AIA vs Full Expensing for commercial solar (2026 comparison)
Two 100% first-year tax reliefs are available for UK commercial solar in 2026 — the Annual Investment Allowance and Full Expensing. Both deduct 100% of qualifying capex in year one. The differences in cap, eligibility, and disposal treatment matter — sometimes by hundreds of thousands of pounds.
Side-by-side comparison
| Feature | AIA | Full Expensing |
|---|---|---|
| Maximum claim | £1m per year (per group) | Unlimited |
| Eligible business structures | All UK businesses (Ltd, LLP, partnership, sole trader) | Limited companies only |
| Effective tax saving (25% main CT) | 25p per £1 of capex | 25p per £1 of capex |
| Effective tax saving (19% small profits rate) | 19p per £1 | 19p per £1 |
| New vs used assets | Either | New only |
| Disposal treatment | Balancing charge / allowance over 8 years | Immediate balancing charge equal to disposal proceeds |
| Permanence | £1m extended indefinitely from 2023 | Permanent from Spring Budget 2024 |
| Stack with grants? | Yes, on post-grant net capex | Yes, on post-grant net capex |
| Stack with SEG? | Yes | Yes |
| Application required? | No — claimed on tax return | No — claimed on tax return |
Which one for your business? Real scenarios
Project under £1m + limited company
Both work identically. Recommendation: AIA — disposal treatment is gentler if you sell the asset within 8 years.
Project over £1m + limited company
AIA cap binds at £1m; remaining amount goes to writing-down pool at 18%. Recommendation: Full Expensing — captures full 100% relief on the entire capex.
Any project + sole trader / partnership / LLP
Full Expensing not available. Recommendation: AIA — only 100% relief route available.
Connected-party acquisition or used asset
Full Expensing excluded (new-only). Recommendation: AIA — accepts used assets and connected-party purchases.
Sale of asset within 8 years likely
Full Expensing has immediate balancing charge on full disposal proceeds — typically punitive. Recommendation: AIA — spreads charge over the writing-down period.
Key deciding factors
- Are you a limited company? If no → AIA is your only 100% option.
- Is your project under £1m? If yes → AIA suffices (and disposal is gentler).
- Is the asset new? If no → Full Expensing excluded; use AIA.
- Do you have other plant purchases this year? AIA cap is shared across all plant.
- Is sale of the property within 8 years likely? If yes → AIA's disposal treatment is gentler.
Comparison FAQs
Can I claim AIA and Full Expensing on the same asset?
No — they are alternative reliefs. You choose one for each specific asset. You can mix and match across different assets in the same accounting period.
What happens to AIA when I incorporate from sole trader to limited?
AIA timing is sensitive to incorporation. The relief must be claimed in the same accounting period the asset is brought into use. Straddling incorporation requires careful apportionment — take specialist advice.
Does AIA scale with my income tax rate as a sole trader?
Yes. AIA deducts from taxable profit, so the cash saving scales with your marginal income tax rate. Higher-rate sole traders save 40-45%; basic-rate save 20%. Limited companies save 19-25% depending on profits.
If my project is exactly £1m, which is better?
Year-one cash effect is identical (£250k saved at 25% CT). Choose AIA for gentler disposal treatment. If you have other plant purchases that year, Full Expensing reserves AIA cap for those — pick based on the wider plant programme.
Want a personalised comparison for your business?
Free 60-second eligibility check tells you which of these schemes apply to your specific business — and how they stack.
Free eligibility check Or call 0800 246 1132