Full Expensing on commercial solar — 25% of your capex back via tax.

How Full Expensing on solar PV actually works

Full Expensing was introduced in the 2023 Spring Budget and made permanent in the Autumn Statement 2023. Mechanically, it gives any UK incorporated company paying corporation tax a 100% first-year capital allowance on qualifying main-pool plant — including new solar PV, inverters, mounting structures, DC infrastructure and (since the 2023 HMRC clarification) battery storage attached to PV.

For a UK company paying main-rate corporation tax (25%), the cash effect is straightforward: every £1 of qualifying solar capex reduces taxable profits by £1 in the year of acquisition, saving 25p in corporation tax. A £400k commercial solar install delivers a £100k corporation tax reduction in the year the system is commissioned. Mechanically simpler than any grant, no application risk, no scoring competition.

Why this matters more in 2026 than ever

For most of 2022–24, commercial operators had multiple parallel options for de-risking solar capex: IETF Phase 3 (manufacturing), PSDS Phase 4 (public sector), UKSPF (general SME), regional/devolved schemes, plus tax allowances. The grant menu was thick and many businesses prioritised it.

By May 2026, IETF Phase 3, PSDS Phase 4 and UKSPF have all closed to new applications. Direct cash grants for new commercial solar projects are now scarce — limited to REPF (rural businesses), the Local Growth Fund (11 Mayoral Authority areas), Salix loans (public sector), GBE Community Fund (community-led), and Scottish IETF (Scottish manufacturers). For everyone else, Full Expensing is the foundation. It still delivers 25% effective subsidy, every time, with no application.

Worked examples

Three illustrative cases:

Case 1 — £180k commercial install, no grant

250 kWp rooftop solar at £180,000 turnkey for a mid-sized manufacturer. No grant available (English IETF closed). Full Expensing claim: 100% × £180,000 = £180,000 reduction in taxable profits. Corporation tax saving: £45,000 (at 25%). 0% VAT applies, so no VAT to recover. Effective net capex: £135,000. Annual savings: £42,000. Payback: 3.2 years.

Case 2 — £620k industrial install, IETF replaced by Full Expensing

800 kWp rooftop on a Coventry automotive supplier. Originally scoped with IETF Phase 3 (would have got ~£140k grant). Post-closure, Full Expensing alone applies. Full Expensing on £620k = £620k reduction in taxable profits = £155k corporation tax saving. Effective net capex: £465,000 (vs ~£325,000 if IETF were still open). Payback: 4.6 years (vs 3.5 years pre-closure). Still within hurdle.

Case 3 — £45k small commercial, AIA route

50 kWp rooftop at £45,000 for a small SME. AIA (which still gives 100% first-year relief on the first £1m of plant) covers fully. Tax saving: £11,250 (at 25%). 0% VAT applies. Effective net capex: £33,750. Payback: 5.8 years.

Practical Full Expensing checklist for solar

1. Confirm UK incorporated company status. Sole traders and partnerships use AIA instead.
2. Confirm new plant. Used or refurb panels do not qualify for Full Expensing.
3. Time the capex around your accounting period end. Capex must be incurred in the period claimed. Sometimes worth accelerating an install to fall in current period.
4. Separate solar plant from civils, fees, and ineligible items in your asset register. Roof remediation, structural work and project management fees may be capital but treated differently — book them on separate lines.
5. Keep the asset on the register for the qualifying period. Sale within 8 years triggers a balancing charge; plan around any building disposal.
6. Apply 0% VAT at install. Stack-able with Full Expensing — installers should apply automatically but worth confirming at quote stage.

Full Expensing alongside the rest of the active 2026 stack

Full Expensing is one leg of the active 2026 commercial solar funding stack. Combined with the others:

• Full Expensing + 0% VAT on a £400k system → effective capex ~£275k
• Full Expensing + 0% VAT + SEG → recurring revenue line on top, ~£15–£60k/year added benefit on a 250kWp system
• Full Expensing + 0% VAT + REPF (rural) → ~£200k effective capex on a £400k farm install
• Full Expensing + 0% VAT + Local Growth Fund (Mayoral areas) → similar economics to pre-closure IETF
• PPA route — alternative structure where you don't need Full Expensing because you don't own the asset; the funder claims it instead

What we do for clients on Full Expensing

Three things specifically. (1) Confirm the eligibility of every capex line — solar plant is straightforward; some adjacent works (roof remediation, structural reinforcement) need careful classification. (2) Time the capex around your accounting period to maximise current-period relief. (3) Build the financial model showing pre-tax and post-Full-Expensing cash flows to your finance director, so the board paper accurately reflects the after-tax economics. The free funding review includes Full Expensing modelling.