The Government’s Spending Review (SR25) was held in Parliament last week, proposing further investments into research and development (R&D) spending to encourage start-ups to grow and scale in the UK.
What is R&D?
R&D involves investing in new ideas, services, technologies and products. R&D tax relief aims to assist the scientific and technological sectors in developing innovative projects that push the boundaries of the field.
For tax purposes, HMRC defines R&D as work that looks to resolve scientific or technological uncertainties, even if the project fails. This means that businesses carrying out genuine innovation may qualify for relief, regardless of a successful outcome.
For eligible businesses, particularly SMEs, the financial benefits can be substantial. SME’s can claim up to 186% of qualifying expenditure, which can either reduce their taxable profits or if they are loss-making, result in a cash credit being paid out. This provides a crucial boost to cash flow and reinvestment potential.
Key investments
The government sees R&D spending as key to growing the economy and improving the livelihood of the British public, therefore R&D funding will rise to £22.6 billion a year by 2029-30. Here are the key investments:
- £500 million for the new R&D Missions Accelerator Programme to solve innovation challenges, aiming to bring £1.5 billion in private investment
- Further support and new opportunities for talented scientists, including new fellowships and easier visas to attract global talent
- At least £1 billion for Advanced Research and Invention Agency (ARIA), a UK agency focused on high-risk scientific research
- Up to £750 million for a new supercomputer at the University of Edinburgh to facilitate research in health, climate and energy
- £410 million for local innovation partnerships, allowing local leaders to shape R&D efforts in their leaders
- £2 billion invested in AI between 2026-30 to build UK’s own AI capabilities and infrastructure
- £25.6 billion for the British Business Bank to help UK startups and growing companies across the UK
How we can help
The challenges and complexities of R&D tax relief can be overwhelming, but with the right support and investment, we can help your business to inspire growth and create a culture of innovation.
Get in touch today to find out more about how we can help you make the most out of this tax incentive.