50% First Year Allowance
Lets a profit-making company write off half the capital cost of new commercial solar against corporation tax in year one.
50% of qualifying capital cost in year one. At the 25% main rate of corporation tax, that's £125 saved for every £1,000 of qualifying spend, in the first year.
None. The 50% first-year allowance for special-rate assets was made permanent in November 2023.
In detail
The 50% First Year Allowance is the single most valuable tax incentive for commercial solar in the UK in 2026. For a profitable trading company paying corporation tax at the 25% main rate, it reduces the after-tax cost of a £200,000 solar investment by £25,000 in year one — that's 12.5% of the gross capital outlay, recovered as a cash tax saving. Combined with the 6% writing-down allowance on the remaining 50%, the total relief over the first 15 years comes to about 20% of the capital cost before discounting. The interaction with the Annual Investment Allowance (AIA) is important: the AIA gives 100% relief in year one on the first £1m of qualifying spend, but it has to be allocated across all capital expenditure that competes for it. Where AIA capacity is available, claiming AIA on solar spend is more valuable than the FYA — but most companies have other capital expenditure that already absorbs their AIA. The FYA fills the gap by giving 50% relief on top of whatever AIA capacity remains. There is no deadline, but timing still matters: the allowance is claimed for the accounting period in which the spend is incurred. Timing therefore decides which accounting period gets the relief, not whether you get it.
Who qualifies
UK companies subject to corporation tax. Available for new (not second-hand) special-rate plant and machinery, including solar PV. There is no qualifying window: the allowance is permanent.
What it does
Allows 50% of the qualifying capital expenditure to be deducted from taxable profits in the year the spend is incurred. The remaining 50% goes into the special-rate capital allowance pool and attracts 6% writing-down allowances per year on a reducing-balance basis.
Worked example
On a £200,000 250kWp system: £100,000 deducted in year one. At 25% corporation tax, that's £25,000 less corporation tax payable in year one. The remaining £100,000 enters the special-rate pool and attracts £6,000 of WDA in year two, £5,640 in year three, and so on. Over the asset's life the total relief tends towards £50,000 (25% of £200,000) in cash terms, but slowly: £25,000 in year one and about £14,500 more over years 2 to 15.
Tax treatment / process
- Capital expenditure on new special-rate plant is incurred in the accounting period
- The expenditure is reflected in the company's accounting period
- The 50% FYA is claimed on the tax computation (CT600) for that period
- Supporting documentation retained: invoices, commissioning certificates, asset register entry
- Remaining 50% added to the special-rate pool for ongoing WDA claims
Pitfalls to watch
- Available only to companies (not sole traders or partnerships — but those have AIA)
- Asset must be new — second-hand systems do not qualify
- Relief follows the date the expenditure is incurred (CAA 2001 s5), so contract and completion dates near a year-end matter
- FYA is a deduction not a credit — if the company has no taxable profit, the allowance creates a loss that must be carried forward
- Connected-party transactions are scrutinised — buying from a parent company doesn't qualify
- The asset must be 'plant and machinery' — most commercial solar PV qualifies, but always confirm scope with your tax adviser
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Frequently asked questions
What is the 50% First Year Allowance for commercial solar?
Does the 50% FYA have an end date?
Can I claim the 50% FYA on a solar operating lease?
Can I combine the 50% FYA with a green loan?
What happens to the remaining 50% not covered by the FYA?
50% First Year Allowance for commercial solar — comprehensive guide
The 50% First Year Allowance (FYA) for special-rate plant and machinery has been permanent since November 2023 and remains one of the most powerful tax incentives available for UK commercial solar investment. For a 25% corporation tax payer, the FYA reduces the effective upfront cost of a solar installation by 12.5% of the total system cost — a material contribution to the project's investment case.
How the 50% FYA works: mechanics
The allowance calculation
In the accounting period in which the expenditure is incurred, a company can claim 50% of the qualifying asset cost as a First Year Allowance. This creates a deduction against taxable profit in that period. The remaining 50% enters the special-rate pool at 6% per annum on the reducing balance. Importantly, the FYA is not a cash grant — it is a reduction in taxable profit, worth (at the full 25% CT rate) 12.5 pence per £1 of qualifying expenditure in the year claimed.
Qualifying expenditure
Solar PV modules, inverters, mounting systems, electrical cabling and switchgear and monitoring hardware qualify for the 50% FYA as special-rate plant (HMRC CA22335). A battery co-installed with the solar and wired into the building's electrical system is normally an integral feature, which is also special-rate (CAA 2001 s33A); confirm the treatment of a standalone battery with your adviser. G99 protection relays, access equipment permanent to the installation, and structural works directly attributable to installing the plant also qualify (CAA 2001 s25 covers building alterations incidental to installing plant). Installation, scaffolding and commissioning costs incurred in providing the plant are part of its capital cost and qualify with it. DNO connection charges are less clear-cut because the DNO owns the connection assets: take advice on those.
Timing: the date the expenditure is incurred
The FYA is given for the accounting period in which the expenditure is incurred (Capital Allowances Act 2001 s5; HMRC CA11800), not the period in which the system is first used. Expenditure is generally incurred when the obligation to pay becomes unconditional, for example on completion or acceptance under the contract, even if payment is made later; if payment is not due until more than four months after that, it is incurred when payment is due. So a contract that becomes unconditional in March 2026 falls in a year ending 31 March 2026 even if the array first generates in April, and one that becomes unconditional in April falls in the following year. Hire purchase has its own rule (s67). Agree the contract and completion dates with your adviser if a year-end is close; an obligation made unconditional early only to pull the relief forward is treated as incurred on the payment date instead (s5(5)).
FYA vs AIA — which should you claim?
| Criterion | 50% FYA | 100% Annual Investment Allowance (AIA) |
|---|---|---|
| % of cost claimable in year 1 | 50% | 100% (up to AIA annual limit of £1m) |
| Annual limit | No monetary cap | £1m per annum per business/group |
| Asset types | New special-rate plant and machinery, including solar PV (companies only) | Most plant and machinery (not cars) |
| Remaining balance (after year-1 claim) | 50% enters the special-rate pool at 6% WDA | No remaining balance — 100% claimed upfront |
| Best for | Installations above £1m total where AIA is exhausted; or when only partial first-year claim is preferred | Smaller installations (below AIA limit); when maximum year-1 relief is the priority |
| Interaction with finance (HP) | Both claimable on HP-financed assets under s.67 CAA | Both claimable on HP-financed assets under s.67 CAA |
For most commercial solar installations under £1m, AIA is simpler and more beneficial — 100% upfront allowance versus 50% + 6% WDA trail. FYA becomes more relevant for larger installations, or where the AIA limit has been used elsewhere.
FYA claim procedure
Company tax return (CT600)
The FYA is claimed in the capital allowances section of the CT600 corporation tax return for the period. Supporting computations should show: asset description, the date the expenditure was incurred, cost, and the FYA claimed. Capital allowance computations are submitted as supplementary pages to the return. The HMRC portal (HMRC Online) or the business's accountant typically prepares these schedules as part of the annual accounts and tax return process.
Required documentation
To support an FYA claim, retain: the installer's VAT invoice (showing asset cost, VAT treatment, and installation date); the commissioning certificate (MCS or equivalent, confirming the date the system was commissioned and first generating); any structural engineer's report attributing additional structural costs to the solar installation; and the DNO G98/G99 connection confirmation letter.
HMRC enquiry risk
FYA claims for commercial solar are straightforward and low enquiry risk when properly documented. HMRC's Capital Allowances Manual (CA22335) confirms solar panels are special-rate expenditure. The most common compliance issue is incorrectly including non-qualifying items (e.g., roof repairs or structural works that would have been needed regardless of the solar installation) in the FYA claim — these should be separately identified and claimed as revenue repairs if they qualify, or capitalised without FYA if capital improvements.
What the Budgets changed, and what they did not
The 50% first-year allowance has had no end date since November 2023, so no later Budget has needed to extend it. The dated history:
Made permanent in November 2023
From 1 April 2023 the 50% first-year allowance for special-rate spend was introduced alongside full expensing for main-rate plant, for spend to 31 March 2026. The Autumn Statement of 22 November 2023 made both permanent (gov.uk policy paper). Earlier versions of this page said a 2026 Budget had extended the allowance to 2028 or 2029; that was wrong.
Autumn Budget 2025: main-rate changes only
The new 40% first-year allowance from 1 January 2026 and the cut in the main-pool writing-down rate from 18% to 14% from April 2026 apply to main-rate plant. Solar is special-rate, so neither changes its treatment: see the 40% first-year allowance and solar.
The 50% First Year Allowance is one of the capital allowances available on commercial solar. For the complete picture — how AIA, the 50% First Year Allowance and the Structures & Buildings Allowance fit together, who can claim, and how to claim — see our parent guide: Capital Allowances on Solar Panels.
See also: the new 40% first-year allowance and solar, and why solar still uses the 50% special-rate FYA above the AIA cap.
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How the 50% allowance fits with the AIA and the 6% pool is set out in capital allowances on solar panels.
How the 50% allowance fits with the AIA and the 6% pool is set out in the full capital allowances guide.
Run the numbers on your project
Build the after-tax model with the right reliefs applied — no missed deductions, no double-counted benefits.
Request a finance reviewIf you are still choosing between structures, compare green lending for commercial solar with installed cost per kWp on the same assumptions — ownership and allowances usually decide it, not the headline monthly figure.