Innovation incentives in 2026 – a guide for forward-looking businesses

January always brings possibility for the year ahead, not least for innovative businesses that are constantly iterating and forging ahead. Whether starting the exploratory stages of a project or commercialising a new product, goals are set and opportunities explored.

For all businesses looking ahead to 2026, there will be financial considerations. These can be significant for start-ups and scale-ups that rely heavily on securing funding. But whatever stage of the life cycle a business is at, innovation incentives and reliefs can play a crucial role in supporting growth.

At ForrestBrown, we’ve helped countless businesses to access a range of incentives from R&D tax relief and grants, to Patent Box and capital allowances, either directly or through our established accountant partner programme.

In 2026, we will delight in doing the same: supporting forward-thinking businesses to unlock opportunity and secure incentives and reliefs to shape what’s next.

To help guide businesses, we set out 10 key themes for businesses to consider when seeking to access innovation incentives and reliefs in 2026.

1. R&D tax relief: advance plan to optimise claims

After a period of intense policy change in R&D tax relief, 2025 was a year of ongoing transition to the new scheme. We made our first claims for clients under it, adapting our processes and methodologies throughout the year.

In 2026, more firms will begin claiming under the merged scheme as the transition continues. It will remain essential for businesses to ensure that they’re adhering to the correct procedural requirements, such as claim notification and the additional information form (AIF). Failure to do this will result in businesses being unable to claim in a given tax year and miss out on valuable funding they may have come to rely on.

To avoid missing a deadline, we always advise businesses to think about a claim early and to reach out to us in advance. Our R&D deadline tool will provide an indicative guide to timelines, but we’re always happy to speak to businesses – large or small – to provide further insights and help optimise claims.

2. Explore the R&D advance assurance pilot

Advance assurance in R&D tax relief offers a mechanism for businesses to send HMRC details of their company’s R&D work, before claiming R&D tax relief to find out whether a project might qualify. It’s not without its issues and, as a result, take up has been low.

In March 2025, a consultation was launched by the government on advance assurance. It sought views on how the current scheme could be made more effective, what form any improvements might take and whether the scheme should be voluntary or mandatory.

The consultation outcome is a new Pilot scheme set to launch in the Spring. It will follow a sector-based approach and focus on four main areas where questions and misunderstandings often occur: whether a project qualifies as R&D, how to handle overseas spending, who can claim when work is subcontracted, and whether a claimant qualifies for exemption from the PAYE and NICs cap. 

We’ll be watching it closely and hoping that any insights gained from the scheme will inform HMRC’s guidance on areas such as contracted out. This would be beneficial for businesses and advisers alike, enabling us to deepen the support we extend to clients.

3. Contracted-out R&D: seek professional guidance ahead of time

The rules around contracted-out R&D, which identify the party in a commercial chain that can claim the relief, have changed significantly under the new rules. As a result, it’s now more important than ever to get to grips with them and to understand who in a commercial relationship “intended or contemplated” the R&D activities at the start of the agreement.

Ongoing uncertainty remains amongst claimants, which was highlighted in our 2025 Accountant Survey, with 64% of respondents indicating continued challenges in establishing who has the right to claim under the new rules on contracted-out R&D. The new advance assurance Pilot may help to provide clarity on some of these issues if HMRC uses some of the examples given to it to build on its guidance.

The introduction of the AIF means that PAYE references now need to be supplied in advance of claim submission where an EPW has worked on an R&D project. For some EPWs, there is a reluctance to supply PAYE references owing to concerns around IR35. But not getting that information can make a significant impact on a claim; at the extreme, potentially shifting the R&D regime a business can claim under.

Be alert to these nuances in 2026 and ensure that you maintain up-to-date knowledge of how to apply the new rules on contracting out. When in doubt, always seek professional guidance ahead of time.

4. HMRC compliance: an evolving landscape

In 2026 we expect to see a range of options being deployed by HMRC as part of its ongoing compliance efforts. This includes a variety of letters targeting companies across a range of Standard Industry Classification (SIC) codes. Some companies’ SIC codes will be riskier than others, so it remains vital that your claim is robustly prepared and that projects are assessed by a competent professional in the relevant field of science or technology.

The proliferation of compliance strategies by HMRC, such as letters in which HMRC ask for more information about how and why the R&D intensity threshold has been calculated, are outside the statutory enquiry framework. This emphasises the importance of getting it right and seeking specialist support where queries arise.

Ultimately, enquiries aren’t going away. Although they have reduced in number since their 2023 peak, they remain a part of the R&D landscape and specialist support is key to navigating them. Be alert to HMRC letters and, where specialist support is required, partner with an experienced adviser to protect your position.

5. Grant funding windows set to open

The grant landscape widened considerably in the final quarter of 2025, with numerous opportunities opening with imminent deadlines. These were in areas aligned to the government’s priority growth areas outlined in its Industrial Strategy, where the focus will remain in 2026.

Over the coming months, major schemes such as the Life Sciences Innovative Manufacturing Fund and DRIVE35 (Collaborate and Demonstrate) will reopen. We can also expect new opportunities in high growth areas such as aerospace and advanced manufacturing. Innovate UK’s Innovation Loans programme – aimed at those seeking support to bridge the gap between late-stage R&D and market readiness – will continue, while Innovate UK’s Growth Catalyst launched in December. This will suit businesses seeking a blend of grant support and private investment.

Whether you require support for a specific element of the grants process or need full application project management, ForrestBrown can help. We can also add value by providing an independent review of an application prepared in house or where an internal grant-writing team requires additional capacity.

To keep up to date with all of the latest grant opportunities, use our Grant Finder.

6. Accountant partnerships: flexible support tailored to individual need

Our 2025 Accountant Survey found that more than three quarters (78%) of accountants have seen clients unable to make a claim because they failed to notify HMRC under the new R&D rules. This highlighted that lack of awareness of the rule changes relating to claim notification and the AIF could be costing businesses carrying out R&D.

While accountants are already taking steps to adapt to the merged R&D scheme, many report increased operational burdens owing to the recent changes. As a result, we have been supporting accountants with all aspects of R&D claims – from one-off project reviews to full claim and enquiry support.

For 2026, we remain the go-to specialist adviser for accountants navigating the complex and changing R&D tax relief landscape. Many of our team are qualified accountants and, alongside or industry experts, can provide trusted advice to suit business needs.

7. Patent Box: don’t overlook this valuable incentive

The latest set of Patent Box statistics, published in September 2025 for the 2023/24 tax year, revealed that the number of companies electing into the Patent Box regime each year remains relatively static, though the value claimed has risen.

It also highlighted that large companies – particularly in the manufacturing sector – continue to be the primary recipients of the relief, with 95% of the total relief claimed going to that sector. The stats highlighted that, once again, SMEs continue to miss out on valuable Corporation Tax reductions, despite being eligible.

Although thousands of patents are granted annually, awareness of Patent Box remains low, despite it providing businesses with valuable relief on commercialised IP. Often, where awareness does exist, a misconception over eligibility may be holding businesses back. With this in mind, it’s important that businesses with the potential to claim reach out to a Patent Box specialist for advice. With the right support, 2026 could be the year to forge ahead with a Patent Box claim.

8. Location strategy: tailored support for investment choices

The UK has much to offer when it comes to investment. With its stable democracy, established legal system and strong regulatory framework, it offers a comparatively safe place to make a long-term investment.

The eight priority growth sectors detailed in the Industrial Strategy will receive the majority of UK government and local authority support in 2026, with sector funding expected to be channelled into designated regional investment zones and freeports.

Grant funding is likely to be devolved further in 2026, making early discussions with local authorities in shortlisted locations increasingly important. Location grants can support the decision-making process, offering a mechanism for facilitating long term plans and enabling businesses to invest with confidence.

While it’s important to stress that incentives should not drive location strategy, businesses should always consider them at the outset. Ideally with the help of an experienced location strategist who can negotiate on behalf of the business, help evaluate options and undertake due diligence.

9. Capital allowances relief changes: protect your business

November’s Budget delivered changes to the capital allowances regime by reducing the main rate of writing-down allowance for plant and machinery from 18% to 14% and introducing a new 40% first-year allowance for main-rate expenditure. 

The new first-year allowance is more accessible than some others, particularly for assets that have previously been excluded from enhanced reliefs. But the reduced writing-down allowance offsets much of the longer-term benefit and, in reality, the 40% allowance will not apply to many businesses.

As businesses take stock of the changes and plan new investments for the year ahead, advisers will play a key role in interpreting the changes and scrutinising claims. Our capital allowances team has significant experience in delivering claims for a range of businesses and is well placed to navigate these changes.

10. Artificial intelligence (AI): draw on deep sector knowledge

No forward planning piece would be complete without considering AI. It represents a huge opportunity for innovators and has risen in prominence across all sectors in recent years. In 2025, this included the First-tier Tribunal, which ordered HMRC to disclose its use of AI in R&D tax relief claims.

As advisers, we take an ‘adviser-led, technology-enabled’ approach, using sophisticated AI tools to help support our claim preparation process. We also have industry-experienced sector specialists with expertise in AI, who can use their deep technical knowledge to determine whether an AI-related project qualifies as R&D.

As AI becomes more sophisticated and more embedded in workflows, the boundaries of what qualifies as R&D in this field may become more difficult to determine. Where a business needs specialist support to determine those grey areas, a dedicated adviser becomes invaluable.