Tax Benefits of Installing Commercial Solar Panels

Please note this article is guidance only and not advice, we always ask that you speak to your accountant / financial advisor.

Investing in commercial solar panels not only reduces energy costs but also offers significant tax advantages for UK businesses. Understanding these incentives can enhance the return on investment (ROI) for your solar installation.

Capital Allowances

Capital allowances allow businesses to deduct the cost of certain assets, like solar panels, from their taxable profits, thereby reducing the amount of Corporation Tax owed. With the Corporation Tax rate at 25%, these deductions can lead to substantial savings.

Annual Investment Allowance (AIA)

The AIA enables businesses to deduct up to £1 million of qualifying expenditure on plant and machinery, including solar panels, from their taxable profits in the year of purchase. This means the full cost of your solar installation can be offset against your profits, leading to immediate tax relief.

Example

For a £1,000,000 solar investment, this could save £250,000 (25%) in Corporation Tax savings on top of the financial returns the solar asset will bring.

First Year Allowance (FYA)

If your annual expenditure exceeds the £1 million AIA limit, additional investments in solar panels may qualify for the First Year Allowance. This scheme allows businesses to deduct 50% of the cost of the solar installation from their taxable profits in the first year, with the remaining balance written down at 6% annually in subsequent years. The FYA has been extended and is available until March 2026.

Conclusion

Installing commercial solar panels offers UK businesses not only energy cost savings but also attractive tax benefits through capital allowances. By leveraging schemes like the Annual Investment Allowance and First Year Allowance, companies can significantly reduce their taxable profits and enhance the ROI of their solar investments.

For tailored advice and to maximise the financial benefits of your solar installation, consult with a tax professional or financial advisor.

Contact East Green Energy on 01394 380557 for more information.