What qualifies
- Solar PV panels, inverters and mounting systems
- Battery storage installed alongside solar
- Associated electrical works forming part of the installation
- Systems bought outright or on qualifying finance such as hire purchase
Annual Investment Allowance for solar
Solar panels are classed as plant and machinery, so qualifying businesses can deduct up to £1m a year of solar spend from taxable profits in the year of purchase. That can transform the payback on your system.
Up to £1m
Qualifying spend per year, including solar
100%
Deducted from taxable profits in year one
Year 1
Relief in the period you incur the cost
Plant
Solar is classed as plant and machinery
How the AIA works for solar
Rather than writing the cost off slowly over many years, the AIA lets you deduct the full qualifying cost in the year you buy.
Things to check
- The £1m limit is shared across all plant and machinery bought that year
- Group companies share a single allowance
- PPA arrangements do not normally qualify, as the funder owns the system
- Always confirm your position with your accountant
Illustrative AIA example
A simplified example for a limited company paying the 25% main rate of corporation tax.
| Example item | Illustrative figure |
|---|---|
| Solar system cost | £100,000 |
| AIA deduction in year one | £100,000 |
| Corporation tax saved (25%) | £25,000 |
| Effective net cost of system | £75,000 |
Illustrative only and not tax advice. Your actual relief depends on your profits, tax rate, ownership structure and the rules in force when you incur the cost.
Making the most of the AIA
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Accreditations
Horizon Commercial Solar is a trading name of Rural & Country Energy Limited.
Our engineering team are fully accredited master installers for leading manufacturers including SolarEdge, Mitsubishi Electric, SunSynk and Tesla Powerwall, and we are SafeContractor approved and Trustmark registered, so every installation meets the highest standards for design, safety and performance.
Frequently asked questions
Do commercial solar panels qualify for the Annual Investment Allowance?
Commercial solar panels and battery storage are generally treated as plant and machinery, so qualifying spend by a business that owns the equipment can usually be claimed under the AIA. Your accountant should confirm eligibility for your circumstances.
How much can I claim?
The AIA allows up to £1m per year of qualifying spend on plant and machinery, including solar, to be deducted from taxable profits in the year of purchase. The limit is shared across all qualifying purchases in that period and between group companies.
Can I claim the AIA if I finance the system?
Often yes, where the finance agreement means your business is treated as owning the equipment, such as hire purchase. Under a Power Purchase Agreement the funder owns the system, so the site occupier would not normally claim the allowance.
Does the AIA apply to farms and sole traders?
Yes. The AIA is available to companies, sole traders and partnerships, including farming businesses, against qualifying expenditure. Mixed partnerships and some trusts have different rules, so check with your adviser.
When should I install to make the most of the allowance?
Relief is given for the accounting period in which the expenditure is incurred. Planning the installation date around your year end can bring the tax benefit forward, so speak to your accountant early.