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.

Solar PV never qualified. Solar panels have been special-rate expenditure since April 2012 (HMRC CA22335), and the super deduction covered main-rate plant only. Special-rate spend in the same window got a 50% first-year allowance (the SR allowance) instead, or the Annual Investment Allowance, which was £1 million throughout. On £100,000 of solar capex covered by the AIA, that was £19,000 of tax saved at the 19% corporation tax rate of the time.

What replaced super deduction

A two-step replacement:

1. From 1 April 2023: Full Expensing (100% first-year deduction on main-rate plant and machinery) became the general regime, first for spend to 31 March 2026 and permanent since November 2023. Solar PV is special-rate plant, so it did not get the 100% rate; it was relieved through the Annual Investment Allowance, then the 50% first-year allowance.
2. For solar specifically, the current regime: the Annual Investment Allowance, then the 50% first-year allowance (permanent). Solar is special-rate plant. The remaining 50% goes into the special-rate pool for 6% writing-down allowances.

For solar, a comparison with the super deduction is beside the point because solar never had it. Against solar's own 2021–23 treatment, the reliefs have the same shape today (the AIA, then a 50% special-rate first-year allowance) and are worth more per £1, because the main rate of corporation tax rose from 19% to 25% in April 2023.

Worked numerical comparison

If you installed solar in 2021–23

If you installed solar between 1 April 2021 and 31 March 2023:

• Check which allowance the corporation tax return for that period claimed. A 130% super deduction claim on solar panels was not available, because solar is special-rate plant; the reliefs that applied were the Annual Investment Allowance or the 50% SR allowance.
• If no allowance was claimed, you may be able to amend the relevant return — typically within 12 months of the original filing deadline.
• 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 reliefs are the Annual Investment Allowance on the first £1m of qualifying spend and the 50% First Year Allowance above it — not super deduction. The 50% route is worth typically 17–19% of qualifying capex over the project lifetime.

Detailed 50% first-year allowance mechanics → · year-end timing: why there is no March 2026 cliff →

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 main-rate plant and machinery against taxable profits. It applied from 1 April 2021 to 31 March 2023. It did not cover commercial solar: solar panels are special-rate expenditure, which got a 50% first-year allowance (the SR allowance) in the same window, or the Annual Investment Allowance.

The super deduction ended on 31 March 2023 and was replaced by full expensing for main-rate plant. For solar, the Annual Investment Allowance (AIA) is now permanent at £1m and the 50% First Year Allowance (FYA) was made permanent in November 2023. For businesses evaluating solar today, the relevant incentives are AIA and FYA — and they remain highly generous.

Annual Investment Allowance: the current primary incentive

For solar, the AIA is 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 special-rate pool at 6% 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 solar, which never had the super deduction, the comparison that matters is with its own 2021–23 relief: the same £1m AIA, now at a 25% rate instead of 19%.

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 business electricity at 0.801p/kWh from 1 April 2026 (0.775p/kWh in 2025–26; gov.uk, Climate Change Levy rates). For a 500kWp installation generating 470,000 kWh/year for on-site use, the CCL avoided is about £3,765/year, a modest but real additional benefit of solar ownership.