RDEC: The R&D Expenditure Credit
Written and reviewed by the R&D Tax Accountants editorial team. Last reviewed 8 August 2026.
RDEC is the R&D expenditure credit. It was the route for large companies, and for SMEs that could not use the SME scheme, for accounting periods beginning before 1 April 2024. The merged scheme that replaced it works the same way, so understanding RDEC is understanding the mechanism now used by everyone.
The difference from the SME scheme is structural rather than a difference of rate. RDEC gives a credit calculated on the qualifying expenditure itself, not an enhanced deduction against profit.
How the Expenditure Credit Works
The credit is calculated as a percentage of qualifying R&D expenditure and is brought into the accounts as income rather than as a reduction in cost. That is what people mean by describing it as above the line: it appears in the profit before tax rather than only in the tax charge.
Because it is taxable income, the headline percentage is not the cash benefit. The credit is reduced by a notional tax charge at the rate applicable to the company, and the amount left is set against the Corporation Tax liability or, where there is none, can be paid out subject to the statutory steps.
The practical advantage of the structure is visibility. A company reporting to a board or to investors can show the credit as a line in its results rather than as an adjustment buried in the tax note, which is one reason the merged scheme kept it rather than extending the SME enhanced deduction to everyone.
RDEC Rates Through to the Merger
The rate moved four times. It was 11% for expenditure from 1 April 2015 to 31 December 2017, 12% from 1 January 2018 to 31 March 2020, 13% from 1 April 2020 to 31 March 2023, and 20% from 1 April 2023 to 31 March 2024.
The jump from 13% to 20% in April 2023 was the largest single change, and it happened at the same time as the SME payable credit was cut. That convergence is what made a single merged scheme possible the following year, because the two regimes were no longer far apart.
For a company amending an older claim, the rate follows the expenditure date within these bands rather than the date of the claim. A period spanning 31 March 2023 can therefore carry two rates.
Where RDEC Still Applies
RDEC applies to accounting periods beginning before 1 April 2024. From that date the merged R&D expenditure credit takes over at 20% for companies of every size, with Enhanced R&D Intensive Support kept separately for loss-making intensive SMEs.
Claims for pre-merger periods are still being made and amended, and they still need an additional information form. HMRC publishes the rate history in its expenditure credit guidance, and the eligibility overview from the British Business Bank is a useful plain summary of what qualifies.