AIA vs full expensing for commercial solar: only the AIA applies to the panels (2026 comparison)
Two 100% first-year reliefs exist in UK corporation tax — the Annual Investment Allowance and full expensing — but only one of them covers solar panels. Solar PV is special-rate plant (CAA 2001 s104A), and full expensing is a main-rate-only relief, so it is not available on the panels at any project size. The AIA gives 100% relief on the first £1m a year to every business type; above that, companies get the 50% first-year allowance on the balance. The table below is the general comparison; the scenarios are the solar answer.
Side-by-side comparison
| Feature | AIA | Full Expensing |
|---|---|---|
| Covers solar panels? | Yes — the AIA covers special-rate assets | No — special-rate assets are excluded (HMRC CA22335) |
| Maximum claim | £1m per year (per group) | Unlimited — on qualifying main-rate plant only |
| 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 qualifying main-rate 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 through the pool | Immediate balancing charge equal to disposal proceeds |
| Permanence | £1m extended indefinitely from 2023 | Permanent from the Autumn Statement of 22 November 2023 |
| 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
Solar project under £1m, any business type
AIA — 100% relief in year one; at the 25% main rate that is 25p back per £1 of capex. Full expensing is not an option on the panels, so there is nothing to compare.
Solar project over £1m + limited company
AIA on the first £1m, then the 50% special-rate first-year allowance on the balance; the unclaimed half enters the 6% special-rate pool the following period. There is no 100% route above £1m for solar — any page offering full expensing here is wrong.
Solar project over £1m + sole trader / partnership / LLP
AIA on the first £1m; the balance goes to the special-rate pool at 6% a year (the 50% first-year allowance is for companies only).
Main-rate plant bought alongside the solar (VSD compressors, LED, heat-recovery plant)
Full expensing can apply to new main-rate plant a company buys in the same programme — keep it off the AIA so the £1m cap is left for the panels. Batteries are not named in the statute and their classification is unsettled: ask your adviser before assuming either route.
Connected-party acquisition or used asset
Full expensing is excluded (new-only) and so is the 50% first-year allowance. AIA accepts used assets and connected-party purchases.
Key deciding factors
- Is the asset solar panels? → the AIA (full expensing is not available on special-rate plant at any size).
- Is the solar project under £1m? → the AIA gives 100% in year one whatever your business structure.
- Is it over £1m and you are a company? → AIA on the first £1m, 50% first-year allowance on the balance.
- Are you buying new main-rate plant alongside? → that is where full expensing earns its keep — reserve the AIA for the panels.
- Do you have other plant purchases this year? The £1m AIA cap is shared across all plant and across the group.
Comparison FAQs
Can I claim full expensing on solar panels?
No. Solar panels are special-rate expenditure (CAA 2001 s104A), and full expensing applies only to main-rate plant. Claim the Annual Investment Allowance instead — 100% on the first £1m a year — and the 50% first-year allowance on anything above that if you are a company.
Can I claim AIA and full expensing on the same asset?
No — they are alternative reliefs on any one asset. Across different assets in the same period you can use both: the AIA on the solar, full expensing on new main-rate plant bought alongside.
Does AIA scale with my income tax rate as a sole trader?
Yes. The 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 solar project is exactly £1m, which is better?
The AIA — it is the only one that applies. At 25% CT the year-one saving is £250,000. What matters is what else you buy that year: put any new main-rate plant through full expensing so the full £1m of AIA stays with the panels.
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