R&D relief remains a multi-billion-pound incentive, but the environment has shifted. Companies that understand the rules, plan accordingly and can robustly evidence their activity are now better placed than ever to secure meaningful benefit.

The sharp decline in SME claims reflects a combination of factors. The most immediate driver was the reduction in SME enhancement and credit rates, which significantly lowered the benefit available to smaller businesses. Alongside this, HMRC’s heightened scrutiny of R&D claims and the marked increase in enquiry activity have deterred many smaller claimants. For companies without the internal expertise or external representation to handle a lengthy HMRC review, the perceived risk and cost of potential challenge often outweigh the prospective benefit.

The administrative reforms introduced by HMRC including the mandatory Additional Information Form (AIF) and Claim Notification Form (CNF) requirements have further increased the procedural complexity of making a claim. These measures, designed to improve compliance and reduce error, have inadvertently discouraged legitimate SMEs from engaging with the scheme. For example, some SMEs may only become aware of the relief well after year-end, by which point they may have missed the CNF deadline. This seemingly small timing oversight can prevent a company from claiming for an entire accounting period.

Conversely, the rise in RDEC claims reflects how larger, better-resourced companies have adapted more easily to the new requirements.

In this new environment, success depends on the quality of technical evidence, the clarity of reasoning behind the claimed advances, and the ability to demonstrate compliance with the definition of R&D. The focus has shifted decisively towards documentation, transparency, and consistency, rewarding companies that take a structured and detailed approach to preparing their claims.

Looking ahead

The 2023-24 figures represent the final snapshot of the previous R&D landscape, which operated under two separate schemes: the SME regime and the Research and Development Expenditure Credit (RDEC). For accounting periods starting on or after 1st April 2024, these have been replaced by a single merged R&D expenditure credit, accompanied by Enhanced R&D Intensive Support (ERIS) for loss-making SMEs that spend at least 30% of their total expenditure on qualifying R&D.

These changes mark the most significant structural reform of the R&D reliefs in a long time. The merged scheme unifies the credit mechanism across all company sizes, bringing greater consistency but also reducing the overall generosity of relief for most SMEs. ERIS acts as a safeguard for the most research-heavy businesses, ensuring that smaller, loss-making innovators continue to receive meaningful support.

The full impact of these reforms will first appear in HMRC’s 2026 statistical release, covering claims for accounting periods beginning on or after 1st April 2024. This will provide the first real insight into how the merged scheme has further reshaped claimant behaviour, claim values, and sector distribution.

For now, the message is clear: the system is evolving, and the threshold for a compliant, robust claim is rising. Companies that invest in strong technical documentation, understand the new qualifying boundaries, and plan early for their next claim cycle will be best placed to benefit under the new regime.

What this means for your business

 The story these statistics don’t show is the number of companies missing out because they’ve been put off by the changes. Many innovative businesses still qualify for valuable relief but are unsure how to approach the new compliance framework or interpret the evolving guidance.

The introduction of the AIF, CNF, and the R&D intensity test has undoubtedly increased the administrative burden. However, with the right guidance, these requirements are manageable and can even strengthen the defensibility of a claim when handled correctly.

Our role is to help clients navigate this complexity. We work closely with technical and finance teams to identify qualifying activity, build clear and well-reasoned technical case studies, and ensure each submission aligns with the BEIS, CIRD Manual and R&D legislation. This includes advising on areas that frequently cause difficulty, such as connected company relationships and the subcontracting and externally provided worker (EPW) rules.

In short, the landscape may have changed, but the opportunity remains. With careful preparation and expert support, companies can continue to benefit from R&D relief while maintaining full compliance under the new merged scheme.

Ready to review your position?

If your company is investing in innovation but unsure how the recent reforms affect your eligibility, now is the right time to review your position. We’re helping businesses across multiple sectors adapt to the new merged scheme and ERIS framework to ensure their R&D activities remain both compliant and can be fully rewarded.