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Is it still possible to get R&D Tax Relief in Manufacturing Businesses in 2025?
3 July 2025
Accounting & Compliance, Ambitious Startups, Building a Business, Reducing Tax, Structuring a Business
New Rules, Same Opportunities
If you’re a UK Manufacturing Businesses working on new products, smarter processes, or technical problem-solving, you could still claim thousands in R&D tax relief.
From April 2024, HMRC merged R&D schemes and introduced tighter compliance rules.
Many businesses risk missing out or facing penalties if they don’t understand what’s changed.
We take a look at:
- What qualifies as R&D in manufacturing
- How much relief you can claim in 2025
- What’s changing in UK tax rules this year
- Other valuable reliefs like Capital Allowances and Patent Box
Do You Qualify for R&D Tax Relief in 2025?
If you’re:
- A UK limited company
- Investing in process improvement, innovation, or overcoming technical challenges
…you could be eligible.
From 1 April 2024, the SME and RDEC schemes were merged into one unified R&D scheme offering a 20% credit rate.
Some SMEs may still access enhanced relief under R&D Intensive Support (ERIS) if they spend over 30% of total costs on R&D.
Key 2025 R&D Tax Changes:
- Merged scheme: All businesses now use the same 20% credit model.
- Notification rule: First-time claimants must notify HMRC within 6 months of their accounting period end.
- Overseas restrictions: Most subcontracted R&D done outside the UK no longer qualifies.
- Stricter scrutiny: Claims must be backed by robust technical reports.
What Counts as R&D for Manufacturing Businesses?
Manufacturing businesses often qualify through:
- Designing or refining production lines
- Developing prototypes or testing materials
- Automating manual processes
- Enhancing product performance or compliance
- Reducing waste, downtime, or energy use
Even failed or incomplete projects can qualify, as long as you faced technical uncertainty and sought a solution.
What Costs Can You Claim?
Eligible expenses include:
- Staff salaries (and NI/pension)
- Materials used in development
- Software and cloud computing costs
- Utilities for R&D facilities
- Certain subcontractor or EPW (externally provided worker) costs
From April 2024, cloud and data costs are claimable under the merged scheme.
How Much Can You Receive?
Under the merged scheme, most businesses receive:
- A 20% credit on qualifying expenditure
- With an effective benefit of around 15%–16% after tax
R&D-intensive SMEs (those with over 30% R&D spend as a proportion of total expenditure) may access enhanced cash credits of 27%.
How to Claim R&D Relief in 2025
- Notify HMRC (if it’s your first claim) — within 6 months of year-end
- Submit a technical report Including:
- The project’s goal and uncertainty
- Scientific/technical baseline
- Your methodology and results
- Link costs to qualifying activities
- Submit through your Corporation Tax return
A specialist advisor can help you build a defendable claim that meets HMRC’s stricter 2025 requirements.
Other Tax Reliefs Manufacturers Should Know in 2025
Capital Allowances – Full Expensing & AIA
If you’re investing in new machinery or upgrades, you may be able to deduct the full cost:
- Full Expensing: Deduct 100% of qualifying new equipment immediately (main rate plant & machinery)
- Annual Investment Allowance (AIA): Up to £1 million in purchases can be written off in full
These schemes offer huge tax savings for manufacturers modernising production lines.
Patent Box – 10% Corporation Tax on IP Profits
If you generate income from UK-registered patents (or IP based on patented processes), you could pay just 10% Corporation Tax on those profits, instead of 25%.
Be ready to:
- Prove your business holds or licenses the patent
- Demonstrate how profits are linked to the IP
VAT Reliefs & Compliance in 2025
VAT rules are tightening, especially if you deal in:
- Energy-efficient products (still 0% VAT until March 2027)
- Charitable or healthcare sectors (reduced or exempt rates)
From 2025:
- Making Tax Digital (MTD) is mandatory for all VAT-registered businesses
- New penalty point system applies for late filings or errors
Are You Missing Out on Valuable Tax Reliefs?
Smart tax planning can free up funds to invest in new staff, better equipment, and faster business growth.
We help manufacturers:
- Identify and document eligible R&D activities
- Submit robust claims that stand up to HMRC scrutiny
- Access reliefs like Capital Allowances, Patent Box, and more
Not sure what you’re eligible for?
Our tax specialists can help you uncover hidden reliefs, ensure compliance, and stop you from overpaying tax.
Call us on 01634 731390 to find out how we can help you maximise your savings.
Our services
If you would like to find out more about some of our services that might help you please take a look at our related pages:
Blogs related to R&D Claims
Take a look at our other blogs on the topic of R&D Claims
R&D claims – Free money or is there a sting in the tail?
5 key ingredients for a successful R&D claim
The content in this blog is correct as at 4th June 2025. See terms and conditions.
