Last month, we hosted our webinar Horizon Europe explained (September 16th, 2026), a practical walkthrough of the programme with a deep dive into Cluster 1: Health. In this newsletter, we turn to one part of the proposal that is often left until last, but that shapes everything else: the budget.
Whether you are a university, hospital, SME, large enterprise, research organisation or NGO, all organisation types are eligible for funding, and the same budgeting principles apply to everyone.
A Horizon Europe proposal has several building blocks: the administrative forms in Part A, the required annexes, and the proposal itself (Part B) with its three sections: Excellence, Impact and Implementation. The budget runs alongside all of these and is closely tied to the work plan in the Implementation section. The work packages, tasks and person-months you describe there are what the budget eventually pays for. A funded project receives one total grant, made up of the individual budgets of each consortium partner.
Budgeting rules
The basic idea is simple: an EU grant reimburses the costs of carrying out activities related to the project. It is not meant to generate profit for the partner organisations, and this no-profit principle is written into the grant rules. Every cost must be actually incurred, necessary for the project, linked to the work described in the work plan and recorded in your accounts.
How much of those costs is covered depends on the type of action. In a Research and Innovation Action (RIA), the EU funds 100% of eligible costs for all partners. In an Innovation Action (IA), companies receive 70% and non-profit organisations 100%. On top of the direct costs, a flat 25% is added for indirect costs, with no receipts needed. However, a few cost categories, such as subcontracting, are left out of that 25% base. Each call also sets its budget model, either the traditional Action Grant or a Lump Sum, as described under Budget models below.
Cost categories
The final budget of one consortium partner consists of several cost categories and sub-categories, all with their own eligibility rules. The largest cost category tends to be the Personnel costs (A). Other cost categories are Subcontracting (B), Purchase costs (C) and Other cost categories (D), such as internally invoiced goods and services and a few others, less frequently used but eligible categories nevertheless. The 25% indirect costs (E) are then calculated on top (see Figure).
| What can a partner budget for? Direct costs (A–D) are budgeted per partner; indirect costs (E) are added on top as a flat rate. | |||
| A Personnel costs | B Subcontracting | C Purchase costs | D Other costs |
| Usually the largest share | Not in the 25% base | Easiest to estimate | Less frequent, still eligible |
| • Salaries of staff working on the project, budgeted in person-months • Natural persons on direct contract and seconded staff • SME owners and natural persons without a salary | • Project tasks carried out by an external provider • Must be described and justified in the proposal • Awarded on best value for money | • C.1 Travel and subsistence: project meetings, conferences • C.2 Equipment: depreciation for the share used in the project • C.3 Other goods, works and services: consumables, publication fees, dissemination, and external support services such as the and consultancy services | • D.1 Financial support to third parties • D.2 Internally invoiced goods and services • Access to research infrastructures and other specific cost types |
| E Indirect costs: a flat 25% on top Calculated on the direct costs (A + C + D), excluding subcontracting and financial support to third parties. Covers overheads such as premises, IT and administration – no receipts needed. | |||
Figure: Horizon Europe cost categories and what they cover
The grant is designed to cover the expenses incurred from the project work. While the estimation of e.g. travel, equipment and, say, publishing fees is fairly easy to make, the prediction of personnel costs is more challenging, as long-term changes like salary rises, organisational changes and inflation can be unexpected. Luckily, an estimate precise to the cent is not required, but it should be the best one can make at the time, as once the grant agreement is signed, no additional funding is available.
What to take into consideration
The budget is shared. Each call announces an indicative budget per project, and that amount is distributed among the consortium partners. Health consortia commonly have 12–15 partners, sometimes 20 or more, so the larger the consortium, the thinner each share becomes.
A partner’s share matches the expected workload and tasks planned: person-monthsi must reflect the real effort and budget allocation to the other cost categories should be realistic and relevant. When in doubt, it is better to budget slightly high and spend less than to budget too low and run out of money before the project ends.
Budget models
Each call sets one of two budget models. Most calls in Cluster 1 are so-called Action Grants, i.e. budgeted in the “traditional way”. In Action Grant calls, the budget is estimated at proposal stage, and when the project is live, the incurred costs are reported at each reporting period. Partners whose requested EU contribution reaches €430,000 or more must also provide a Certificate on the Financial Statements (an external audit).
A Lump Sum project, on the other hand, is also budgeted at the proposal stage, but does not require financial reporting or auditing after the proposal is accepted and the grant agreement is signed. It sounds simple at first, and it is simple from a reporting point of view, but requires additional consideration when building the work plan at proposal stage. In Lump Sum projects, payment follows after each reporting period upon the completion of each work package by all involved partners.
Work packages ranging from the beginning to the end of the project could benefit from splitting them up according to the reporting periods, as work would otherwise be done without any interim payments during the project runtime. The progress of the technical work (and the completion of work packages) is confirmed in the periodic technical reports.
Both models include pre-financing at the beginning of the project. The same basic cost rules apply in both models, but you don’t get to choose: the call decides which model is used.
Commitment
You’re in it for the long run. Preparing a proposal typically takes around eight months from call scouting to submission, and a funded project usually runs for three to four years, sometimes five. By joining, you commit both to the work and to the reporting. Each consortium partner is obliged to report on their progress at the end of each reporting period, which usually lasts 12–18 months. Additionally, the partners commit to report progress in regular review meetings with HADEA, the European Health and Digital Executive Agency that manages Cluster 1 projects and external reviewers assigned to the project.
Need help with your budget?
At Grants, budget preparation is part of our Horizon Europe application package, alongside call analysis, consortium building and proposal writing.
If you are planning a Cluster 1 Health proposal, or have questions about the budgeting process, get in touch with our EU team: Malin Tverin, EU Funding specialist, malin.tverin@grants.fi, +358 40 5603 442.
Going to Health Design in Helsinki on 28–29 October? Come see us at our booth!!