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For many startup founders, research and development feels like an endless cycle of experimentation and uncertainty. You work tirelessly to innovate, but where are the tangible benefits? It’s a challenge that has no clear answer until you begin to analyze the tax credits available for your R&D efforts. Statistics about R&D tax credits can reveal information about how they can benefit your startup and help you achieve your objectives. This article will help you understand R&D tax credit statistics and offer practical takeaways for startup founders looking to capitalize on these credits.
Haven’s accounting services for small businesses can help you achieve these objectives. We can help you understand R&D tax credit statistics and uncover your startup’s specific opportunities for tax savings.
Table of Contents
Overview of R&D Tax Credit Usage in 2024-2025
R&D tax credits have seen us through a tough economy and remain a high priority for policymakers on both sides of the Atlantic. Innovation funding is more critical than ever, especially as businesses grapple with the rising cost of living and inflation. In the UK, £7.5 billion in R&D tax relief was claimed during the 2022-2023 tax year, supporting £46.7 billion in R&D expenditure. This represents a 1% year-on-year increase and reflects the steady growth of innovation funding.
UK R&D Tax Credit Statistics: Key Numbers
UK R&D tax credit statistics reveal innovation funding is continuing to rise, despite some of the recent changes to the schemes. The latest data shows that while the overall number of claims dipped by 21%, the average claim value increased significantly, rising by 11% to £97,000. This suggests that companies are submitting larger, more targeted claims, reflecting improved understanding of the schemes, alongside more strategic tax planning by tech firms and high-growth startups.
Understanding Recent R&D Tax Credit Reforms
Recent policy changes have reshaped R&D tax credits in the UK and the US. In the UK, the SME credit rate was reduced in April 2023, resulting in lower relief for many small businesses, including startups. The RDEC rate was increased, making the large company scheme more attractive, even for some SMEs under new rules. In the US, the American Innovation and R&D Competitiveness Act of 2025 aims to reverse the TCJA’s amortisation requirement and restore immediate expensing of R&D costs, a move widely supported by the startup and tech sectors.
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Claim Volumes and Trends
The total number of R&D tax credit claims in the UK for the 2022-2023 tax year dropped by 21% to approximately 65,690 claims. This decline was more pronounced in the SME scheme, which saw a 23% decrease in claim volume, while the RDEC scheme claims fell by 9%. Despite this significant reduction in the number of claims, the average claim value rose sharply, by 26% for the SME scheme and 18% for the RDEC scheme, indicating that companies are submitting fewer but larger or more targeted claims. This trend is reflected in a decrease in smaller claims (under £15,000) and an increase in claims above £250,000, especially within the SME scheme.
Smarter R&D Credit Use Boosts U.S. Innovation
In the US, similar patterns are emerging. Firms are becoming more knowledgeable about how to effectively utilize R&D tax credits, leading to increased R&D spending per dollar of credit claimed. Research shows that over time, $1 of R&D tax credit can stimulate between $1 and $4 of new R&D investment, as companies better understand the credit’s structure and optimize their claims.
Legislative efforts, such as the American Innovation and R&D Competitiveness Act of 2025, aim to restore the immediate expensing of R&D costs, which is expected to further encourage innovation investments by reducing tax burdens and simplifying compliance. This growing sophistication in claiming and leveraging R&D credits is driving more efficient and impactful use of these incentives across US industries.
Strategic R&D Claims Drive Innovation Growth
While claim volumes have decreased, both UK and US data indicate that companies are submitting higher-value claims and investing more strategically in R&D, maximizing the benefits of tax credits to fuel innovation and growth.
Industry Breakdown of R&D Tax Credit Claims
R&D tax credit claims are concentrated in three main sectors:
Information & Communication
Manufacturing
Professional, Scientific & Technical sector
Together, these sectors account for approximately two-thirds of R&D claims. Sectors like these align well with national innovation priorities and, as such, have a clear research and development focus that can help businesses maximize tax credit eligibility.
Information & Communication
Information & Communication covers software development, digital technologies, and telecommunications. These areas are characterized by rapid technological advancement and high R&D intensity. Not surprisingly, this sector accounts for about 25% of R&D claims in the UK.
Manufacturing
Advanced engineering, product development, and industrial innovation are integral to the manufacturing process. These areas often require substantial R&D investment and closely follow Information & Communication, with 24% of claims.
Professional, Scientific & Technical
The Professional, Scientific & Technical sector encompasses research services, consultancy, and scientific development. This sector supports innovation across multiple industries, accounting for approximately 17% of claims. For founders, focusing R&D efforts within these sectors can increase the likelihood of qualifying for tax credits, as there is a clear link between their activities and recognized R&D criteria.
Sectors Benefiting From R&D Tax Credits in the US
In the US, the sectors that benefit most from R&D tax credits include technology, healthcare, particularly biotech and pharmaceuticals, as well as energy. These industries invest heavily in research and development to maintain a competitive advantage and comply with regulatory demands, making them prime candidates for maximizing R&D tax incentives. Founders aiming to maximize R&D tax credit eligibility should consider aligning their innovation projects with these high-claim sectors, ensuring their activities meet the technical and scientific criteria that underpin successful claims.
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Cost Band Analysis and What It Means for Founders
Cost band analysis examines the distribution of R&D tax credit claims across various ranges of qualifying expenditures, providing insights into the size of R&D claims for startup founders. In the UK for the 2022–2023 tax year, the majority of claims, about 64%, fall into the lower cost bands, meaning allegations of up to £50,000. These smaller claims are predominantly made under the SME scheme, reflecting the volume of smaller businesses making R&D claims.
Scaling R&D for Bigger Tax Relief Returns
When examining the total amount of tax relief claimed, the largest share, 33%, comes from claims exceeding £2 million, which are typically submitted by large companies that invest heavily in research and development (R&D). For startups and scale-ups, this means that while smaller claims are common and expected at early stages, there are significant opportunities to grow both R&D investment and claim size as the business expands. Increasing the scale and scope of qualifying R&D activities can lead to larger claims and greater tax relief benefits over time.
How Can Startups Optimize Their R&D Tax Credit Claims?
To optimize claim amounts, it is crucial for founders to track all qualifying expenditures carefully. This includes the wages of staff directly involved in R&D, as well as the costs of software, materials, prototypes, and testing. Detailed and accurate record-keeping ensures that all eligible expenses are captured and substantiated, which not only maximizes the claim value but also helps meet HMRC’s increasing compliance requirements.
From Small Claims to Big Gains in R&D Tax Relief
While many startups begin with smaller R&D claims, strategic growth in R&D activities combined with meticulous tracking of qualifying costs can unlock substantial tax relief, supporting innovation and business scaling.
5 Practical Takeaways for Founders
1. Know Your Scheme: Understanding the Different Types of R&D Tax Credits
In the UK, two primary schemes support R&D tax credits. The SME scheme is designed for startups and scale-ups with fewer than 500 staff and less than €100 million in turnover. The RDEC is typically reserved for larger companies, but many SMEs now fall under it due to the merged regime for subcontracted or grant-funded work. In the US, two schemes are also available. The regular credit, which requires base-period documentation, and the simplified credit, which is easier to calculate and more common for startups. Understanding which one applies to your company is the first step to optimising your claim.
2. Document Everything: The Importance of Detailed Recordkeeping
Tax credits reward qualified R&D spend, but only if you can back it up. That means you need to track time spent on eligible development work, record software licences, prototype materials, testing expenses, and contractor costs, and keep clear records of how each activity links to a technical challenge you're solving. Think of it like building your due diligence file for fundraising. Clear documentation now saves headaches (and risk) later.
3. Focus on Emerging Innovation Areas: Targeting High-Value R&D Tax Credits
Not all R&D is created equal. Innovation in sectors such as AI, biotech, clean tech, and advanced manufacturing is often viewed more favourably and sometimes prioritized in audits or funding schemes. If you’re working in one of these areas, there may also be additional grant opportunities alongside your tax credit claim.
4. Keep an Eye on Policy Shifts: Staying Up-to-Date on R&D Tax Credit Changes
Both the UK and the US are seeing ongoing reform. For example, the UK’s merged R&D scheme affects how startups apply under SME vs RDEC rules. The US is actively debating the restoration of immediate expensing, which would ease cash strain for early-stage firms. Tax incentives are strategic levers, but they’re only helpful if you’re aware of the current rules.
5. Use Data to Your Advantage: Leveraging R&D Tax Credit Trends for Future Growth
If you track your R&D spend and credit claims year over year, you’ll see patterns, what worked, what didn’t, and where you left value on the table. This insight can inform budget planning for future R&D sprints, hiring decisions (e.g., allocating more time to technical hires), and investor updates that demonstrate strategic resource management.
Book a Call to Learn More About our Accounting Services (Trusted by 400+ Startups)
Haven streamlines the often complex process of claiming R&D tax credits. The firm manages everything from bookkeeping to filing your R&D tax credit forms. Their experienced team of accountants knows the ins and outs of R&D tax credits, helping you get the most out of your credits. They understand the unique challenges growing businesses face and offer around-the-clock support to ensure you never miss a deadline.
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