Solar Panel Tax Relief For UK Businesses
What tax reliefs are available to UK Businesses for Solar Panels?
Author
Harry Dexter | Operations Director
Table of Contents
Author
Harry Dexter | Operations Director
Table of Contents
Solar Panel Tax Relief For UK Businesses
With energy costs rising and the push for sustainability growing stronger, solar panels are becoming a every better option for UK businesses looking to reduce their operating costs, appeal to new and existing clients and achieve environmental goals.
If you’re thinking about investing in commercial solar panels, here’s what you need to know about the tax reliefs and financial incentives available to your business.
Annual Investment Allowance (AIA)
What is it?
You can deduct the full cost of solar panels, inverters, and installation equipment, up to £1 million per year, from your taxable profits.
Example:
Spend £50,000 on solar panels → Save £12,500 in Corporation Tax (25% of £50,000).
Best for:
Most SMEs and businesses making one-off solar purchases.
Full Expensing / First-Year Allowance (FYA)
What is it?
If you’ve already used up your AIA, or you’re not eligible, FYA allows companies to deduct 100% of the cost of new, unused solar equipment in the year it’s purchased.
Available:
From April 2023 to March 2026.
Bonus Option:
If you can’t claim the full 100%, you might still be able to claim 50% upfront, with the rest deducted gradually (see WDA below).
Writing-Down Allowance (WDA)
What is it?
For any remaining cost after initial claims (like FYA or AIA), you can still deduct 6% per year on a reducing balance basis.
Think of it like:
An ongoing tax saving every year that builds up over time.
Structures & Buildings Allowance (SBA)
What is it?
If your solar panels are part of a new building or large renovation project, you can claim 3% per year on the structural costs over 33 years.
Note:
This applies more to the building itself than to the solar panels, but still offers long-term tax relief if they’re part of a combined investment.
VAT Considerations
Zero-rate VAT (0%) is available on residential or qualifying mixed-use buildings (e.g. care homes, boarding schools) until March 2027.
Most businesses will still pay the standard 20% VAT on commercial installations, but this may be reclaimable if you’re VAT registered.
Enhanced Capital Allowances (ECA) in Special Zones
If your business operates in a Freeport or Investment Zone:
You may be eligible to deduct 100% of solar panel costs in the year of purchase.
Conditions include:
- The equipment must be new and unused.
It must be used in your trade and in a designated special tax site.
Full Breakdown
Relief Type | % Deductible | When Claimed | Best For |
AIA | 100% | Year of purchase | SMEs under £1m spend |
Full Expensing (FYA) | 100% | Year of purchase | Large companies & over £1m spend |
50% FYA | 50% now + 6% annually | Year of purchase + onwards | Partial relief if full FYA unavailable |
WDA | 6% annually | Ongoing | Remaining balance after AIA/FYA |
SBA | 3% annually | Ongoing | If solar part of wider building project |
ECA | 100% | Year of purchase | In Freeport / special tax zones |
Final Thoughts
Installing solar panels isn’t just about going green—it can significantly cut your energy bills and lower your tax bill.
If you’re unsure about which route to take, our team at Energise Solar can help you assess your options and work with your accountant to make the most of your investment.
Contact us today for a free no obligation quote and start your solar journey.
