Commercial solar finance routes in 2026

The four routes side by side

Route	Upfront	Tax relief	Balance sheet	End of term	25-yr IRR
Cash purchase	100% capex	Full AIA / FYA yr 1	Asset on BS	You own day one	14-22%
Asset finance / HP	0-20% deposit	Full AIA / FYA yr 1	Liability + asset	You own at end of term	9-14%
Operating lease	£0	Lease is revenue expense	Off-BS (often capitalised under IFRS 16)	Reverts to financier or buy at FMV	7-11%
Power Purchase Agreement	£0	You buy electricity, not asset — no capex relief	Off-BS (operating expense)	Reverts to you, often £1 or FMV	6-9% (vs grid)

Cash purchase

The simplest and highest-IRR route. You pay 100% of the system cost upfront from operating cashflow or bank debt. For limited companies, the entire cost qualifies for 100% Full Expensing in year one — typically reducing the effective net cost by 25% via corporation tax saving.

Best for: profitable limited companies with strong cashflow; sole traders and partnerships with sufficient working capital headroom; charities and not-for-profits with reserves they want to deploy.

Asset finance and hire purchase

Debt-style finance over 3-7 years. You're treated as the owner from day one, so you claim AIA or Full Expensing year one — but you spread the cash cost. Most popular UK commercial solar finance route in 2026 for projects under £500k.

Best for: tax-paying businesses that want to preserve working capital; projects £30k-£500k; SMEs willing to accept personal guarantees for better rates.

Operating lease

You don't own the asset — the financier does. You pay a fixed monthly rent for 5-10 years. The rent is a revenue (operating) expense, not capital. The financier claims the capital allowances; you cannot.

Best for: loss-making businesses (no tax to offset); businesses that prefer operating expenses over capex in management accounts; medium-size projects (50-300 kWp).

Power Purchase Agreement (PPA)

The third-party investor owns the system. You pay per kWh of generation at a fixed price for 15-25 years. Lowest upfront commitment, longest tenor, requires long-term property tenure.

Best for: large systems (200+ kWp); freehold or long-leasehold properties; businesses with ESG mandates but limited capex; multi-site retail rollouts at scale.