Treasury minister Angela Eagle said this would raise the total tax relief available to small and medium companies to around £300mill a year.
To enable companies to claim the additional tax relief, the rate available for qualifying small and medium-sized enterprises (SMEs) investing in R&D will increase from 150 per cent to 175 per cent of their investment.
The size of company that can qualify for tax relief will also increase, from 250 employees to up to 500 employees while the revenue qualification will double to £78mill.
Ms Eagle said: ‘The R&D tax credit schemes are the Government’s most important policy in support of R&D investment by companies in the UK.
“By increasing the value of the SME scheme by a third, we are showing our continued commitment to helping innovative UK companies invest to grow.”
The changes are accompanied by small revisions to the rules of the scheme to ensure it complies with European rules, which limit the amount of aid that can be claimed per R&D project to 7.5 million Euros and prevent companies in difficulties from claiming relief.