WellTax Blog

Budget 2021: Research and development (R&D) tax relief will be focused on UK spending – from 2023-2024

October 28, 2021

The Chancellor declared that Britain has the second-highest R&D relief spending in the world but it is not effective as expected. He said that businesses claimed £48bn in R&D last year but almost half of this was not conducted in Britain, with only £22bn UK investments. The relief criteria are also extended to cover cloud computing and data R&D.

In the budget was also confirmed that the government will increase research and development (R&D) spending to £20bn a year by 2024-25, with the spending also including funding for EU programmes.

The government intends to increase the R&D efforts from £14.8bn this year to 16.1bn in 2022-23, to 19.4bn in 2023-24.  The funds for R&D are intended to support the UK in specialising in cutting-edge research methods and “refocus government support towards innovation”.

The Chancellor stated that the government’s spending on R&D has reached 20%. Rishi Sunak said that this combined with the government’s direct spending on R&D with the support for the tax relief, total R&D help as a proportion of GDP is forecasted to increase from 0.7% to 1.1% in 2024-25, which are well above the latest OECD average of 0.7%.

This announcement is the next step the government is taking to achieve an increased R&D spending to £22bn by 2026-27 and drive economy-wide R&D investment to 2.4% of GDP by 2027.

Finally, the announcement can be very positive news for multinational companies investing in the UK. Although, the message sent could disincentivise the UK international connection and attraction of investments from all over the world.

Michele Ammirati

Photo by Jaron Nix on Unsplash

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