If you’re building software, developing APIs, solving technical problems your developers haven’t cracked before, or iterating on a product that pushes boundaries there’s a very good chance HMRC owes you money. And most UK tech founders have no idea.
R&D tax relief for tech startups is one of the most underused financial tools available in the UK. At Griffith Accountants, we regularly work with software founders who’ve been leaving tens of thousands of pounds on the table not through any fault of their own, but simply because nobody told them they qualified.
What Counts as R&D for a Software Company?
This is where most tech founders trip up. They assume R&D tax credits are for labs and scientists in white coats. They’re not. HMRC’s definition is actually quite broad and software development sits squarely within it.
Your work may qualify if you’re:
- Building new software functionality where the solution wasn’t obvious from the outset
- Developing algorithms, data processing pipelines, or machine learning models
- Creating integrations between systems that required overcoming technical uncertainty
- Improving performance, scalability, or security of existing platforms
- Experimenting with new tech stacks, architectures, or infrastructure approaches
- Solving problems where your engineers had to research, test, and iterate — rather than just implement
The key phrase HMRC uses is ‘resolving scientific or technological uncertainty.’ In plain English: if your developers had to figure something out rather than just apply a known solution that’s likely R&D.
What Costs Can a Tech Startup Actually Claim?
One of the most important things we do for our clients is make sure they’re capturing every qualifying cost not just the obvious ones. For tech startups, this typically includes:
- Staff salaries and employer NIC for developers, engineers, and technical PMs directly involved in R&D
- Subcontractor and freelancer costs for qualifying UK-based technical work
- Software licences used directly in the R&D process
- Cloud computing costs (AWS, GCP, Azure) directly tied to development and testing
- Consumables used during development and experimentation
For many software startups, the biggest cost is people and that’s also where the most significant relief comes from. If you have a team of developers working on innovative problems, those salary costs can generate a substantial claim.
What’s Changed Since April 2024?
The R&D tax relief landscape changed significantly from April 2024. The old SME and RDEC schemes were merged into a single unified scheme, and the rules around what qualifies have been tightened. HMRC has also significantly ramped up compliance checks.
For most tech startups, the key points to know are:
- Overseas R&D costs are now largely excluded — work must be UK-based to qualify
- R&D-intensive SMEs spending 30%+ of total expenditure on qualifying R&D can still access enhanced relief under the ERIS scheme, with up to 27% back on qualifying costs
- Documentation and technical narratives are scrutinised more closely than ever
- Claims must be pre-notified to HMRC before submission
This is exactly why working with a specialist matters more now than it did a few years ago. A poorly prepared claim can trigger an HMRC enquiry and a well-prepared one can make the difference between a compliant claim and a rejected one.
Real Results: How We Helped MycoBiome
MycoBiome is a great example of the kind of innovative startup that benefits from R&D tax relief. Christopher Middleton, Director at MycoBiome, put it simply:
“They’ve been supportive of our work and have provided invaluable guidance to help our R&D development and compliance with Companies House. I couldn’t recommend them highly enough.”
Innovative startups across sectors from biotech to pure software often underestimate the breadth of qualifying activity. Our job is to help them see it clearly, document it properly, and claim every pound they’re entitled to.
How Much Could Your Startup Actually Claim?
There’s no single answer it depends on your qualifying spend, company size, and profitability. But to give you a sense of the scale: HMRC statistics show the average R&D claim under the previous SME scheme was around £85,000. Many tech startups with active development teams can realistically claim between £20,000 and £100,000+ depending on their circumstances.
Crucially, you can claim retrospectively for up to two prior accounting periods so if you haven’t claimed before, there’s a real chance you could recover costs going back two years.
What Does the Process Look Like with Griffith Accountants?
We handle R&D tax relief claims end-to-end, so your team doesn’t get dragged into paperwork. Here’s how it typically works:
1. Free eligibility consultation we review your activities and give you a clear picture of what qualifies.
2. Technical narrative preparation we work with your team to document the R&D in HMRC-compliant language.
3. Financial calculation and cost analysis we identify every qualifying pound of expenditure.
4. Claim submission and ongoing support we handle HMRC communication and are there if any questions arise.
As ICAEW and ACCA chartered accountants, we bring the professional rigour that HMRC expects — and the commercial awareness to maximise your claim within the rules.
Ready to find out what you could claim?
Book a free consultation with our team at Griffith Accountants. We’ll take a look at your business tell you whether you qualify and give you a realistic picture of what you could claim could be worth.