Capital allowances for solar across the recent Budgets: what changed and what did not
Published 2026-10-28 · 5 minute read · By Commercial Solar Finance editorial team
The 50% first-year allowance that applies to solar has no end date. Earlier versions of this page described a 31 March 2026 deadline; that was wrong, and this page replaces it with the dated rules and their sources.
The short version. The 50% first-year allowance for special-rate assets, which is the allowance solar gets above the Annual Investment Allowance limit, is permanent. It was introduced alongside full expensing (the 100% allowance for main-rate plant) for company spending from 1 April 2023, originally to 31 March 2026, and the government made both permanent in November 2023 (gov.uk). A 31 March 2026 deadline has been quoted on this site; that was an error, and it has been removed from every page.
The dated rules
| Date | Measure | What it means for solar | Source |
|---|---|---|---|
| 15 March 2023 | Policy paper: full expensing (100% first-year allowance on main-rate plant) and a 50% first-year allowance on special-rate expenditure, for companies, on spend from 1 April 2023 to 31 March 2026; the Annual Investment Allowance kept at £1 million permanently | Solar is special-rate, so it was in the 50% group; the AIA applied to it as well | gov.uk policy paper |
| 22 November 2023 | Policy paper: full expensing (main-rate plant) made permanent, with the 50% first-year allowance for special-rate expenditure; the 1 April 2026 end date removed | No deadline for the 50% allowance on solar | gov.uk policy paper |
| Today | Annual Investment Allowance £1 million; 50% first-year allowance for special-rate spend above it; the balance in the special-rate pool at 6% a year | Most commercial systems are relieved at 100% in year one through the AIA | gov.uk AIA, HMRC CA22335 |
What it means for a solar project
Solar panels are special-rate plant (HMRC CA22335), so the 100% first-year allowance for main-rate plant does not apply to them. The AIA does: the first £1 million of qualifying spend in a period is relieved at 100%. The 50% first-year allowance matters only for spend above that limit, and the balance goes into the special-rate pool at 6% a year. Only the owner of the plant claims, and only companies can claim the first-year allowance; a lease or PPA moves the allowances to the funder. The full claim is set out on the capital allowances on solar panels page.
Worked illustration (modelled, not a client engagement)
A company paying corporation tax at the 25% main rate (gov.uk) buys a £1.2 million array with no other plant spend in the period. The AIA relieves the first £1 million, worth up to £250,000 of corporation tax. Of the remaining £200,000, the 50% first-year allowance relieves £100,000, worth up to £25,000, and the other £100,000 goes into the special-rate pool at 6% a year. Every figure assumes the company has the taxable profit to absorb the relief.
Does the 50% first-year allowance for solar expire on 31 March 2026?
No. The government made the allowance permanent in November 2023, so there is no cliff-edge for commercial solar. The date that matters is the end of your own accounting period; see year-end tax planning for solar panels. To see which finance route keeps the allowances for your situation, use the finance route checker.
Claims table: every figure on this page and its source
Every number and proper noun above is listed here with where it comes from and the date it was checked. If a row is not here, the figure should not be on the page.
| Claim | Source | Checked |
|---|---|---|
| Full expensing (100% first-year allowance, main rate) and a 50% first-year allowance for special-rate expenditure were made permanent | gov.uk: Capital allowances: permanent first-year allowances (policy paper, 22 November 2023) | 2026-10-28 |
| Original period: spend from 1 April 2023 to before 1 April 2026; the Annual Investment Allowance made £1 million permanently | gov.uk: Capital allowances: first-year allowances (policy paper, 15 March 2023) | 2026-10-28 |
| The Annual Investment Allowance is £1 million | gov.uk: Annual investment allowance | 2026-10-28 |
| Solar panels are special-rate expenditure | HMRC Capital Allowances Manual CA22335 | 2026-10-28 |
| Corporation tax main rate 25% (profits above £250,000) | gov.uk: Corporation Tax rates | 2026-10-28 |
| Illustration: £1.2m array | Arithmetic on the sources above; modelled, not a client engagement | 2026-10-28 |
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