UK funding for software and app projects in 2026: Innovate UK competitions, innovation loans, KTPs and R&D tax relief, checked against official sources.
In short: as of September 2026, the main public funding routes for a UK software or app project are open Innovate UK competitions, Innovate UK innovation loans, Knowledge Transfer Partnerships and R&D tax relief. Innovate UK's well-known Smart grants are closed to new applications. Which route fits depends on how much genuine technical uncertainty your project involves, how far along it is, and whether you are loss-making. Every fact below links to the official source we checked on 29 September 2026; funding rules change, so check the source before you apply.
Is there government funding for software development in the UK?
Yes, but it is not a general subsidy for building software. Public money is aimed at innovation: work that solves a problem nobody has solved in a routine way. Innovate UK, part of UK Research and Innovation, describes its role as backing the most promising deep tech businesses in the UK's priority sectors with funding, expert support and connections.
For a software project that has two consequences. First, the stronger your technical uncertainty — new AI methods, hard integration problems, novel data processing — the better your fit. Second, a well-built but conventional product (a booking app, a standard e-commerce site) rarely qualifies on its own, however useful it is.
The main routes at a glance
| Route | What it is | Status and fit for software (September 2026) |
|---|---|---|
| Innovate UK competitions | Grants awarded through competitions with a specific brief | Open competitions change month to month; the fit depends on each brief |
| Smart grants | Innovate UK's former open grant for any sector | Closed for new applications |
| Innovation loans | Loans for late-stage R&D projects | For single UK-registered SMEs; R&D projects only |
| Knowledge Transfer Partnerships | Funded partnerships with academics and researchers | Suits software problems that need research expertise |
| R&D tax relief | Tax credit on qualifying R&D spend | Can cover software work that resolves technological uncertainty |
| Innovate UK Business Growth | Growth and scaling support rather than cash | New requests paused except for existing and grant-funded clients |
Innovate UK Smart grants: closed to new applications
Smart grants were for years the default answer to "is there a grant for my innovative product?". As of September 2026, Innovate UK's guidance states that Smart grants are now closed for new applications as funding is aligned to Innovate UK's new strategic direction. If you see a consultant or article still recommending a Smart application, treat it as out of date.
Innovate UK competitions: where to find what is open
Innovate UK now funds through themed competitions. Two places list them:
- the Innovation Funding Service, the government's application portal, which lists every open and upcoming competition;
- Innovate UK Business Connect, Innovate UK's network partner, which lists opportunities by sector and region.
Competitions are specific. As an example of what is relevant to software, in September 2026 Innovate UK Business Connect listed a competition called Efficient, Structured and Controllable AI Systems, in which UK-registered SMEs can apply for a share of up to £1.66 million to deliver experimental validation of prototype AI systems; it opens on 12 October 2026 and closes on 18 November 2026. Dates and amounts differ for every competition, so always read the brief itself.
What makes a software application competitive is the same across briefs: a clearly defined technical problem, a plan for resolving it, a credible team, a realistic budget and a route to market. That is where preparation pays off (see below).
Innovation loans for late-stage R&D
If your project is past the feasibility stage, an innovation loan can fund the development. According to UKRI's eligibility guidance, innovation loans are:
- for research and development projects only, not general business purposes;
- not for earlier stages such as fundamental research or feasibility studies (for those, a grant may fit better);
- open only to single UK-registered SMEs — collaborations cannot be funded through a loan;
- compatible with subcontracting, if you can justify why the subcontracted work is critical to delivering the project.
The loans are delivered through Innovate UK Loans Ltd, a wholly owned subsidiary of UKRI. For a software company this usually means using the loan to take a proven prototype to a production product, with part of the engineering subcontracted.
Knowledge Transfer Partnerships
Knowledge Transfer Partnerships (KTPs) connect a business with a university or research organisation to solve a specific problem, and are described by UKRI as a way to improve competitiveness and productivity through funded partnerships with academics and researchers. They suit software projects where the hard part is research — a new algorithm, a data science model, a novel sensing or simulation problem — rather than product engineering. A KTP can sit alongside a development partner: the research team works out what is possible, and an engineering team turns it into a product.
R&D tax relief for software development
For many software companies the most valuable scheme is not a grant but R&D tax relief. The key facts, from HMRC's guidance on the merged scheme (last updated 8 January 2026):
- For accounting periods beginning on or after 1 April 2024, the merged R&D expenditure credit (RDEC) scheme and enhanced R&D intensive support (ERIS) replace the old SME and RDEC schemes.
- The merged RDEC credit rate is 20%.
- Under ERIS, loss-making companies that meet the intensity condition can deduct an extra 86% of qualifying costs (186% in total) and claim a payable credit worth up to 14.5% of the surrenderable loss.
- The intensity condition is met when relevant R&D spend is at least 30% of total expenditure, including connected companies.
- The credit is capped at £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities, unless an exemption applies.
- There are restrictions on some overseas expenditure, including payments to overseas contractors.
Does software count? HMRC's manual CIRD81960 explains how the R&D guidelines apply to software development. In practice the test is whether the work seeks an advance in science or technology by resolving technological uncertainty — for example, making a system do something a competent professional could not readily work out — rather than applying known techniques to build a new feature. Record the uncertainties as you go: claims are far easier to support with sprint notes, architecture decisions and test results than with memory.
Innovate UK Business Growth
Innovate UK Business Growth is Innovate UK's national growth and scaling service for innovation-focused SMEs, offering one-to-one support from growth specialists rather than cash. As of September 2026 its website says the service continues for existing clients, including businesses coming through Innovate UK grant competitions, but new requests from other businesses are paused during the current planning cycle.
How to make a software project fundable
Funders and HMRC look for the same things: a clear problem, evidence that it is technically hard, a credible plan and a budget that stands up. Five practical steps:
- Name the technical uncertainty. Write down what you do not yet know how to do. "Build an app for carers" is a product; "reliably extract structured observations from carers' free-text notes" is an innovation question.
- Prove the core cheaply. A working prototype shows assessors that the idea is real and that you understand the risk. Magora builds a free working prototype in 5–10 working days before any paid engagement.
- Turn the idea into a scope. A discovery sprint — two weeks, from £3,000 at Magora — produces a scope, architecture, estimate and roadmap. Those documents map directly onto the project plan, work packages and budget sections of most applications.
- Get the budget right. Use realistic UK rates; our software development cost guide shows the typical bands, from £10,000 for an MVP to £30,000–£150,000 for a production build.
- Keep evidence while you build. Sprint reviews, decision records and test results make both grant reporting and R&D claims easier.
How Magora supports grant-funded projects
We do not write applications or give tax advice. What we do is the technical groundwork that funders and advisers ask for: a coded prototype, a written scope and architecture from a senior Product Owner and Solution Architect, and delivery by a UK in-house team in London that has shipped more than 150 products since 2010. Where funding rules restrict overseas contractor costs, it helps that our engineers are UK-based.
If your project involves AI, see our AI agent development page; for regulated work, our healthcare software development page covers the assurance evidence NHS buyers expect. To talk through a funded project, get in touch.
Frequently asked questions
Are Innovate UK Smart grants still open?
No. As of September 2026, Innovate UK says Smart grants are closed for new applications while funding is aligned to its new strategic direction. Current competitions are listed on the Innovation Funding Service and on Innovate UK Business Connect.
Can a software or app project get an Innovate UK grant?
Yes, if the project is genuinely innovative and fits the brief of an open competition. Innovate UK focuses on innovative businesses in the UK's priority sectors, so the question is whether your software solves a technical problem that competition is funding, not simply whether it is new to your company.
Can I claim R&D tax relief for software development?
Possibly. HMRC's guidance applies the R&D definition to software: the work must aim at an advance in science or technology by resolving technological uncertainty. For accounting periods starting on or after 1 April 2024 claims go through the merged RDEC scheme, where the credit rate is 20%, or enhanced R&D intensive support for qualifying loss-making SMEs. Take advice from a qualified adviser before claiming.
What is an Innovate UK innovation loan?
Innovation loans are for research and development projects only, not general business costs, and not for early-stage work such as feasibility studies. Only single UK-registered SMEs can apply, and the loans are delivered through Innovate UK Loans Ltd.
Can I use a software agency on a grant-funded project?
Often, but check the competition rules. For example, innovation loans allow you to subcontract work if you can justify why it is critical to delivering the project. For R&D tax relief there are restrictions on some overseas contractor costs, so where your supplier's engineers are based can matter.
Does Magora write grant applications?
No. We are a software company, not a grant or tax adviser. We help with the technical side: a free working prototype, a discovery sprint that produces a scope, architecture, estimate and roadmap, and delivery by a UK in-house team.
Pavel Shevtsov
Pavel Shevtsov is a seasoned professional in the field of software development, currently serving as the Managing Director at Magora, a leading software development company known for its innovative solutions. With a passion for leveraging technology to solve complex business challenges, Pavel has played a pivotal role in Magora's growth and success.
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