Budget 2025 delivered the biggest change to SR&ED in a decade — doubling the expenditure limit to $6M and lifting the refundable credit ceiling to $2.1M. If your company is scaling its R&D, the math just changed in your favour. Here is exactly what moved, who benefits, and the mistakes that still leave money on the table.
What actually changed
SR&ED is Canada’s largest innovation program: roughly $4.5 billion is paid out every year. For Canadian-Controlled Private Corporations (CCPCs), the headline benefit is a 35% refundable investment tax credit on eligible R&D — a cash refund even if you owe no tax.
Budget 2025 raised the annual expenditure limit on which that enhanced 35% rate applies from $3M to $6M, and correspondingly lifted the maximum refundable credit from about $1.05M to $2.1M per year. It also raised the taxable-capital phase-out range so more mid-sized firms keep the enhanced rate as they grow.
Who actually benefits
Not everyone. A pre-revenue startup spending $400K a year on development was already well under the old $3M limit — its refund is unchanged. The firms that gain are the ones that had outgrown the ceiling: scaling CCPCs spending between $3M and $6M of qualified R&D a year. For them, the change can roughly double the refundable portion of the claim.
If your CCPC spends more than $3M a year on eligible R&D, the new $6M limit can nearly double your refundable credit — from roughly $1.05M to as much as $2.1M. Below $3M of spend, your refund is unchanged, but the higher phase-out threshold means you keep the enhanced rate longer as you grow.
The three claim mistakes that cost the most
How it stacks with IRAP and provincial credits
SR&ED rarely travels alone. Most R&D-intensive companies pair it with NRC IRAP, which funds the project while you spend, and with provincial credits layered on top. Because IRAP contributions reduce your SR&ED base, the order you apply in changes your cash flow — which is exactly the trap we cover in our IRAP vs SR&ED guide.
