Growth-stage UK fintechs allocate just 12% of their R&D tax claims to non-payroll costs, according to a new analysis of almost £50 million in claims, highlighting a significant shift in how innovation models evolve as fintech firms scale.
The research, conducted by EmpowerRD, whose clients have included Marshmallow, Penfold and Shieldpay, shows that R&D spend becomes increasingly salary-driven as fintechs move from early-stage experimentation to established growth businesses.
The analysis reveals a clear evolution in R&D structures as fintechs mature. Early-stage companies tend to adopt broad and highly experimental innovation models, with significant non-payroll expenditure supporting product development, technical validation, and core infrastructure build.
However, as firms transition into the growth stage, R&D claims become markedly more payroll-led. Among this cohort, just 12% of claimed expenditure relates to non-payroll costs, indicating a substantial shift toward internally resourced development models.
By contrast, more established fintechs demonstrate structurally significant levels of subcontracted R&D activity. This suggests a more deliberate approach to capital allocation, with greater use of specialist external development partners alongside internal teams as businesses scale.
Across the dataset, the median fintech R&D claim sits at £513,000 and is predominantly salary-driven. However, more than one third (38%) of total aggregate R&D expenditure sits outside payroll and is concentrated among a relatively small number of larger firms.
The findings come at a time when venture capital funding and alternative financing routes have slowed, placing greater emphasis on capital efficiency and sustainable innovation models. The data suggests that as fintechs scale, internalisation of R&D capability increases, but may also raise questions about whether some growth-stage firms are narrowing their innovation approach or under-claiming eligible external expenditure.
Commenting on the findings, Robert Whiteside, CEO of EmpowerRD, said: “The data shows a clear structural evolution in how fintechs fund innovation as they grow. Early-stage firms typically take a wide, experimental approach, and as they scale, R&D becomes significantly more payroll-centric. That can reflect maturity and in-house capability, but it can also signal a missed opportunity to structure innovation in a more capital-efficient way.”
The analysis provides fresh insight into how UK fintechs are funding innovation in the current climate and raises broader questions about how delivery models, capital discipline, and long-term competitiveness intersect as firms mature.
Whiteside concluded: “In a tighter funding environment, fintechs that think strategically about how they allocate R&D spend, including the use of subcontracted specialists where appropriate, are often better positioned to sustain innovation without eroding margins.”
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