Insights / Funding
R&D tax relief, SEIS and EIS for software projects: the 2026 numbers
In short
- For accounting periods from 1 April 2024, most companies claim R&D tax relief through the merged scheme, a 20% expenditure credit.
- Loss-making SMEs whose R&D is at least 30% of total spend can claim more through ERIS, with an extra 86% deduction and a payable credit of up to 14.5% of the surrenderable loss.
- Software development can qualify where it resolves genuine scientific or technological uncertainty. Routine development and design do not.
- SEIS gives investors 50% income tax relief, with a £250k lifetime limit per company.
- From 6 April 2026, EIS lets companies raise up to £10m a year (£20m if knowledge-intensive), with investors getting 30% relief.
Grants get the attention, but for many software businesses the bigger, more reliable money comes through the tax system. R&D tax relief returns part of what you spend on development, and SEIS and EIS make your company more attractive to investors. Here are the numbers for 2026, and what they mean for a software or AI project.
This is general information, not tax advice. Rules are detailed and change often, so speak to an accountant or R&D tax specialist before you claim.
R&D tax relief: the merged scheme
For accounting periods starting on or after 1 April 2024, the old SME and RDEC schemes merged. Most companies now claim a 20% expenditure credit on qualifying R&D spend.
ERIS: extra support for R&D-intensive SMEs
Loss-making SMEs that spend heavily on R&D can claim enhanced R&D intensive support (ERIS) instead.
| ERIS | |
|---|---|
| Who | Loss-making SMEs |
| Intensity test | Qualifying R&D is at least 30% of total relevant spend (a grace period applies if you dip below) |
| Extra deduction | 86% on top of the normal deduction, 186% in total |
| Payable credit | Up to 14.5% of the surrenderable loss |
For a young software company spending most of its budget on building the product, ERIS can be worth considerably more than the merged scheme.
Does software count as R&D?
This is where most claims go wrong. HMRC does not fund software development as such. It funds attempts to achieve an advance in science or technology by resolving uncertainty that a competent professional could not easily resolve.
What often qualifies:
- new methods for integrating messy data from sensors or legacy systems
- novel algorithms, models or AI techniques, where it was not clear they would work
- performance or scale problems with no known solution
What usually does not:
- building a website or app using established tools and patterns
- visual design, UX research and content
- configuring off-the-shelf software
Keep records as you go: the uncertainty, what you tried, what failed and what you learned. It makes claims faster and safer.
SEIS and EIS: tax relief for your investors
If you are raising money, SEIS and EIS make investing in you cheaper for investors.
| SEIS | EIS (from 6 April 2026) | |
|---|---|---|
| Investor income tax relief | 50% | 30% |
| Company limit | £250k lifetime | £10m a year (£20m knowledge-intensive), £24m lifetime (£40m knowledge-intensive) |
| Investor limit | £200k a year | £1m a year (£2m if knowledge-intensive) |
| Company size | Gross assets up to £350k, fewer than 25 staff | Gross assets up to £30m before and £35m after investment |
| Trading age | Under 3 years | Rules on age and stage apply |
Advance assurance from HMRC before you raise gives investors confidence that the relief will apply.
Putting it together
A typical path for a software product looks like this:
- A grant or accelerator funds feasibility and a prototype. See our guide to Innovate UK funding in 2026.
- R&D tax relief returns part of the development cost each year.
- An SEIS round, then EIS, funds the team and the launch.
Each step makes the next easier. A funded prototype with a clear R&D story is exactly what SEIS investors want to see.
If you need a product scoped, designed and built in a way that stands up to funders, investors and HMRC, talk to us. For the wider picture, see how to fund a digital product in Greater Manchester.
Common questions
Does software development qualify for R&D tax relief?
It can. Work qualifies where it seeks an advance in science or technology by resolving uncertainty a competent professional could not easily resolve. Building a standard website or app with known methods usually does not. Novel data integration, algorithms or AI methods may.
What is the R&D tax credit rate in 2026?
Under the merged scheme, the expenditure credit is 20% of qualifying spend. Loss-making R&D-intensive SMEs can instead claim through ERIS, with an extra 86% deduction and a payable credit of up to 14.5% of the surrenderable loss.
Can I claim R&D tax relief on work done by a subcontractor?
Rules on contracted-out R&D changed with the merged scheme. Generally the company that decides to do the R&D and bears the risk claims it. Get advice from a specialist before you contract the work.
What is the difference between SEIS and EIS?
SEIS is for very early companies and gives investors 50% income tax relief on up to £200k a year, with a £250k lifetime limit per company. EIS is for larger raises and gives 30% relief, with much higher company and investor limits.
Sources
- HMRC, R&D tax relief, the merged scheme and enhanced R&D intensive support (archived copy, January 2026)
- Saffery, EIS, SEIS, VCT and UK investment tax reliefs explained
- Lewis Silkin, Budget 2025, what founders need to know about VCT and EIS reforms
Funding rules change often. Always check the funder’s own guidance before you apply. This article is general information, not financial advice.
