Is there a business tax credit for solar panels in the UK? What applies instead

There is no solar tax credit in the UK. Searches for one usually come from the US federal credit, which has no UK equivalent. A UK business gets something different: capital allowances, which reduce the taxable profit of a business that buys the array. This page sets out how that works, who can claim it and what it is worth.

What replaces the credit: capital allowances

The Annual Investment Allowance is £1 million (gov.uk), and for most commercial solar systems it gives 100% relief in the first year on the installed cost. Solar PV is a special-rate asset for the pool rules (HMRC CA22335), which matters only above the £1 million cap. The relief is a deduction from profit, not a payment: it lowers a corporation tax bill, so it is worth something only to a business that pays one. The full claim is in capital allowances on solar panels.

What it is worth

The value is the allowance multiplied by the tax rate you pay. The main rate is 25% for profits above £250,000 and the small profits rate is 19% for profits of £50,000 or less, with marginal relief between (gov.uk). A modelled example, not a client engagement: a company paying the main rate that buys a £200,000 array sets that cost against its profit in year one, which is up to £50,000 less corporation tax if it has the profit to absorb it. A company paying the small profits rate gets less from the same spend, and a loss-making company, charity or public body gets nothing from it.

Who can claim it

Only the owner of the plant claims. If you buy the array outright, on hire purchase or with a business loan, you claim. If you lease it or sign a power purchase agreement, the lessor or developer owns the array and takes the allowances, and you deduct the rentals or the per-kWh charge as an expense. That is why the finance route changes the tax result, and why a business that cannot use allowances often compares a lease or PPA first.

Other tax lines on a solar project

Two other reliefs are separate from capital allowances: the business rates position, covered in business rates and solar panels, and the VAT treatment, covered in VAT on solar panels. To see which route keeps the allowances for your situation, use the finance route checker.