If you are a commercial landlord, financial director, or own your own business and have recently been looking into solar, then there’s a good chance that you have already tried to find out if the UK government will help with the initial costs by entering terms such as “solar panel grants” into your preferred search engine.
You may have also found by now that there are no universal UK government grants that help UK businesses pay for a commercial solar installation, although you can occasionally find various useful local funding schemes.
There are, however, other options that can help financially, including things like reducing electricity costs, potentially earning money from any surplus electricity that your business exports to the grid, and using tax relief, such as the Annual Investment Allowance (AIA).
Before deciding on your best course of action, remember that understanding this tax relief is a core part of calculating your true commercial solar panel cost and payback picture, rather than focusing only on the initial installation cost.
Are there solar panel grants for UK businesses in 2026?
No, there currently aren’t any nationwide government grants that businesses can apply for to have solar panels installed.
With that said, occasionally, you may find that your local authority, council, or other organisations offer funding for low-carbon or energy efficiency projects, but these schemes typically come with geographical restrictions, application deadlines, and eligibility criteria.
For instance, eligible businesses in some areas have been offered grants via schemes in the past, such as Low Carbon Workspaces. Schemes like this are usually only temporary, which is why you should always carry out your own basic research into what’s currently available in your local area, instead of just presuming that the scheme you may have heard about is still active.
In other words, the savings generated by producing your own electricity and tax relief tend to be the key financial incentives for the majority of businesses, which is why, rather than viewing going solar as something you will only be able to afford with a grant, view it as an investment for your business.
The alternative to grants: claiming capital allowances
For businesses investing in solar, the Annual Investment Allowance (AIA) is regarded as the top tax incentive.
Can I claim solar panels as a business expense in the UK?
For capital allowances purposes, HMRC recognise solar panels as plant and machinery, with solar panels specifically being treated as special-rate expenditure, as well as qualifying equipment that is required for the installation all included in the system.
It’s important to note that the process differs from including the installation process as part of your business’s typical day-to-day expenses. For example, capital expenditure is handled via the capital allowances rules.
You can see this commercial installation to show how local businesses have benefited.
How does the Annual Investment Allowance work?
All qualifying businesses are permitted by the AIA to deduct the total value of qualifying plant and machinery from their taxable profits, all of which is subject to a yearly £1 million limit. A range of businesses, as some partnerships/sole traders qualify for the £1 million allowance.
For example, when a qualifying business is calculating its tax liability, it could potentially deduct £100,000 if it invests £100,000 in solar equipment that the full outgoing costs qualify for AIA. However, that doesn’t mean that a business in this situation would receive up to £100,000 back from the government.
It means that the amount of profit based on how tax is calculated is reduced. Therefore, the business’s current tax position and circumstances will determine the actual amount that can be saved.
In other words, if some of the expenditures don’t qualify, or the amount that was initially invested happens to be greater than the AIA limit, you will find that other claim capital allowance rules will likely be applicable. To find out exactly what your business is eligible to claim, you can ask your tax adviser or accountant, and they should be able to confirm the exact amount, but the rates published by HMRC for 2026/27 show the AIA at £1 million.
When you’re calculating the commercial solar panel cost and payback, this tax treatment can make a huge difference.
It would also be beneficial to find out what this actually means for you.
Earning money back: the Smart Export Guarantee
One of the main financial benefits of commercial solar is reducing the amount of electricity your business typically spends money on, but this begs the question, “what happens when your business is using less electricity than the solar system you have installed actually generates?”
In this scenario, you may be able to take advantage of the government-backed scheme, Smart Export Guarantee (SEG), to export any surplus electricity it generates to the grid and then receive a payment for this.
SEG essentially requires all participating suppliers of electricity to reward eligible generators with financial compensation for any low-carbon electricity their system exports to the grid.
The tariffs are set by the supplier, plus they also set other terms, such as the length of the contract, meaning businesses would be best off comparing the currently available SEG tariffs instead of just thinking they will all pay the same rate.
Larger commercial installations have their own certification requirements, but for solar PV installations up to 50kW, suitable certification is required, with MCS certification or an equivalent scheme being accepted for SEG purposes.
Depending on various factors, such as how much electricity a system generates, the size of the system, how much electricity is exported, and how much a business actually uses, the exact amount that a business can earn.
Therefore, one thing that remains a top priority for many businesses is to maximise how much electricity it uses, because it means it won’t have to buy as much from its supplier.
Commercial solar sizing: what is the 20% rule?
During your time researching commercial solar, you may have stumbled upon what is known as the “20% rule,” but it is worth noting that the government hasn’t imposed an official rule that requires a commercial solar system to be sized at 20% above the electricity demand of a business.
Instead, when discussing the capacity of a system, the figure is sometimes used as a design guideline or rule of thumb.
Solar systems in the commercial sector must be designed around the needs of businesses on an individual level. Therefore, professional solar installers tend to factor in things like how much electricity is typically consumed, the type of building, how much space is on the roof, connection requirements, planned/existing equipment, and operating hours.
It is also worth pointing out that allowing for some leeway when it comes to the design of the system can also be beneficial. For example, business owners may have contemplated expanding their operations, installing charging ports for EVs, and/or increasing how much electricity they typically consume.
Over time, solar panels also become slightly less efficient than when they were brand-new, but installing a system just because someone says you need to follow the “20% rule” isn’t the way forward. A well-designed commercial system must ideally be based on your actual and expected energy use.
For a typical business that operates every working business day, from Monday to Friday, you may find that all of your daytime electricity needs can easily be met by the solar system, whereas other businesses, including factories and warehouses, agricultural operations, and even retail premises and some offices, will vary when it comes to their energy requirements.
For this reason, it is always important before deciding how large your system should be to have a proper site survey and analysis of how much energy your business consumes.
