For 25 years, the UK’s Research and Development (R&D) tax credit scheme has offered support to innovative businesses looking to unlock opportunity and growth.
But in 2024 changes to the incentive scheme were implemented, meaning there were new considerations for businesses to address when applying to the scheme.
Most businesses conducting qualifying R&D that want to claim tax relief will now be able to access the Research and Development Expenditure Credit (RDEC). But another programme — the Enhanced R&D Intensive Support Scheme (ERIS) — is also open to loss-making SMEs with higher R&D levels, providing higher amounts of tax credits.
Due to the ever-changing nature of government tax relief, other forms of non-dilutive funding, such as innovation loans and debt financing, have become increasingly popular and more accessible for startups looking to grow.
UK startups raised a staggering £37bn in grant and debt financing in 2025 across 3,808 deals, according to Sifted data — a steady climb from the £32bn raised in 2024 across 3,958 deals.
Sifted asked three experts from tax consultancy firm ForrestBrown how startups can utilise innovation loans and how expert advisors can support them in navigating funding scheme changes.
Going into 2026, startups have to think strategically about how they can stack a combination of incentives in order to extend runway and unlock investment, according to Adam Kotas, director at ForrestBrown and this includes using innovation loans and other non-dilutive funding in addition to the government’s R&D tax relief.
It can be difficult for startups to keep up with just how many changes are made to the government’s R&D tax scheme, as well as the other funding options available to them, explains Sara Brigden, managing director of ForrestBrown.
In recent years, the government’s R&D tax relief scheme has seen changes ranging from the rates of relief and the treatment of qualifying cost categories, as well as how and when businesses should notify HMRC they are applying for the relief.
“I would go so far as to say there's only one thing that hasn't changed, which is the definition of R&D,” says Brigden. “It’s very difficult for businesses to keep up when the rulebook is relentlessly changing.”
Innovation funding
Much of the funding that startups can receive is complementary to others, says Kotas, especially when it comes to applying for innovation loans on top of grants and equity.
Innovation grants are often available to businesses in key innovative sectors, such as quantum computing, life science and deeptech. Britain’s main provider of innovation grants is Innovate UK, which offers between £25k and £10m for R&D projects.
In order to unlock investment, companies need to be very active in identifying these funding opportunities.
Innovate UK’s Growth Catalyst scheme offers high-potential startups combined grant funding along with private investment from a pre-approved list of investors.
“The market in general, in terms of raising investment and accessing capital is challenging. In order to unlock investment, companies need to be very active in identifying these funding opportunities,” says Karim Budabuss, director at ForrestBrown.
From a business perspective, you've got to be great at planning and, with growing businesses, things change from one day to another.
“You can get to a point where some grants may not be applicable anymore because the innovation has matured but not sufficiently to unlock private investment or commercialise the product. Some people refer to this as the ‘valley of death’. Innovate UK innovation loans are specifically designed to bridge that gap.”
Applying for innovation loans and other non-dilutive funding requires time and resources to plan, adds Brigden — something that growth-phase startups often don’t have.
“From a business perspective, you've got to be great at planning and, with growing businesses, things change from one day to another. You have to put together a lot of material around what you're going to use the grant for and a lot of financials. It's very challenging for businesses.”
Navigating funding changes with expert advisors
ForrestBrown supports startups in navigating changes in R&D tax relief, as well as helping put together applications for innovation loans and grants.
If you don’t meet the statutory compliance deadline, such as telling HMRC that you are going to make an R&D claim, then you won't be able to receive funding.
“If you look at the split of our work, it could be advising companies on how to understand changes from HMRC or it could be helping larger businesses to think about how they develop their capability in house,” says Kotas.
“If you don’t meet the statutory compliance deadline, such as telling HMRC that you are going to make an R&D claim, then you won't be able to receive funding. There's an element of expertise in understanding what the rules are and when they apply. You can understand the tax legislation perfectly but if you can't present information to HMRC, then you're not going to be in a good position.”
It is essential that startups are proactive in shaping their business and the funding that it’s looking to receive, Brigden says.
“Working with an advisor like us enables you to have confidence that you're being proactive in shaping your business. I know founder-led businesses are on an incredibly hard journey and it can be very demanding. Having advisors that you trust that bring opportunities is a real benefit.”
Things move very quickly, so it’s about getting up to speed with your R&D.
In order to maintain a strong runway in 2026, startups need to be planning their grant and loan applications well in advance, says Budabuss.
“You have to think about grants now for a project that you'll be starting at the earliest in September this year, so there's six to nine months before your project actually starts. It takes time to identify the right opportunity, to prepare the bid and for the funding body to review and assess.”
Brigden agrees and emphasises the importance of bringing government R&D claims up to date so businesses can focus on securing other funding options ahead of time with the support of advisors.
“Things move very quickly, so it’s about getting up to speed with your R&D, so then you have a proactive plan from a funding perspective to see how other incentives can support you to achieve your goals.”
