Public R&D spending is increasing – How does this affect R&D tax reliefs?

Despite the guidelines around R&D tax relief claims being relatively stable, the commitment to public investment in R&D seems less assured.

In recent months, there have been announcements of region-specific investments coupled with warnings that previously helpful grants would become limited.

Recently released statistics may go some way to shedding some light on the future of public investment in R&D and it is worth considering how this may interact with R&D tax reliefs.

Is the Government investing in more R&D?

The Office for National Statistics has now issued a release concerning the level of public investment in R&D for 2024.

The net expenditure on R&D from the UK Government was £20.4 billion in 2024.

This figure is a dramatic increase of 11.6 per cent from the £18.2 billion spent in 2023.

Of the investment made by the UK Government, UK Research and Innovation (UKRI) was the largest single source of expenditure, an impressive £6.8 billion or 33.2 per cent of the total expenditure.

While there are some who are keen to point to the release of the statistics as a sign of ongoing commitment to R&D investment, the reality might be more complicated.

Earlier in the year, UKRI was placed in line for a potential cap on the number of projects that could be supported through the scheme.

We discussed the planned changes at the time, but it was far from clear then why such decisions were being made.

In light of the new statistics, some of the logic may be more apparent.

With Government money needing to stretch further than before, it would seem that the hefty price carried by UKRI has made it a clear target for financial savings.

Understanding that UKRI was a disproportionately large part of R&D investment could mean that changes to it are designed to diversify the way that investment is handled going forward.

It is best to remain hopeful that the statistics, when paired with the regional R&D investments, are a sign that the UK Government is still committed to supporting R&D.

What do the statistics reveal about the future of R&D tax relief claims?

Historically, statistics about grant funding for R&D have meant very little for R&D tax relief claims, as the two were incompatible.

You may be aware that the previous R&D tax relief scheme had strict rules rejecting the inclusion of grant-funded projects.

This is no longer the case under the Merged Scheme, so we are seeing a better tapestry of funding being woven into successful projects.

It will still be important to clearly delineate costs incurred by an innovative business and grant funding to ensure that HMRC have a clear view of qualifying expenditure.

As the handling of grant funding can make or break an R&D tax relief claim, seeking support from an R&D tax consultant is advisable here.

We can support you in helping your client with R&D by keeping you updated on the latest guidelines and best practices.

Whatever the future holds for UKRI, there seems to be clear indications that the Government understand the value of R&D in the UK.

Where investment succeeds in driving innovation, an R&D tax relief claim is likely to give innovative businesses an additional means of seeking an advance.

All of these measures are designed to alleviate the financial burden of resolving uncertainty so that braver steps can be taken even where success is not assured.

Help your clients make the most of R&D investments by speaking to our team today. 

Adam Bointon

Adam Bointon is a Technical Director specialising in R&D Tax Credits for SMEs in manufacturing and software sectors. With over 15 years’ experience, he works closely with businesses to identify qualifying R&D activities and prepare clear, compliant claims. He combines technical expertise with a strong understanding of economics and finance to support successful outcomes. Adam also contributes to industry webinars and CPD sessions, sharing insights on R&D tax relief and HMRC requirements.