Grants, tax relief and funding for commercial solar
An honest guide to what UK businesses can actually claim in 2026, and where the real money is (it is mostly tax relief, not grants).
Tax relief and allowances
Solar PV is SPECIAL RATE plant (HMRC CA22335). This one fact drives the whole tax position and is the most commonly misreported point in the market.
| Relief | What it means for you | 2026 status |
|---|---|---|
| Annual Investment Allowance (AIA) | 100% first-year tax relief on qualifying plant up to £1,000,000 per year. Solar qualifies. For most commercial installs (well under £1m) AIA gives 100% relief on the whole cost in year one, so it is the primary route. Available to companies and unincorporated businesses. | £1m, permanent, unchanged into 2026 |
| 50% special-rate first-year allowance | Because solar is special-rate, a company can deduct 50% of qualifying cost in year one, with the remaining 50% written down in the special-rate pool at 6% per year. New and unused assets, companies only, uncapped. Mainly relevant for spend above the £1m AIA cap. | Permanent (part of the permanent full-expensing package) |
| 100% full expensing does NOT apply to solar | Full expensing and the new 40% first-year allowance (from January 2026) are for MAIN-RATE plant. Solar PV is special-rate, so neither applies. Content claiming '100% full expensing on solar' is a material error. | Excluded, main-rate only |
| Special-rate writing-down allowance | Any solar spend not relieved by AIA or the 50% FYA is written down at 6% per year in the special-rate pool. The Autumn Budget 2025 cut only the main-rate WDA (18% to 14% from April 2026); the special-rate 6% is unchanged. | 6% per year, unchanged |
| VAT | Commercial solar is standard-rated at 20% VAT. The 0% domestic rate does NOT apply to commercial installations. A VAT-registered business can reclaim the 20% input VAT through its normal VAT return, so it is a cash-flow timing item, not a net cost, for most businesses. | 20%, reclaimable if VAT-registered |
| Business rates | In England, eligible onsite renewable generation and storage, including rooftop solar, is 100% exempt from business rates from 1 April 2022 to 31 March 2035. Qualifying self-consumption solar does not raise your rateable value in that window. Scotland and Wales differ. | 100% exempt in England to March 2035 |
Tax treatment depends on your company's specific circumstances and accounting framework. These are general points, not advice. Always confirm your position with your accountant before relying on any relief.
Grants and incentives
Smart Export Guarantee (SEG)
May applyOngoing incentive
The main ongoing incentive, replacing the Feed-in Tariff which closed to new applicants in 2019. Every large electricity supplier must offer at least one export tariff paying you for electricity exported to the grid. Systems up to 5 MW qualify, so almost all commercial rooftop and ground systems are eligible. Suppliers set their own rates; indicative 2026 best rates are roughly 12 to 16.5p per kWh. SEG income is generally taxable for commercial operators.
Salix / Public Sector Decarbonisation Scheme
Not for commercialGrant, public sector only
Grant and interest-free loan funding for the public sector only: central government, NHS trusts, schools and academies, FE colleges, some universities, local authorities and emergency services. Private-sector companies and social housing are not directly eligible. Included here for completeness because buyers often ask.
Regional / combined-authority business grants
May applyGrant, regional and intermittent
Some combined authorities and regional bodies run occasional energy-efficiency or net-zero business grant schemes. These are regional, time-limited and frequently open and close, so current availability must be checked for the specific region before relying on them.
ECO4 and the Great British Insulation Scheme
Not for commercialDomestic only
These are domestic household schemes for low-income and vulnerable homes. They do NOT apply to businesses. GBIS closed to new applications on 31 January 2026. Flagged so commercial buyers are not misled by domestic marketing.
How the reliefs stack up in practice
The honest headline on commercial solar funding is that the strongest support does not come from a single grant cheque. It comes from several tax reliefs and income streams that work together on the same install. Each is modest on its own, but stacked across the life of the system they change the economics considerably. Understanding how they combine is more useful than hunting for a grant that, for most private businesses, does not exist.
The four things that stack
For a typical VAT-registered company buying a rooftop system for its own use, four benefits tend to apply at once: capital allowances on the qualifying cost, VAT reclaimed through your return, no additional business rates while the system powers your site, and export income on the units you do not use. These are not alternatives you choose between. They apply in parallel, which is why the real cost of ownership is a good deal lower than the price on the quote.
Why solar being special-rate matters
Solar PV is classed as special-rate plant and machinery. This excludes it from the two most generous headline schemes: 100% full expensing and the 40% first-year allowance are both main-rate only, so neither applies. In their place, the Annual Investment Allowance (AIA) does the heavy lifting, giving 100% first-year relief on qualifying spend up to £1 million a year. Because most commercial rooftop installs sit well under that cap, the majority still attract full first-year relief on the whole cost. Where a company's total qualifying spend exceeds the £1 million cap, the balance on the solar asset can use the 50% special-rate first-year allowance (available to companies), with the remaining value written down at 6% a year on the reducing-balance basis. The takeaway: do not assume a headline "100% write-off" is full expensing. For solar it is AIA, and it follows the AIA rules.
VAT, rates and export income
VAT on commercial solar is charged at the standard 20% rate. The 0% domestic rate does not apply to commercial installs, but a VAT-registered business can normally reclaim that VAT through its return, so for most companies it is a cash-flow timing point rather than a permanent cost. On business rates, rooftop solar generating power for your own use is 100% exempt in England from April 2022 to March 2035, so self-consumption does not raise your rateable value. For export income, the Smart Export Guarantee (SEG) replaced the Feed-in Tariff and pays for units sent back to the grid, with generation up to 5 MW eligible. SEG rates vary by supplier, so it is worth comparing tariffs.
How to actually claim, and the common pitfalls
The reliefs are claimed in different places, which is where businesses trip up. Capital allowances go through your corporation tax return, VAT recovery through your VAT return, the rates exemption with your local billing authority, and SEG through a licensed electricity supplier. Keep the itemised invoice, the MCS certificate and the commissioning paperwork, because your accountant will need them. The frequent mistakes are assuming full expensing applies, expecting the domestic 0% VAT rate, and overlooking SEG registration once the system goes live. This is general information, not tax advice, so confirm your position with your accountant.
An honest note on grants
Direct capital grants for private commercial solar are limited. Salix funding and the Public Sector Decarbonisation Scheme are public sector only, and broad private-sector grants come and go, so it is unwise to build a business case around one. For most companies the reliefs above are the real support, and the strongest lever remains choosing the funding route that fits your cash position. See how the routes compare on the finance options compared page, model the reliefs against the outlay with the finance calculator, and if a low-outlay start suits you, look at a no upfront cost route. When you are ready, get it costed with a tailored quote. We are a comparison and quote service, not a lender or financial adviser, and we connect UK businesses with vetted MCS-certified installers and funders.
Sources and official guidance
Figures on this page are based on the following primary sources. This is general information, not tax advice.
Further reading
Funding and tax questions
What tax relief can my company claim on commercial solar panels?
For most installs the Annual Investment Allowance gives 100% first-year relief up to £1m, which at 25% corporation tax returns about 25p per £1 spent in the first year. Solar is special-rate, so above the £1m cap a company can use the 50% first-year allowance with the balance written down at 6% a year. Solar does not qualify for 100% full expensing, which is main-rate only. Confirm your position with your accountant.
Who gets the tax relief and export income under a PPA?
The PPA provider, because they own the asset. You get cheaper power, not the capital allowances or the SEG export payments. If capturing the tax relief matters to you, own the system through cash, a loan or hire purchase.
Can I reclaim the VAT on a commercial solar installation?
If you are VAT-registered, yes. The 20% input VAT is reclaimable through your normal VAT return, provided the system is for business use and you hold a valid VAT invoice. The 0% domestic rate does not apply to commercial buyers, so it is a cash-flow timing item rather than a net cost.
Will commercial solar increase my business rates?
No. In England, qualifying rooftop solar for self-consumption is 100% exempt from business rates from April 2022 to March 2035, so it will not raise your rateable value in that window. Scotland and Wales have separate regimes, so check locally.
Are there grants for commercial solar?
Genuine capital grants for private commercial solar are limited. The main ongoing incentive is the Smart Export Guarantee, which pays for exported electricity. Salix and the Public Sector Decarbonisation Scheme are public sector only. Some regional business grants appear intermittently, so check current schemes for your area. ECO4 and GBIS are domestic-only and do not apply to businesses.
With hire purchase, do I still get the capital allowances even though I pay over time?
Yes. Under hire purchase you are treated as the owner from the start, so you can claim the AIA or 50% first-year allowance on the full cost in year one even though you are paying in instalments. The interest element is separately deductible.