If your company is creating new products, overcoming technical hurdles, or improving processes, then you may be missing out on valuable financial support that would really benefit your business in the future.
What is innovative funding?
Innovative funding in the UK refers to a specialised financial support in the form of grants, tax reliefs, and loans. All of which are designed to help businesses research, develop, and commercialise new products, services, and processes.
It targets high-growth actors, aiming to foster collaboration and ultimately boost the UK economy.
Key types of innovative funding include:
- Innovate UK grants
- R&D Tax Credits
- Private investment
- Collaborative research and development
What is R&D Tax Credits?
So what are R&D Tax Credits? HMRC R&D tax credits are government incentives. They allow companies to reduce their Corporation Tax or receive cash payments for investing in various innovations. Making advances in science or technology means companies can claim relief on costs like staff, software, and any subcontractors they use.
Let’s dive a little deeper into R&D tax credits and how to make use of them as a UK business.
Eligibility
To qualify, a project will need to aim to achieve an advance in science or technology with the resolution of solving scientific or technological uncertainties.
What can be claimed?
Costs that can be claimed include employee salaries, software consumables, subcontractor fees, and certain utility costs.
Schemes
Schemes offered included merged schemes, where many large and SME companies are claimed under this. It typically offers a taxable credit of 20% of qualifying expenditure.
Enhanced R&D Intensive Support, or ERIS for short, is a higher rate of relief for loss-making SMEs that spend 30% or more of their total expenditures on R&D.
The relief reduces a company’s Corporation Tax liability or provides a payable cash credit. It’s reduced where it’s profitable and a payable cash credit if it’s loss-making as a project.
Claim process
Claims need to be submitted via the Company Tax Return, and it should also be accompanied by an Additional Information Form, explaining the technical justifications.
The unclaimed funding landscape
It’s worth understanding the different types of funding available and why much of it is going unclaimed due to a lack of awareness or knowledge about what can be claimed as a business.
R&D Tax Credits
Too many companies will assume they’re not doing scientific research and therefore not eligible for R&D tax credits. They miss out on valuable R&D tax relief that exists to fuel business growth.
If you have a project that involves solving any technical problems, testing new and improved products and processes, or building prototypes, then you’ll qualify for these tax credits.
The benefit of R&D tax credits is that they can refund a significant portion of your innovation costs, increasing cash flow for future projects, too.
Innovation grants and support
Innovate UK is the primary government agency that provides grant funding, which helps UK businesses to accelerate innovative projects.
The types of funding available through this support include non-repayable grants, innovation loans, and investor partnerships. These match public funding with private investment.
Key sectors making use of this support include high-growth SMEs, specifically those who are working on disruptive, game-changing ideas within the field of technology and R&D.
In terms of amounts, projects can receive funding anywhere between £25,000 and a staggering £2 million, depending on the project duration.
Why does funding go unclaimed
So why does the funding go unclaimed by so many businesses? Well, firstly, there’s a misunderstanding of R&D and who is eligible for such support.
Many businesses don’t recognise that their routine activities actually qualify as innovative work and therefore don’t bother trying to claim it.
The complexity of the grant application process is often thought to be too technical, difficult to navigate, or time-consuming for a lot of businesses. However, the process is perceived inaccurately and, in fact, is fairly straightforward. Despite the reality, the perceived notion of it being too difficult means many don’t apply.
The lack of resources that some small and medium-sized enterprises often lack the in-house expertise to identify and apply for the available opportunities.
How to find and secure relevant funding
With a better understanding and knowledge of this type of funding being available for businesses, how do you best go about it to find and secure such relevant funding?
- Check eligibility
It’s good to review the specific criteria for each tax incentive or grant before applying. You should focus on how the project will contribute to the economic growth of your business, as well as its productivity and innovation overall.
- Use free resources
Make use of the free resources available online, particularly from Innovate UK Business Connect. If you have the time, you should attend their workshops to get feedback on any applications you’ve made previously or may be making in the future.
- Get specialised advice
It’s a good idea to speak to an R&D tax specialist to identify any eligible projects and to help maximize your claim.
- Use the Innovative Canvas
Innovative Canvas is a tool that’s highly useful for identifying the most important challenges when developing new products or services.
The importance of using innovation funding in 2026
If your company is investing in growth through R&D, then you should evaluate your current projects for any missed opportunities.
Using innovative funding in 2026 is something that’s critical for a lot of businesses, especially those looking to accelerate their growth in what is a rapidly changing technological landscape. It can also be helpful in managing the financial risks that are often associated with R&D.
With innovative funding becoming more complex, a strategic approach is required from private investment to the use of tax incentives and blending grants. This all helps to secure capital without having to dilute your business equity.
