R&D Tax Credits for Software and Games Studios: What Qualifies, What Doesn’t, and How to Claim in 2026

You have spent the year solving hard technical problems. Building, testing, breaking, rebuilding.

The question almost every founder asks us is the same one: does any of that actually count as research and development, or is it just the day job? And if it does count, is it still worth claiming now that HMRC has tightened the screws?

Both are fair questions, and the honest answer to the second one has changed. HMRC has spent the last two years cracking down hard on R&D claims.

Weak or overstated claims that once sailed through are now being challenged, and a lot of businesses have been scared off entirely. But the relief itself is still one of the most valuable things available to a software or games company, and genuine claims, built properly, are still being paid.

So here is the plain version for 2026: what qualifies, what does not, what a claim is worth, why the ground has shifted, and the part most studios miss, how R&D interacts with the Video Games Expenditure Credit.

First, what has actually changed?

This matters before we get to the detail, because it reframes everything. HMRC used to process R&D claims with a fairly light touch. That era is over. Following a wave of reform aimed at fraud and error, the number of claims has collapsed.

-26%

Total R&D claims fell by 26% in 2023–24, the sharpest drop on record. Claim numbers have nearly halved from their 2021 peak, and small claims, the typical profile of an early stage software or games business, were hit hardest.

Two things follow from this. The first is a warning: HMRC is now actively rejecting claims that are not clearly evidenced, and a rejected or challenged claim costs you time, money and stress.

The second is an opportunity: a large chunk of that fall is genuine businesses who were frightened off or who filed something weak and gave up. If your work qualifies and you build the claim properly, you are competing for HMRC’s attention against far fewer, and far worse, claims than before.

The takeaway is simple. This is no longer about whether you can find something to claim. It is about whether your claim stands up. That single shift is what the rest of this guide is built around.

What HMRC actually means by R&D

Forget the word “research” for a moment. HMRC is not looking for lab coats. It is looking for a project that set out to achieve an advance in science or technology by resolving genuine technical uncertainty.

The test that matters most is the competent professional test. If a skilled developer in your field could work out the solution readily, by reading documentation, searching online, or applying established techniques, it is not R&D.

It is routine development, however difficult or time consuming it was. If, after genuine effort, a competent professional still could not say for certain whether the goal was achievable or how to achieve it, you are likely in R&D territory.

HMRC’s own software guidance is clear on one more distinction: the advance has to move the field forward, not just add a feature that is new to your business. A new product is not automatically R&D.

The question is whether the technology behind it had to push beyond what was already known and available. HMRC sets out the full test on its check if you can claim R&D tax relief guidance.

Here is what that looks like in practice for a software team.

Likely qualifies

• Building a novel algorithm where existing approaches fail or fall short
• Achieving performance, latency or scale that established methods cannot reach
• Integrating systems where no known method exists and the outcome is genuinely uncertain
• Developing or fine tuning a machine learning model with a genuinely new approach
• Architecting distributed or real time systems beyond documented patterns

Usually does not

• Building standard features from well documented libraries and frameworks
• Routine integration of third party APIs with established patterns
• Configuring, styling or assembling existing components
• Bug fixes, testing and maintenance on their own
• Work that was new to your market but not to the field

A useful gut check: if the hard part was deciding whether it could even be done, that points to R&D. If the hard part was simply the volume of work, or being first to market with a known technique, it usually does not.

One point that trips people up, and it works in your favour: your project does not need to have succeeded. 

If you set out to resolve a real technical uncertainty and the work failed, or the project changed direction, the qualifying activity still counts. HMRC rewards the attempt to advance the field, not only the wins. In fact, documented dead ends are some of the strongest evidence a claim can have.

What a claim is worth in 2026

The rules changed for accounting periods beginning on or after 1 April 2024. The old separate SME and RDEC schemes were replaced by a single merged scheme that now covers most companies regardless of size.

Under the merged scheme you receive an above the line credit of 20% of your qualifying R&D spend. Because that credit is itself taxable, the real world benefit works out at roughly 15% to 16% of qualifying costs depending on your corporation tax position. On £200,000 of qualifying spend, that is somewhere in the region of £30,000 back.

There is a more generous route for companies that live and breathe R&D.

If your qualifying R&D is at least 30% of your total expenditure and you are loss making, you may fall under the enhanced support for R&D intensive SMEs, known as ERIS, which is worth considerably more.

Many early stage software and games businesses, burning cash on development ahead of revenue, sit closer to this threshold than they realise.

A word of caution on the numbers.

Broad “you will get X back per £100 spent” claims should be treated carefully. The actual figure depends on whether you are profit or loss making and how the credit flows through your tax computation. The scheme is also far more compliance heavy than it used to be, with a mandatory Additional Information Form, advance notification for some claimants, and detailed technical write ups now expected as standard. Getting the qualifying activity and costs right is where the real value, and the real risk, sits.

Games studios: the part almost everyone gets wrong

If you develop games, you have two potential pots of relief, and the way they interact catches a lot of studios out.

Alongside R&D tax relief there is the Video Games Expenditure Credit (VGEC), which replaced Video Games Tax Relief. VGEC lets a UK games developer claim 34% of core production costs as an above the line credit, worth around 25.5% after corporation tax.

 It applies to qualifying expenditure and requires your game to be certified as British through the BFI cultural test, with at least 10% of core costs spent in the UK.

Here is the rule that matters: you cannot claim both R&D relief and VGEC on the same expenditure. Where VGEC is claimed on a cost, that cost is closed to R&D relief, and vice versa.

But, and this is the valuable bit, you can claim both within the same accounting period if the work is separated into distinct projects with distinct costs.

The classic example: developing an innovative new game engine is R&D, while producing the qualifying game itself is VGEC. Split cleanly, with no cost claimed twice, both reliefs are available on the same title.

For most studios doing genuinely novel technical work, R&D relief tends to be the more generous route where the activity qualifies. Which pot each cost belongs in is a judgement call, and it is precisely the kind of judgement worth getting right before you file, not after HMRC asks.

How to make a claim that stands up

The mechanics are straightforward. The claim goes in through your Company Tax Return (CT600), supported by an Additional Information Form that sets out your projects, the technical uncertainties you tackled, and your qualifying costs.

Some claimants must also notify HMRC in advance that they intend to claim, and missing that notification window can invalidate the whole thing.

You have up to two years from the end of your accounting period to claim, but the sooner the record keeping happens, the stronger the claim. The full sequence of steps is set out in the GOV.UK R&D tax relief guidance.

The part that decides whether a claim survives scrutiny is not the form.

It is the narrative and the evidence behind it: a clear account of what you were trying to achieve, why it was technically uncertain, and what your team actually did to resolve it, framed in terms of technological challenges rather than commercial ones.

In the current climate, that is the difference between a claim that gets paid and one that triggers an enquiry.

Not sure what qualifies in your business?

We work with software companies and games studios across Guildford and Surrey to identify qualifying R&D, structure claims that hold up under HMRC scrutiny, and make sure nothing valuable is left on the table.

See how we work with tech businesses.

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