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UK solar leasing — May 2026

Commercial solar leasing UK — PPAs, operating leases, asset finance compared.

Three commercial solar leasing structures in the UK in 2026. Each suits different business circumstances. The right answer depends on capex constraints, accounting treatment, building tenure and how the Annual Investment Allowance fits.

The three UK solar leasing structures

1. Power Purchase Agreement (PPA)

Third-party funder pays for and owns the solar asset. You sign a long-term contract (typically 15-25 years) to buy the electricity at a fixed pence/kWh, typically 6-9p below grid prices. Zero capex from your business. The funder claims AIA on the asset and recovers capital through the off-take payments. Dominant in UK commercial solar above 250kWp. Full PPA guide.

2. Operating lease

Third party owns the asset; you make fixed monthly payments to use it. Typically 5-15 year terms. Less common in UK commercial solar than PPAs but used in some retail/SME contexts where simpler accounting is preferred. Under IFRS 16, operating leases now appear on balance sheet as right-of-use assets.

3. Asset finance / hire purchase

You make fixed monthly payments over 5-7 years and own the asset at the end. Effectively a loan secured against the solar asset. You can claim AIA because you own the asset (or have a strong claim to ownership). Common in UK commercial solar 50-250kWp range where the project is too small for a PPA but capex is unwelcome.

Which leasing structure suits which business

Use a PPA when

  • 15+ year horizon at the site
  • Site demand 100,000+ kWh/year
  • Stable tenant covenant (PPA funder needs assurance)
  • Roof or ground available for unobstructed PV array (>250kWp typical)
  • Capex constraints or capital allocation preferences favouring opex over capex

Use asset finance when

  • Project size 50-250kWp (PPA transaction costs disproportionate)
  • You want to own the asset and claim AIA yourself
  • 5-7 year horizon is acceptable
  • You\'re comfortable with on-balance-sheet treatment

Use cash + AIA when

  • You can fund capex from reserves
  • You want to maximise long-term IRR (best post-25-year economics)
  • You have engineering capacity to manage the asset

Worked example — same project, three structures

A 500kWp commercial solar project at £350,000 turnkey, against grid imports at 22.3p/kWh:

Cash + AIA

  • Capex: £350,000
  • Annual Investment Allowance tax saving: £87,500 (25%)
  • 0% VAT applied
  • Net cost: £262,500
  • Annual savings: £85,000
  • Payback: 3.1 years
  • 25-year cumulative savings: £2.6m

PPA (5.9p/kWh tariff, 25-year term, CPI escalator)

  • Capex: £0
  • Year 1 PPA payments: £36,000 (against grid imports of £85,000)
  • Year 1 savings: £49,000
  • 25-year cumulative net savings: £1.6m (after CPI-escalated PPA payments)
  • Asset transfers to operator at £1 at end of term

Asset finance (7-year hire purchase, 6% effective)

  • Capex: £0 upfront; £4,750/month for 84 months = £399,000 total
  • Annual Investment Allowance tax saving: £87,500 (over the asset life, claimed as you own the asset)
  • Effective net cost: £311,500
  • Annual savings (year 1): £85,000 — exceeds annual finance cost (£57,000)
  • Net cash flow positive from year 1
  • 25-year cumulative savings (post-finance term): £2.0m

Selling solar back to the grid — separate from leasing

Whichever leasing structure you choose, the solar generation that exceeds your self-consumption gets sold back to the grid via the Smart Export Guarantee. Under PPA, the SEG revenue accrues to the funder (not you). Under operating lease and asset finance, SEG revenue is yours. The right SEG tariff is a separate decision — see SEG tariff comparison.

Related

The lease-versus-PPA decision turns on who claims the allowances, and the specialists at Solar Asset Finance set that comparison out in more depth than we do here.

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Solar leasing FAQs

Can UK businesses lease solar panels?
Yes, three structures are commonly used. (1) Power Purchase Agreement — third-party investor owns the asset, you buy the electricity at a fixed pence/kWh. Zero capex, 15-25 year terms. (2) Operating lease — third party owns the asset, you make fixed monthly payments to use it. 5-15 year terms typically. (3) Asset finance / hire purchase — you make fixed monthly payments and own the asset at the end. 5-7 year terms typically. Each suits different business circumstances.
What's the difference between leasing solar and a PPA?
A PPA is technically a leasing structure where you pay for the electricity (kWh consumed) rather than the asset itself. Operating leases pay for the asset (fixed monthly), regardless of generation. Asset finance pays for the asset (fixed monthly) and you own it at the end. PPAs are dominant in UK commercial solar above 250kWp because of the regulatory and tax structuring; asset finance is more common at smaller scales.
Can I lease solar without changing accounting treatment?
Depends on the structure and your accounting standard. Under IFRS 16, most operating leases now appear on balance sheet as right-of-use assets — including some PPAs that contain a leased asset. Asset finance is unambiguously on balance sheet. PPAs that explicitly purchase electricity (not capacity) and give the funder operational control of the asset usually keep off balance sheet. Listed companies must take audit advice before signing any leasing structure.
How much does it cost to lease commercial solar in 2026?
For PPAs on UK commercial solar 250kWp+: tariff economics 5.4-7.5p/kWh — typically 6-9p below grid prices. For operating leases: typically £8-£15/kWh of installed capacity per month, with the lease covering 5-15 years. For asset finance / hire purchase: typically 5-7 year terms with fixed monthly payments at 4-7% effective interest.
Can a leased solar system claim capital allowances?
No — capital allowances follow ownership. Under PPA or operating lease, the funder owns the asset and claims the allowances on its own corporation tax return. Note that on solar the allowance in question is the Annual Investment Allowance, not Full Expensing: solar panels are special-rate expenditure (HMRC CA22335) and Full Expensing reaches main-rate plant only. Under asset finance / hire purchase, you typically own the asset (or have a strong claim to ownership) and can claim the allowance yourself. The choice between leasing structures should account for the value of who claims it.
Selling a building with leased solar panels — what happens?
Depends on the leasing structure. Under a PPA with a long-term roof lease, the new building owner typically inherits the roof lease and PPA off-take obligation — this can constrain the sale or affect the price. Under asset finance with you as owner, you can sell the building with the solar asset transferring to the buyer (capital allowances transfer too). Always check the early termination / buyout terms before signing any lease. Most PPAs include buyout schedules from year 7 or 10.

Funding by asset class

The allowance depends on the asset, and most pages on this topic get it the wrong way round. Solar PV is special-rate expenditure (HMRC Capital Allowances Manual CA22335), so the 100% year-one route is the Annual Investment Allowance — Full Expensing is a main-rate measure and does not reach it. Battery storage, EV charging and heat pumps are main-rate plant, so Full Expensing genuinely does apply to those.

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What you get, within one working day
  • 1. A short written funding note naming every scheme your site qualifies for in 2026 — and the ones it does not.
  • 2. Indicative system size and a capex band for your roof.
  • 3. Year-one tax treatment per asset in £ — solar is special-rate expenditure, so the route is the Annual Investment Allowance; battery storage and heat pumps are main-rate plant, where Full Expensing does apply. Most pages get this the wrong way round.
  • 4. Projected SEG export revenue at current rates.
  • 5. Any red-flag eligibility or DNO issues we can see up front.

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What we will not do
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Five questions. They are the eligibility test itself — scheme eligibility in 2026 turns on sector, tenure, site size and spend, so we cannot shortlist anything without them.

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Explore this guide cluster

Export tariffs, SEG & financing

Turn exported generation into revenue and remove capital cost — every Smart Export Guarantee tariff and zero-capex structure compared.

Pillar guideSEG export tariffs comparedSide-by-side of every commercial SEG rate in 2026.