UK Government Budget 2024: Latest Update to R&D Tax Credits

30 October 2024

Economists believe that R&D tax credits are essential for driving innovation in the UK but will the 2024 UK Government Budget reflect this? We tuned in as Rachel Reeves presented Labour’s budget to the House of Commons, to decipher how the new budget will impact R&D relief. Explore the latest budget news, current R&D policies, the existing parliamentary budget, the 2024 budget announcement, and how it will directly affect your claim. 

For the first time in 14 years, Labour stood before Parliament today to present their government budget. As the Chancellor of the Exchequer took centre stage, we analysed every word she had to say about the R&D tax credits budget, to bring you the latest news and insights about how it may impact your future claims alongside existing HMRC policy and legislation.

Current R&D Tax Credit Policy

Since their inception in 2000, R&D tax credits have undergone an array of transformations that offer greater support to innovative businesses. Designed to incentivise investment in research and development that seek an advancement in science or technology, businesses of all sizes have been able to benefit from the relief.

In 2024 HMRC introduced a major update to the R&D tax credits policy that would see the existing R&D schemes (SME and RDEC) combined to create the new merged scheme. The key benefit to the merged scheme is that it simplifies the claims process by producing the same rates across the field for both large businesses and SMEs (small and medium sized enterprises). 

As the merged scheme was implemented for claimants whose accounting year begins on or after April 1st 2024, and considering the fact that businesses are able to claim for research and development made in the past two accounting years, the older schemes still exist, but will soon fade into oblivion as the merged scheme takes effect. 

Current Parliamentary R&D Budget

With the aim of transforming the UK into a core of innovation that supports scientific and technological advancement, in March 2022, Parliament pledged to increase the annual R&D budget to a whopping £20 billion by 2024/2025. 

This mammoth budget represents a 33% increase when compared to earlier spending periods, reflecting a deep commitment to the UK Innovation Strategy – a formal Parliamentary plan to make the UK a global hub for innovation by 2035. 

But have they continued to put innovation at the forefront of their plans with the budgetary announcement?

2024 Government Budget Announcement

Prior to the government budget, British Prime Minister, Keir Starmer, agreed to continue government support for growing tech companies, putting a particular emphasis on the AI sector. 

As Chancellor of the Exchequer, Rachel Reeves turned the spotlight on the highly anticipated budget, she stated that economic growth can only be made with investment, calling on Parliament to “Invest, invest, invest.”

Following this, Reeves announced that in order to aid in economic growth, there needs to be dedicated support for SMEs (small and medium sized enterprises), along with adequate contributions to industry advancement. 

With this, the 2024 government budget plans to maintain the current rates of R&D tax relief, taking the overall budget to £39.8 billion allowing businesses to continue to claim a portion of their research and development investments. 

How Does the Government Budget Affect R&D Tax Credit Claims?

The increased allocation of funds to the R&D tax credit initiative has the potential to spark a surge in innovation throughout the UK. That’s because with additional funding, HMRC have the ability to:

• Enhance tax credit rates
• Broaden eligibility
• Provide further support for innovative small businesses

With these possibilities now available to the governing bodies of the R&D initiative, more and more businesses are likely to feel compelled to invest in research and development, and thus economically propelling the UK forward.

These potential changes represent the need for accuracy within an R&D claim, which is where a specialist may be of help.

How Alexander Clifford Can Help Produce an Accurate R&D Tax Credit Claim

As leading R&D tax credit specialists, the team at Alexander Clifford takes it upon themselves to understand the latest HMRC policies. This – combined with their extraordinary expertise on a variety of innovative industries – allows our team to assist clients in navigating the R&D claims process.

Drawing on their in depth knowledge, our team has developed a 5-star service that has produced over 2,400 successful R&D claims on behalf of our clients. 

This is what makes Alexander Clifford your trusted choice for R&D tax credits. 

Get specialist assistance with your R&D claim today by filling the form below, or click here to book an appointment with a member of our team.