UK businesses embrace innovation as R&D investment climbs to £51bn in latest HMRC figures
UK businesses are investing more in research and development, according to latest HMRC statistics published in September. Qualifying R&D spend hit an estimated £51.0bn in 2024-25, up 7% on the previous year, while total tax relief claimed increased to £8.2bn, up from £7.8bn.
The 2024-25 figures are provisional and will be revised next year to include late claims. They are also the first to reflect the combined R&D expenditure credit and the increased support for R&D-intensive SMEs, so they give an early view of the new schemes, and it will take further years of data to judge their impact. Even so, they point to a business community that is continuing to invest in innovation through a period of change and challenges.
Josh Perry, head of sales UK & IRE at innoscripta, said: “These figures show UK businesses continuing to put serious funding behind innovation, at a time when HMRC continues to tighten rules on R&D error and fraud submissions. A 7% rise in qualifying spend is a vote of confidence in the UK as a place to build new products, technologies and ideas across its businesses and institutions.”
Average claim value rose 27% across the year. Qualifying spend by larger companies rose 14% to £30.2bn, twice the overall rate, an indication that innovation investment remains a priority at the top end of the market.
Perry continued: “With average claims now larger, the task is making sure each one reflects the work being carried out. A technology-led approach helps innovators capture qualifying activity accurately and clearly, so they can spend their time on innovation rather than paperwork. For innovation to succeed in the UK, businesses need the funding, but also a seamless application process.”
The data points to the strength of the UK’s digital economy. Information & communication accounts for 27% of all R&D claims, on a par with manufacturing. Combined with professional, scientific and technical services, the three sectors make up 75% of claims, showing how much of the country’s innovation activity is driven by technology, engineering and specialist expertise.
Perry continued: “Software, services and digital businesses are at the heart of UK innovation, and that is reflected in these numbers. With the merged scheme now in its first reporting year (which began on 1 April 2024, replacing the previous R&D relief schemes), businesses have an early sense of how the new system is bedding in. What we want to see is these key sectors continuing to invest, innovate and claim with confidence.
“For companies planning their next round of investment, this early read on the schemes matters, as does having the right support in place to prepare claims accurately and efficiently.”
Perry concluded: “Looking ahead, there should be plenty of optimism about where UK innovation is heading. Businesses are investing more, and the merged scheme is now taking shape, giving companies a clearer basis for long-term planning.
“The organisations likely to benefit most are those that approach R&D as a long-term strategy and put the right processes in place to evidence their work. For innovators, that should be encouraging: the support and opportunity to turn great ideas into commercial success has rarely been clearer. We’re excited to help UK businesses make the most of it.”