Payments firms investing in proprietary technology could use R&D tax relief and Patent Box to support innovation and reduce the tax burden on qualifying profits.
Few areas of financial services are evolving as rapidly as payments. From digital wallets and contactless payments to Buy Now Pay Later (BNPL), Open Banking and digital asset solutions, the way consumers and businesses move money has changed dramatically. Digital wallets alone accounted for 29% of UK card transactions in 2023, up from 8% in 2019.
Alongside this transformation, the UK Government is driving the development of a world-leading payments ecosystem through its National Payments Vision. While card payments remain heavily reliant on established global networks, policymakers and regulators are encouraging greater competition, innovation and alternative payment methods.
Regulation is evolving too. BNPL entered Financial Conduct Authority regulation in July 2026, while new legislation is introducing a broader UK regulatory framework for cryptoassets. At the same time, Government and regulators continue to support innovation in Open Banking, tokenisation and emerging payment technologies.
Against this backdrop, the UK tax system offers valuable incentives for businesses investing in innovation. R&D tax relief can help fund the development of new technologies, while Patent Box provides a reduced Corporation Tax rate on profits generated from patented inventions. For payments businesses investing in proprietary technology, understanding how these incentives work together can be an important part of both growth and commercialisation strategies.
Where does R&D happen in payments?
The payments sector is particularly rich in R&D opportunities. Payment systems must process high transaction volumes securely and in real time while integrating with complex external and legacy systems. Developing new solutions often requires overcoming technological challenges that existing approaches can’t resolve.
Areas where we have seen successful R&D claims include:
- Building new payment rails and infrastructure
- Interoperability and systems integration
- Fraud detection and transaction monitoring
- Data processing and reconciliation
- Web3 and crypto technologies
- In many cases, the qualifying R&D is not the customer-facing product itself, but the technical advances needed to make it possible. Successful claims often focus on solving limitations in underlying technologies, infrastructure, and engineering processes.
For payments businesses, this means identifying what existing technology could not achieve, why conventional methods were insufficient and how development teams overcame those challenges.
Good R&D claims start with good records
Identifying qualifying activity is only part of the process. Businesses must also be able to demonstrate and evidence their R&D to HMRC.
Fortunately, many payments businesses are already well positioned. Operating in a regulated environment often means maintaining extensive documentation covering systems, controls, development processes and technology risks.
Development teams also generate valuable evidence through project specifications, architecture documents, sprint records, testing results and release documentation. The key is ensuring these records capture the technical challenges and uncertainties encountered, not just the commercial objectives.
Compared with many technology businesses in less regulated sectors, payments organisations often already have documentation disciplines embedded. With the right approach, existing records can provide a strong foundation for identifying, documenting and defending R&D claims without creating a separate reporting process.
Could Patent Box reduce your tax rate?
R&D tax relief may only be part of the opportunity. Where technology is patentable, businesses should also explore Patent Box.
Patent Box allows qualifying companies to benefit from an effective 10% Corporation Tax rate on profits attributable to patented inventions, provided certain conditions are met. Generally, the company must own or exclusively license qualifying patents and have undertaken development activity linked to the patented technology.
This can be particularly relevant for businesses creating new technologies in areas such as transaction processing, authentication, security, interoperability and digital asset infrastructure. While software patents can be complex, businesses should not assume their technology is ineligible. Where a project delivers a novel technical solution to a technical problem, it may be worth exploring patent protection with a specialist adviser.
The Patent Box and R&D tax relief are also closely linked. Businesses already tracking development costs for R&D claims are often gathering information that will also support future Patent Box calculations. Considering both incentives together can help maximise the value of innovation throughout its lifecycle, from development to commercialisation.
Taking a more strategic approach to innovation incentives
The payments landscape continues to evolve, creating opportunities for both new entrants and established businesses.
The nature of innovation in this sector means many businesses are well placed to benefit from UK tax incentives. R&D tax relief can support investment in new technologies, while Patent Box can deliver longer-term tax savings where innovation leads to patented, commercially successful IP.
The key is not to view these incentives as a year-end exercise. Identifying technological advances early, capturing evidence throughout the project lifecycle, and assessing the value of resulting IP can help businesses take a more strategic, joined-up approach to innovation.
For payments businesses investing heavily in proprietary technology, now may be the right time to assess whether they are fully using the incentives available.
To discuss how HaysMac can support your business with R&D tax relief and Patent Box, contact Jack Williams, R&D Director, at [email protected].
