Horizon Europe Budget: How to Plan, Allocate and Manage Grants

A Horizon Europe budget is the estimated breakdown of eligible costs and contributions, structured by beneficiary and by budget category, that sets the maximum grant amount for your action and each partner. To plan it well, you estimate personnel, subcontracting, purchase and other costs against your work packages, add the 25% flat rate for indirect costs, and confirm the funding rate that applies to your type of action. To manage it well, you track actual spending against the estimate and use the budget flexibility rules to shift funds where they are needed, without exceeding the maximum grant amount.

The estimated budget in Annex 2 of your Grant Agreement is not a fixed spending plan. As the Annotated Grant Agreement (AGA) states, the budget is "an estimation" and is "in principle flexible" (HE AGA, Article 5.5, p.37). That flexibility is one of the most useful and most misunderstood features of Horizon Europe financial management.

Horizon Europe runs a total budget of EUR 95.517 billion in current prices for 2021-2027 (European Parliament Legislative Train Schedule, MFF Horizon Europe). This article focuses on your slice of that: how to build, allocate and steer a single project budget across a consortium of 10 to 20 partners.

What Is a Horizon Europe Budget and How Is It Structured?

A Horizon Europe budget is a budget-based mixed actual cost estimate: it is broken down by budget category and by participant, based on actual costs incurred, and it may also include simplified forms of funding such as unit costs and flat-rate indirect costs (HE AGA, Article 5.1, p.34). The estimated budget is annexed to the Grant Agreement as Annex 2 and determines the maximum grant amount for each beneficiary and for the action as a whole (HE AGA, Article 5.4, p.36).

The standard budget categories that usually apply are set out in Article 6.2 and reflected in the Annex 2 budget table (HE AGA, Article 5.4, p.36):

• Personnel costs: employees, natural persons under direct contract, personnel seconded against payment, and (in some programmes) SME owners without salary and volunteers
• Subcontracting costs
• Purchase costs: travel, accommodation and subsistence; equipment; and other goods, works and services
• Other cost categories: financial support to third parties (FSTP) and internally invoiced goods and services (the latter only in HE, DEP and EDF)
• Indirect costs

Programme-specific categories may also apply, for example access to research infrastructure costs, PCP/PPI procurement costs, or ERC additional funding (HE AGA, Article 5.4, p.37). Each category is either cost-based (actual, unit, flat-rate or lump sum costs) or contribution-based, and Annex 2 shows which form of funding applies to each line. If unit costs are used, the calculation method sits in Annex 2a (HE AGA, Article 5.4, p.37).

In practice, most collaborative Horizon Europe projects are dominated by personnel costs, with indirect costs added automatically. Understanding this structure early prevents the common mistake of squeezing real staff effort into the wrong category. You can read the full rules in the Horizon Europe Annotated Model Grant Agreement.

How Does the 25% Indirect Costs Flat Rate Work?

In Horizon Europe, indirect costs are reimbursed through a single 25% flat rate applied to eligible direct costs, rather than through detailed overhead reporting (HE AGA, Article 5.4, p.36). The budget table in Part A of your proposal includes all direct costs plus the additional 25% flat rate of indirect costs, calculated only on the entitled direct costs (Enspire Science, Horizon Europe budget preparation guide).

The mechanism removes a large administrative burden. You do not track or justify overhead invoices; you simply apply 25% to the direct cost base. Certain categories are excluded from that base, most notably subcontracting and, where applicable, financial support to third parties. This is why placing costs in the correct category matters financially: a euro booked as subcontracting generates no indirect cost reimbursement, while a euro booked as personnel does.

Worked example: if a beneficiary has EUR 300,000 in eligible direct costs (personnel, travel, equipment, other goods and services) and EUR 50,000 in subcontracting, the indirect costs are 25% of EUR 300,000 (the direct cost base, which already excludes subcontracting), which is EUR 75,000. Subcontracting is added on top without any flat rate. The total eligible costs would be EUR 425,000.

A common challenge is that some coordinators forget the flat rate is fixed. You cannot negotiate a higher percentage, and you cannot claim actual overheads instead. The 25% flat rate is Horizon Europe's standard indirect-cost rate, applied under the Common Model Grant Agreement (CMGA) framework used across EU programmes. The EPRS strategic assessment of Horizon Europe (EPRS Study PE 757.813, July 2024) examines stakeholder views on the CMGA, finding both appreciation for its simplified approach and criticism of certain implementation aspects: the picture is mixed rather than uniformly positive.

How Do You Plan and Allocate the Budget Across Work Packages and Partners?

You allocate a Horizon Europe budget by estimating the resources each work package requires, translating them into person-months and direct costs per partner, and confirming the totals match the funding available for the call. Budget information about activities, planned effort and personnel gives evaluators an in-depth picture of how the project will be run, so the budget must correlate with the tasks defined in the work packages (EMDESK, Horizon Europe Budget Preparation guide).

The proposal presents the budget in two places. Part A carries the "bottom line" budget table with each partner's total and the project total, including the 25% flat rate. Part B provides the narrative justification, explaining subcontracting, major equipment and any unusual costs (Enspire Science, Horizon Europe budget preparation guide). Both must tell the same story.

A practical allocation sequence

1. Start from the work plan. List every task in every work package and identify which partner delivers it.
2. Estimate person-months per partner per work package, then apply each organisation's real personnel cost rates.
3. Add direct non-personnel costs: travel to meetings, equipment depreciation, consumables and any subcontracting.
4. Apply the 25% flat rate to the eligible direct cost base for each partner, excluding subcontracting (HE AGA, Article 5.4, p.36).
5. Apply the funding rate set for your type of action to reach the EU contribution.
6. Reconcile against the topic budget so the requested grant sits within the indicative amount in the call. You can check open calls and their indicative budgets on the Funding and Tenders Opportunities Portal topic search.

The funding rate is defined in Article 5.3 and applies to the action's eligible costs, while contributions are not subject to any funding rate (HE AGA, Article 5.4, p.34). Most Research and Innovation Actions (RIAs) are funded at 100% of eligible costs. Innovation Actions (IAs) typically fund non-profit entities at 100% and other entities at 70%, though some IA sub-types, including EIC Accelerator, apply different rates. Always confirm the exact rate in your call and Data Sheet before you finalise allocations.

Starting in 2026, the Commission is introducing integrated online budget tables for selected topics, already in use for HORIZON-CL5-2026-05 and HORIZON-CL5-2026-07, running in parallel with legacy Excel templates during the transition (EMDESK, Horizon Europe Budget Templates guide). According to Accelopment's analysis, as cited in that EMDESK guide, approximately 50% of 2026 call topics use lump sum funding, so check your call type before choosing a template.

What Is the Difference Between Actual Cost and Lump Sum Budgets?

Horizon Europe uses two main forms of grant: actual cost grants, where you report the real eligible costs you incur, and lump sum grants, where you receive pre-agreed fixed amounts on completion of work packages rather than reporting detailed costs (HE AGA, Article 5.1, p.34). The model is not a free choice: each call for proposals states whether it uses actual costs or lump sums (Future Needs, actual vs lump sum grant).

Sources: HE AGA, Article 5.1, p.34; Future Needs, actual vs lump sum grant.

Lump sum funding is a simplified cost model in Horizon Europe that replaces detailed cost reporting with pre-agreed fixed amounts for work packages. It is not "free money" without oversight: payment depends on completing the work package as described, and reviewers still assess whether the requested amount is reasonable for the planned work (Future Needs, actual vs lump sum grant).

For lump sum projects, the budget management discipline shifts from tracking euros against invoices to protecting the completion of each work package, because a work package assessed as not completed can be paid at zero. The Commission publishes a dedicated "How to manage your lump sum grants" resource referenced in the AGA (HE AGA, Article 1, p.35) for detailed guidance on this model.

How Can You Transfer Budget Without an Amendment?

Under Horizon Europe budget flexibility rules, beneficiaries may transfer budget among themselves, between affiliated entities and between budget categories without an amendment, as long as the action stays in line with the description in Annex 1 (HE AGA, Article 5.5, p.37). At reporting, you can declare costs that differ from the estimated budget, provided the work remains consistent with Annex 1.

This is the single most valuable management tool in an actual cost grant. If a partner's real personnel costs come in lower than estimated, the difference can be allocated to another partner or another category, and the reimbursement to the receiving partner may be higher than originally planned (HE AGA, Article 5.5, p.37). The AGA gives a concrete illustration: beneficiary A estimated at EUR 60,000 personnel and beneficiary B at EUR 75,000 can end up with A spending EUR 75,000 and B spending EUR 60,000, and this is acceptable if A's extra costs meet the eligibility rules of Article 6 and stay within the maximum grant amount at action level (HE AGA, Article 5.5, p.37).

Two hard limits apply. A transfer can never increase the maximum grant amount (HE AGA, Article 5.5, p.37). And the budget table is treated by the granting authority as reflecting the actual situation, so it can be used for decisions such as offsetting payments from beneficiaries that owe money to the Commission (HE AGA, Article 5.5, p.37).

Some changes always require a formal amendment under Article 39:

• Changes to the description of the action in Annex 1
• Changes to the budget category for volunteers, if used
• Changes to budget categories with lump sum costs or contributions, including financing not linked to costs
• Changes to categories or activities with higher funding rates or budget ceilings
• Activation of the contingency reserve, where foreseen. The contingency reserve is an optional additional amount that can be built into the maximum grant amount for certain action types; it can only be activated, increasing the ceiling, through a formal amendment at the end of the action (HE AGA, Article 5.2, p.34).

Adding subcontracting amounts not provided for in Annex 1 requires either an amendment or a simplified approval procedure (HE AGA, Article 5.5, p.37). The honest reality is that amendments take time, so experienced coordinators use flexible transfers wherever the rules allow and reserve amendments for genuine structural changes.

How Are Payments Calculated Against the Budget?

Payments in Horizon Europe are calculated by applying the funding rate to accepted costs, then capping the result against the maximum grant amount and the 90% interim payment ceiling. The granting authority first calculates the "maximum EU contribution to costs", takes account of any Certificate on Financial Statements (CFS) threshold cappings, and adds contributions to reach the "total accepted EU contribution" (HE AGA, Article 22, p.227).

Certificate on Financial Statements (CFS). For actual cost grants, a CFS is required when a beneficiary's cumulative requested EU contribution exceeds the threshold set out in the Data Sheet (Point 4.3) of the grant agreement. The AGA uses EUR 430,000 as an illustrative threshold in its examples (HE AGA, Article 24.5, as referenced in Article 22, p.227). The CFS is an independent audit opinion confirming that the claimed costs are real, eligible and correctly calculated. Costs above the applicable threshold that are not covered by a CFS are capped at the threshold amount, which directly reduces reimbursement. As coordinator, you must track each partner's cumulative declared costs and alert them before they cross the threshold so the CFS can be commissioned in time.

Pre-financing. The initial advance payment is set as a percentage of the maximum grant amount, with the exact rate specified in the Data Sheet for each action. For reference, the AGA worked example below uses pre-financing of approximately one-third of the maximum grant amount.

The AGA provides a worked case that is worth internalising. In a grant with a maximum grant amount of EUR 1,000,000 at 100% funding and pre-financing of EUR 333,334, the interim payment ceiling is 90% of the maximum grant amount, which is EUR 900,000. If the consortium declares EUR 625,000 in the first reporting period but EUR 40,000 is rejected as ineligible, the total accepted costs are EUR 585,000. The interim payment is then capped at EUR 566,666 (EUR 900,000 ceiling minus EUR 333,334 pre-financing already paid). The difference between EUR 566,666 and EUR 585,000 is cleared from the pre-financing (HE AGA, Article 22.3, p.225).

That example carries a clear planning lesson: rejected costs and the 90% ceiling mean you should never assume every euro budgeted will arrive on schedule. The final balance is settled at the end, when the total accepted EU contribution is compared against pre-financing and interim payments already received; a positive balance is paid, a negative balance is recovered (HE AGA, Article 22, p.227).

Where a beneficiary fails to repay an amount owed to the granting authority, the Mutual Insurance Mechanism (MIM) may intervene to protect the continuation of the action, subject to the conditions set out in the rules governing the Mechanism (HE AGA, Article 22, p.227). This backstop is relevant for coordinators managing large multi-partner consortia where one partner's financial difficulties could otherwise disrupt the whole project.

Your project officer at the European Research Executive Agency is the main contact for reporting and payment matters, and the coordinator acts on behalf of the consortium and distributes payments (European Research Executive Agency, Horizon Europe grants and reporting). All financial reports are submitted through the Funding and Tenders Opportunities Portal, the Commission's central platform for grant management.

What Does Effective Budget Management Mean in Practice?

Effective Horizon Europe budget management means monitoring actual spend against the Annex 2 estimate throughout the project, forecasting under- and over-spends per partner and category, and acting on them before each reporting period closes. Horizon Europe projects typically manage budgets of EUR 2 to 15 million over 36 to 60 month lifecycles, which makes continuous financial tracking essential (EMDESK, Horizon Europe Project Management guide).

Here are concrete, actionable steps you can apply:

• Build a cost allocation model before the kick-off meeting, mapping each partner's Annex 2 budget to work package tasks across the standard categories (personnel, subcontracting, travel, equipment, other goods and services, and indirect costs at the 25% flat rate). Reference the Annex 2 budget table structure directly so every partner uses the same category definitions from the outset.
• Run a quarterly forecast per partner. If a partner is tracking 20% under budget on personnel by Month 18, flag it early so the consortium can plan a transfer to a partner that needs more effort, well within the flexibility rules of Article 5.5.
• Track CFS thresholds actively. Monitor each beneficiary's cumulative declared costs against the CFS threshold set in the Data Sheet (Point 4.3) of your grant agreement (HE AGA, Article 24.5). Commission the audit in good time; a missed threshold can cap reimbursement and cannot be corrected after the reporting deadline.
• Scenario: a partner withdraws in Month 18. The coordinator should identify the terminated beneficiary's accepted costs to date, reallocate their remaining tasks and budget to other partners through an amendment, and remember that a terminated partner's grant reduction feeds into the total accepted EU contribution at action level (HE AGA, Article 22, p.227).
• Keep the budget table current. Because the granting authority treats it as the actual situation, an outdated table can distort payment offsets for partners with outstanding debts (HE AGA, Article 5.5, p.37).
• Reconcile before every periodic report. Check that declared costs stay within each partner's maximum grant amount and that any category with a ceiling or higher funding rate has not been altered without an amendment. Submit all financial reports through the Funding and Tenders Opportunities Portal.

Many coordinators find that the discipline of a shared, live budget model, rather than a static Annex 2 spreadsheet, is what keeps a large consortium solvent and audit-ready. For a wider view of the process, the University of Oslo's management and reporting guidance and UKRO's Horizon Europe legal and financial basics factsheet are useful companions. You may also find the EMDESK Academy article on Horizon Europe financial reporting helpful for understanding how budget data feeds into periodic and final reports.

Conclusion and Outlook

A Horizon Europe budget is best understood as a living estimate. You plan it by mapping eligible costs to work packages, allocate it by partner and category with the 25% flat rate applied, and manage it by using the generous transfer rules while respecting the maximum grant amount and the categories that need an amendment. The estimated budget in Annex 2 sets your ceiling, but real spending will always diverge from the plan, and the AGA is designed to accommodate that.

Looking ahead, the parallel rollout of online budget tables and the growing share of lump sum calls in 2026 mean coordinators need fluency in both actual cost and lump sum logic (EMDESK, Horizon Europe Budget Templates guide). Whichever model your call uses, the fundamentals stay the same: a realistic budget that matches the work plan, careful category placement, disciplined CFS threshold monitoring, and continuous tracking against Annex 2 from the kick-off meeting to final payment.

Frequently Asked Questions

What are the standard budget categories in a Horizon Europe grant?

The standard categories are personnel costs, subcontracting costs, purchase costs (travel, accommodation and subsistence, equipment, and other goods, works and services), other cost categories (such as financial support to third parties and internally invoiced goods and services), and indirect costs (HE AGA, Article 5.4, p.36). Programme-specific categories, like access to research infrastructure costs, may also apply depending on the type of action.

Can I move budget between partners without a formal amendment?

Yes. Beneficiaries may transfer budget among themselves, between affiliated entities and between budget categories without an amendment, provided the action stays in line with the description in Annex 1 (HE AGA, Article 5.5, p.37). A transfer can never increase the maximum grant amount, and changes to volunteers, lump sum categories, or categories with higher funding rates always require an amendment.

How are indirect costs calculated in Horizon Europe?

Indirect costs are reimbursed as a single 25% flat rate applied to eligible direct costs, with subcontracting excluded from the base (HE AGA, Article 5.4, p.36). For example, EUR 300,000 of eligible direct costs (excluding subcontracting) generates EUR 75,000 of indirect costs. The rate is fixed and cannot be negotiated or replaced with actual overhead reporting.

What is the difference between an actual cost and a lump sum Horizon Europe budget?

Actual cost grants reimburse the real eligible costs you incur and require detailed financial reporting, while lump sum grants pay pre-agreed fixed amounts per work package on completion, without detailed cost reporting (HE AGA, Article 5.1, p.34). You do not choose the model: each call states which one applies. According to Accelopment's analysis (cited in EMDESK's Budget Templates guide), approximately 50% of 2026 call topics use lump sum funding.

What is the interim payment ceiling in Horizon Europe?

The interim payment ceiling is 90% of the maximum grant amount set in Annex 2. In the AGA example, a EUR 1,000,000 grant has a EUR 900,000 ceiling, and the interim payment for the first reporting period is capped at EUR 566,666 (EUR 900,000 minus EUR 333,334 pre-financing already paid). The remaining balance is paid after the final report is accepted (HE AGA, Article 22.3, p.225).

When is a Certificate on Financial Statements required in Horizon Europe?

A Certificate on Financial Statements (CFS) is required when a beneficiary's cumulative requested EU contribution exceeds the threshold set in the Data Sheet (Point 4.3) of the grant agreement (HE AGA, Article 24.5). The AGA uses EUR 430,000 as an illustrative threshold figure in its examples. The threshold is not a universal fixed amount: always check your specific Data Sheet. Costs above the threshold that lack a CFS are capped, directly reducing reimbursement.