RDEC vs the SME Scheme: What Changed Under the Merged Scheme

Quick answer: RDEC was the R&D expenditure credit for large companies, while the SME scheme gave smaller companies an enhanced deduction and a payable credit. For accounting periods beginning on or after 1 April 2024, both were replaced by one merged scheme, with extra support for loss-making, R&D-intensive SMEs through ERIS.

If you have searched for the difference between RDEC and the SME scheme, the honest 2026 answer is that the distinction is now largely historical: for accounting periods beginning on or after 1 April 2024, a single merged R&D expenditure credit scheme replaced both. This guide explains what each scheme did, how the rates compared, and which set of rules applies to your company now. For the mechanics of the current scheme, see our guide to the merged scheme.

What Were the RDEC and SME Schemes Before the Merger?

The two schemes worked in fundamentally different ways. RDEC, the Research and Development Expenditure Credit, gave large companies a taxable credit above the line, worth 20% of qualifying spend from 1 April 2023, up from 13% before that date. The SME scheme instead worked through the tax computation, giving smaller companies an enhanced deduction of 86% of qualifying costs from 1 April 2023, reduced from 130%, and a payable credit for surrendered losses. Which scheme a company used depended on its size, whether its work was subsidised, and whether the R&D had been subcontracted to it.

How Do the Old Rates Compare to the Merged Scheme?

Under the merged scheme, almost every company now uses one rate: a 20% above-the-line expenditure credit, the same headline rate the reformed RDEC scheme reached in April 2023. Because that credit is taxable as trading income, the net benefit is lower than the headline figure once Corporation Tax is applied [own-analysis]. The old SME payable credit, worth up to 14.5% before 1 April 2023 and 10% for most claims after it, no longer exists in its old form. Our guide to how R&D tax credits are calculated walks through the current mechanics with worked examples.

Do Loss-Making SMEs Still Get Better Treatment?

Yes, but through a new route rather than the old SME scheme. A loss-making company whose relevant R&D expenditure is at least 30% of its total expenditure can claim Enhanced R&D Intensive Support instead of the standard credit. ERIS gives a 186% deduction and a payable credit worth up to 14.5% of the surrenderable loss, which is closer to the old SME scheme in spirit. Our guide for loss-making companies explains when this applies.

Which Scheme Applies if My Accounting Period Straddles the Change?

This is where mistakes happen, so it is worth stating plainly. The test is based on when the accounting period begins, applied to the whole period. If a period began before 1 April 2024, it stays entirely on the old RDEC or SME rules, and the merged scheme only applies to periods beginning on or after that date. There is no splitting of a single period between the old and new schemes based on the calendar; it is a whole-period test decided by the start date [own-analysis]. Try our free R&D tax relief calculator for an indicative figure under the current rules.

Get a Written View, No Call Required

If you are unsure which scheme your company falls under, or an accounting period straddles the change, reply and we will send a free written eligibility assessment within 48 hours, no call involved [own-analysis].