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How Do Solar Panel Tax Rebates Work

The are numerous pros for installing solar panels for businesses: reduced uncertainty over your electricity supply, a lower carbon footprint, and of course, cheaper electricity, to name just a few. However, small- to medium-sized businesses face average costs of £50-£100,000 to install commercial solar panels to power their operations.

It’s not an insignificant chunk of change, but the UK government has introduced several tax incentives to help British businesses invest in renewable energy. In a nutshell, you could find significant financial support available to install solar photovoltaic (PV) panels on your premises.

How Do Solar Panel Tax Rebates Work?

In the UK, the Government encourages commercial enterprises to invest in renewable energy through tax incentives, primarily capital allowances. These incentives mean that as well as a significant reduction in electricity spend, businesses pay reduced taxes by claiming back the cost of installing solar panel systems.

50% First Year Allowance

The Government’s post-Covid stimulation package, “The 130% Super-Deduction and the 50% First Year Allowance” operated from 1st April 2021 to 31st March 2023. Only the latter part of the package applies to solar panel installations, as solar panels are classed as “Special Rate Assets”.

Under the 50% First Year Allowance scheme, companies can deduct half the value of new solar panel installations from their profits in the first year of installation, thus reducing their Corporation Tax bill. The remaining 50% will be written down at 6% in subsequent years. Previously, solar panels only qualified for the 6% special rate writing down allowance.

Although the 50% First Year Allowance was due to end on 31st March 2023, the 2023 Spring Budget extended the allowance for a further three years until 31st March 2026.

Other Incentives

Since April 2022, VAT has been reduced to 0% for certain energy-saving products, which includes solar panels and their installation. The reduced VAT rate applies for five years, making it a great time for residential customers to significantly reduce their overheads by investing in solar panels.

In addition to the reduced VAT rate, domestic uptake of solar panels is encouraged through the following incentives:

  • The Energy Company Obligation 4 (ECO4) began on 1st April 2022 and will run until 2026. It will see £4bn of investment targeted towards low-income or vulnerable households to reduce their energy costs; and
  • The Smart Export Guarantee (SEG) has operated since 1st January 2020 and allows households to be paid for excess electricity exported to the National Grid.

Can I Claim Back Tax On Solar Panels?

All UK businesses that pay Corporation Tax, from farms to factories, can benefit from the current tax incentives as long as they are legally entitled to install solar equipment. To qualify, your solar panel system must be fixed on your property to generate electricity to power your business. You cannot claim on portable or temporary solar panel systems.

In some instances, planning permission may be required before solar panel building and installation can take place such as listed buildings, so it’s worth checking with your local council.

What The Government Says

The UK Government has set ambitious targets to power 20 million homes via solar by 2035, which would require a fivefold increase in solar power generation. Since ground and rooftop solar installations will play a significant role in helping the Government to achieve its vision, it announced generous capital allowances to stimulate investment, back in March 2021.

While these temporary incentives were due to expire in March 2023, the Chancellor of the Exchequer effectively extended the tax cuts for a further three years, giving British businesses more time to implement commercial solar panels and help reduce the UK’s dependency on fossil fuels.

How Do I Claim Tax Relief For Solar Panels?

Tax relief on your solar equipment is claimed via your annual Company Tax Return. It’s worth keeping in mind that the claim must be submitted for the accounting period in which you bought the equipment. Per HMRC guidelines, the date you bought the equipment is either:

  • The date you signed the contract, where payment is due within four months; or
  • The date payment is due, if it’s more than four months after you sign the contract.

Explore Our Range Of Solar Panels Today

Solar panels have an average lifespan of 25+ years, so you’ll want to make sure you’re getting a great ROI. At , Mypower we have extensive experience installing solar power systems across all industries including agriculture, manufacturing and commercial sectors. Call our knowledgeable team today for advice on the best commercial solar panels to suit your needs.

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