Super deduction for solar — historic relief, expired 2023

Super deduction — what it was

The 130% super deduction was a UK corporation tax relief introduced in the March 2021 Budget by then-Chancellor Rishi Sunak as a stimulus measure during the COVID-19 economic recovery. It was available to limited companies subject to corporation tax, on qualifying capital expenditure on new main-rate plant and machinery, between 1 April 2021 and 31 March 2023.

For solar PV specifically, the super deduction allowed 130% of qualifying capex to be deducted from year-one taxable profits. On £100,000 of solar capex, this delivered a £130,000 deduction worth £24,700 in tax saved at the prevailing 19% main corporation tax rate. The relief was time-limited and explicitly intended as a temporary investment stimulus.

What replaced super deduction

A two-step replacement:

1. April 2023 – March 2026: Full Expensing (100% first-year deduction on main-rate plant and machinery) became the general regime. Solar PV qualified during this window but at 100% rather than the 130% historic.
2. For solar specifically, current regime: 50% First Year Allowance (until 31 March 2026). Solar moved into the 50% FYA category alongside other special-rate plant. The remaining 50% goes into the special-rate pool for 6% writing-down allowances.

The 50% FYA route is materially less generous than super deduction historically was — about 75–80% of super deduction's historic cash value at the new 25% main corporation tax rate. Still substantial, just less than peak.

Worked numerical comparison

If you missed super deduction

If you installed solar between 1 April 2021 and 31 March 2023 and didn't claim super deduction at the time:

• Check if your corporation tax return for the relevant period claimed the relief. The 130% deduction would show as a specific entry in capital allowance computation.
• If not claimed, you may be able to amend the relevant return — typically within 12 months of the original filing deadline. Past that window, the relief is generally lost.
• Your accountant or tax adviser is the right party to assess this. The recovery process is administrative — eligible recoveries are typically straightforward where the underlying expenditure clearly qualified and the timeline window is still open.

For 2026 projects: use FYA, not super deduction

If you're planning a UK commercial solar installation in 2026, the relevant UK tax relief is the 50% First Year Allowance — not super deduction. Worth typically 17–19% of qualifying capex over the project lifetime.

Detailed 50% FYA mechanics → · FYA deadline planning for year-ends before March 2026 →

Frequently asked questions

Related

The super deduction and commercial solar: what replaced it

The super deduction was a temporary tax incentive that allowed companies to deduct 130% of qualifying capital expenditure (including commercial solar) against taxable profits. It applied from 1 April 2021 to 31 March 2023. For a £200,000 solar installation, the super deduction allowed a £260,000 deduction — delivering a Corporation Tax saving of £49,400 (at 19% CT rate).

The super deduction expired in April 2023 and was replaced by the enhanced Annual Investment Allowance (AIA) permanent regime and the 50% First Year Allowance (FYA). For businesses evaluating solar today, the relevant incentives are AIA and FYA — and they remain highly generous.

Annual Investment Allowance: the current primary incentive

AIA replaced the super deduction as the principal first-year capital allowance. It allows 100% deduction of qualifying plant and machinery in the year of purchase, up to £1 million per year. Commercial solar panels, inverters, mounting systems, battery storage, and electrical infrastructure all qualify as plant and machinery.

50% First Year Allowance (FYA) for larger projects

For expenditure above the £1m AIA threshold, the 50% First Year Allowance provides a 50% deduction in year one, with the remaining 50% entering the general pool at 18% reducing balance. This is less generous than AIA but still significantly better than standard writing-down allowances.

Super deduction vs AIA: why AIA is arguably better for most businesses

The super deduction offered 130% deduction at 19% CT = 24.7% effective relief rate. AIA today offers 100% deduction at 25% CT = 25% effective relief rate. For most companies now paying 25% Corporation Tax, AIA delivers a higher absolute tax saving than the super deduction did at the old 19% rate.

Only very large groups with expenditure consistently above £1m/year on qualifying assets (where AIA must be shared between group members) face a meaningful limitation vs the super deduction era. For single-entity businesses with solar projects under £1m, AIA is as effective as the super deduction was — and permanent.

Climate Change Levy exemption for solar

Businesses generating their own electricity through commercial solar and using it on-site are exempt from Climate Change Levy (CCL) on that self-generated electricity. CCL is charged on commercial electricity at 0.775p/kWh (2024/25 rate). For a 500kWp installation generating 470,000 kWh/year for on-site use, the CCL exemption saves approximately £3,640/year — a modest but real additional benefit of solar ownership.