R&D Tax Calculator UK: Merged Scheme vs ERIS (2026 Rates)

How the merged scheme works (April 2024 onward)

The merged scheme replaced the SME R&D scheme and RDEC for accounting periods beginning on or after 1 April 2024. It provides a single 20% above-the-line credit on qualifying R&D expenditure. "Above-the-line" means the credit appears as income in the profit and loss account rather than reducing the tax charge below the line. For a profitable company paying Corporation Tax at 25%, the net benefit is approximately 15% of qualifying spend (20% credit minus the CT on that credit: 20% minus 25% x 20% = 15%).

HMRC published the merged scheme rates at CIRD10000 and in the Finance (No.2) Act 2023.

Profitable companies under the merged scheme

If your company is profitable, the 20% credit offsets your CT liability. For every £1 of qualifying R&D spend, you receive 20p as a credit, which reduces your CT bill. After CT at 25% on the credit itself, you are approximately 15p better off per £1 spent. This is the headline "15% net" figure you will see quoted across the industry.

A typical software company spending £500,000 on qualifying R&D in a profitable year would expect an indicative recovery of approximately £75,000 under the merged scheme. The actual figure depends on the precise cost mix (staff versus subcontractors versus consumables) and any deductions that apply.

Loss-making companies under the merged scheme

Loss-making companies that do not qualify for ERIS can still claim under the merged scheme. The credit is applied against any CT liability first. If there is no CT liability (because the company is in loss), the credit can be surrendered for a payable cash amount. The payable amount is subject to a notional CT deduction, which reduces the net benefit to below 15%. The exact rate depends on the company's circumstances. As a rough guide, loss-making companies not qualifying for ERIS typically recover around 16p per £1 after the payable credit mechanism.

How ERIS works for R&D-intensive SMEs

Enhanced R&D Intensive Support (ERIS) is available to loss-making SMEs where qualifying R&D expenditure equals at least 30% of total expenditure for the accounting period. It is designed for early-stage R&D-heavy companies that spend most of their budget on R&D activity and have not yet turned a profit.

ERIS provides an effective net rate of approximately 27p per £1 of qualifying spend. This is substantially higher than the merged scheme rate for the same company and makes a material difference for qualifying businesses. HMRC set out the ERIS conditions at CIRD92000.

The 30% intensity test

R&D intensity is calculated as: qualifying R&D expenditure divided by total expenditure for the period, as a percentage. If your company spends £400,000 on qualifying R&D and £1,200,000 in total, the intensity is 33.3% and you pass the ERIS test. Total expenditure is broadly all business expenditure, not just revenue costs.

The test is applied independently for each accounting period. A company can qualify for ERIS in one year and claim under the merged scheme in the next if its intensity drops below 30%.

Who counts as an SME for ERIS?

For ERIS, the SME definition uses the EU-derived thresholds: fewer than 500 employees, and either annual turnover not exceeding €100 million or a balance sheet total not exceeding €86 million. Most early-stage UK tech and life sciences companies will qualify. Larger companies must claim under the merged scheme only. Check the glossary for the full ERIS SME definition.

Transitional periods straddling April 2024

If your accounting period straddles 1 April 2024 (for example, a 30 June 2024 year-end), the period is split. The pre-April portion is claimed under the old rules (SME scheme or RDEC as applicable). The post-April portion is claimed under the merged scheme. HMRC published transitional guidance to address this calculation. This calculator assumes the accounting period begins on or after 1 April 2024 and uses merged scheme rates throughout.

Qualifying R&D expenditure: what counts

Both the merged scheme and ERIS apply to the same categories of qualifying expenditure. The main categories are:

• Staff costs: salaries, employer NIC, and employer pension contributions for staff directly engaged in R&D (and a proportionate share for staff partly engaged in R&D). See the qualifying expenditure guide for the full treatment.
• Externally provided workers: agency workers or seconded staff engaged in R&D, subject to a 65% restriction.
• Subcontractor costs: payments to subcontractors for R&D work, subject to a 65% restriction for unconnected subcontractors. The contracted-out rules determine whether your company or the subcontractor claims. Use the contracted-out decision tree if this applies.
• Consumable materials: materials and utilities consumed or transformed in the R&D process.
• Software: software licences used directly in R&D activity.
• Cloud computing and data: cloud hosting and data licence costs for R&D (from April 2023 onward).

Capital expenditure, rent, and general overheads are not qualifying expenditure. Detailed guidance is at CIRD83000.

How to use the result from this tool

The result from this calculator is an indicative estimate based on industry-average apportionments. In practice, the qualifying expenditure for your company will differ based on the actual cost mix. Staff doing both R&D and non-R&D work need their time apportioned. Subcontractor costs are subject to the 65% restriction. Some software costs may not qualify.

Use the result as a starting point. If the figure looks meaningful (typically, claims above £20,000 are worth pursuing), the next step is a free assessment with a specialist who will perform a full cost analysis and prepare the AIF and CT return amendment. If you want the full breakdown in writing, enter your email at the result stage and we will email a one-page PDF summary.