For UK Businesses (as of 2025)
In the UK, businesses can use capital allowances to offset the cost of solar panel installation:
1. Full Expensing (Until March 2026)
- Under the full expensing scheme, businesses can deduct 100% of the cost of qualifying plant and machinery, including solar panels (in most cases), from their taxable profits in the year of purchase.
- Applies to companies subject to Corporation Tax.
- Introduced in April 2023, available until March 2026 (and potentially extended).
2. Annual Investment Allowance (AIA)
- For sole traders, partnerships, and companies not using full expensing, the AIA allows 100% deduction up to £1 million per year on qualifying capital expenditure—including solar panels.
3. Super-deduction (Expired March 2023)
- If you installed solar panels between April 2021 and March 2023, you may have benefited from a 130% deduction under the super-deduction scheme.
HMRC Guidance on Solar Panels
HMRC’s internal manual specifically states that all capital expenditure on the provision of solar panels qualifies as plant and machinery, and is eligible for capital allowances under corporation tax and income tax rules .
Their public-facing guidance on capital allowances similarly confirms that you can deduct the full cost of these items from your profits before tax using Annual Investment Allowance (AIA), subject to usual conditions .
Modern Relief Options (UK Business Tax – 2025)
- Annual Investment Allowance (AIA)Businesses (sole traders, partnerships, companies) can claim 100% deduction up to £1 million per year for qualifying assets—including solar panel installations .
- Full Expensing (for companies until March 2026)Under this scheme, companies can deduct 100% of the cost of qualifying plant and machinery, but note that ‘special rate assets’—such as integral features of a building—may not qualify under full expensing and instead fall under AIA or other allowances .
- First-Year Allowance (FYA)In some cases, solar panels may qualify for 50% first-year allowance if they’re classified as integral features. That said, much of this is now superseded by AIA or full expensing rules .
What It Means for You
- Install solar panels and inverters via your business.
- Use AIA (up to £1M/year) for a full 100% write‑off.
- If a limited company, and full expensing applies, you can deduct the full capital cost in the purchase year.
- If panels are seen as building features, AIA or first-year allowances will still allow rapid deduction.
