Grants and funding for solar panels on flat roofs
The honest position on funding flat-roof solar in 2026: what really pays for it, and the tax facts most sites get wrong.
How flat-roof solar is really funded
A commercial solar array is an asset, not an expense — a 25-year-plus piece of plant that turns an empty roof into generation you own, rather than a recurring cost. Because it is special-rate plant and machinery, it does not qualify for full expensing or the 50% first-year allowance; the correct route is the Annual Investment Allowance (AIA), which currently allows 100% relief on qualifying plant up to the AIA limit in the year of spend, with special-rate writing-down allowances on any excess. Your accountant confirms the treatment for your business. If you would rather not use capital, the array can be funded through asset finance or a lease, or delivered under a power purchase agreement (PPA) where a third party owns the system and you buy the on-site power at a rate below the grid — no upfront cost. A typical commercial system costs in the region of £600 to £900 per installed kWp, so a 250 kWp array might be around £150,000 to £220,000 before allowances.
Funding routes at a glance
| Route | Who it suits | Upfront cost | Owns the asset |
|---|---|---|---|
| Capital purchase + AIA | Profitable businesses with capital | Full system cost | You |
| Asset finance / lease | Spreading the cost over years | Low / none | You (after term) |
| Power purchase agreement | No-capital, cheaper power now | £0 | The funder |
| 0% VAT (domestic) | Flat-roofed homes to 31 Mar 2027 | System cost | You |
Tax and finance treatment is indicative — confirm with your accountant. The 0% domestic VAT rate currently reverts to 5% on 1 April 2027.
Funding routes in detail
No general solar grant — be honest, the value is self-consumption and tax treatment
There is no general public grant that pays for commercial rooftop solar in the UK. The value comes from the electricity you no longer buy (self-consumption), the Smart Export Guarantee income on the surplus, capital allowances on the asset, and financing routes such as asset finance, leasing and power purchase agreements — not from a cash grant. Any site promising a specific commercial solar grant should be treated with caution.
- Value
- Value is in avoided energy cost, SEG export income, and capital allowances — not a grant cheque.
State plainly that commercial solar is funded from capital, finance or a PPA. Do not imply a general grant exists.
Smart Export Guarantee (SEG) — paid for exported surplus
The Smart Export Guarantee obliges larger licensed electricity suppliers to pay for surplus units your system exports to the grid, provided the installation is suitably metered (and, for domestic systems, MCS-certified). It is an ongoing income on what you do not self-consume, not an installation grant.
- Value
- Export tariffs vary by supplier and are best current examples, not fixed — dated in the site's savings content from reference/sales rather than hardcoded.
On a commercial flat roof the priority is self-consumption; export via SEG monetises only the surplus. Rates must be date-stamped and pulled from reference/sales, never stated as a permanent figure.
Capital allowances — Annual Investment Allowance (AIA), not full expensing
Solar PV is special-rate plant and machinery, so it does NOT qualify for full expensing (the 100% first-year allowance for main-rate assets). A business within the charge to tax can instead claim the Annual Investment Allowance, which currently allows 100% relief on qualifying plant up to the AIA limit in the year of expenditure, with writing-down allowances at the special rate on any excess.
- Value
- Up to 100% relief in year one via the AIA (subject to the AIA limit), then special-rate writing-down allowances on the balance.
This is the single most-abused fact in commercial solar marketing. Solar is special-rate, so the route is the AIA, NOT full expensing or a 50% first-year allowance. Always route the client to their accountant to confirm eligibility and pooling.
0% VAT on domestic flat-roof solar (to 31 March 2027)
Solar panels installed on a domestic property are a qualifying energy-saving material and currently attract 0% VAT under VAT Notice 708/6. This relief is time-limited: it is currently set to revert to the reduced rate of 5% on 1 April 2027. It applies to residential installations — a flat-roofed house, extension or garage — not to commercial buildings, where solar is standard-rated at 20% and recoverable as input tax by a VAT-registered business.
- Value
- 0% VAT on qualifying domestic installs until 31 March 2027, then 5% (current position).
Only for domestic. Do NOT imply the 0% rate is permanent or applies to commercial roofs. Date-stamp the reversion.
Public Sector Decarbonisation Scheme (Salix) — public bodies only
Where the building is public-sector — a school, NHS site, council or university estate — rooftop solar can sometimes form part of a wider heat-decarbonisation or energy-efficiency project funded through the Public Sector Decarbonisation Scheme administered by Salix. This funds public bodies, not private commercial owners, and runs in time-limited, competitive phases.
- Value
- Scheme-dependent and competitive; public bodies only.
Only for eligible public-sector estates, and only within an open funding round. Verify the current phase is open before quoting it; not available to private commercial owners.
Power Purchase Agreement (PPA) — no-capital route
Not a grant, but the most common no-upfront-cost route for a commercial flat roof: a third party funds, owns and maintains the array on your roof, and you buy the on-site electricity it generates at a rate below the grid price under a long-term contract. You get cheaper power and a lower carbon footprint without the capital outlay; the funder takes the asset value and the allowances.
- Value
- No upfront cost; a discounted on-site electricity rate for the contract term (typically 15-25 years).
Frame accurately: a PPA is a financing and ownership arrangement, not a giveaway. The host saves on energy; the funder owns the system and takes the asset value. Never market a PPA as no-cost panels.
Map the right funding route for your roof
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- 2. Site survey and a fixed-price proposal, itemised in writing.
- 3. Install and aftercare by MCS-certified engineers.
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