An overhaul of research & development (R&D) tax relief in the past year has resulted in major changes to the amount of claims being made.

Latest HMRC figures for 2024-25 show £8.2bn of total R&D tax relief was paid out over the year, up 5% from £7.8bn but claims by SMEs were down by 19% after HMRC tightened up application process with more robust pre-claim checks at the point of submitting a tax return.

Qualifying R&D expenditure totalled £51bn for the period, up 7% from 2023-24, but the number of claims dropped sharply by 17% to 40,325 claims, down by nearly a fifth in just 12 months.

There are also clear signs SMEs are pulling back from using the tax break with only 24% of investment in R&D applicable for relief carried out by these smaller businesses, while 76% was spent by large companies claiming under either the RDEC or Merged RDEC scheme.