What if installing solar panels on your factory could cut your electricity costs by thousands and also slash your corporation tax bill?

That’s exactly what happens when you use capital allowances to finance solar through your business.

And this still works in conjunction with an immediate cash positive asset finance solution – if you don’t want to use the companies cash reserves.

In this article, we’ll explain how capital allowances work, how they apply to solar panel installations, and why now is the perfect time to take advantage – especially if you’re using cash positive asset finance.

What Are Capital Allowances?

Capital allowances let UK businesses deduct the cost of certain assets from their taxable profits. That means you pay less corporation tax.

Solar energy systems – including panels, inverters, batteries, and associated equipment – are classed as qualifying plant and machinery.

So, if you install a system on your factory roof, you can claim the full installation cost against your profit.

And yes – as stated earlier – this still applies if you finance the system through cash positive asset finance.

Let’s See It in Action

Suppose your factory installs a solar system worth £500,000 using immediate cash positive asset finance over 5 years.

You’re making no capital investment, but the system is still booked as an asset on your balance sheet.

You can claim that £500,000 in capital allowances – even though you didn’t pay it up front.

✅ At 25% corporation tax, that’s a £125,000 reduction on your tax bill

That’s money you would’ve paid to HMRC, now kept in your business.

Combine Tax Relief with Energy Savings

Now combine that £125,000 in tax relief with your monthly solar savings:

✅ Monthly electricity bill: £25,000

✅ 70% saving: £17,500/month

✅ Finance repayment: £13,000/month

✅ Net cash flow: +£4,500/month

✅ Total cash gain over 5 years: £270,000

✅ Plus tax relief: £125,000

✅ Total benefit in 5 years: £395,000

✅ Total system life savings: £5 million

All without using your own capital!

What About Rental?

If you go with a rental model, you don’t own the system, so capital allowances don’t apply.

But you still enjoy immediate monthly savings with no responsibility for maintenance or depreciation – so it’s still highly cash-efficient.

Time-Sensitive Bonus

Until March 2026, UK companies may benefit from the government’s full expensing policy, which allows 100% first-year tax relief on qualifying plant and machinery – including solar.

So if you’re making enough profit and considering solar, this could dramatically reduce your next tax bill if timed right.

Why Give It to HMRC?

If you’re profitable, solar isn’t just about energy savings – it’s a smart tax move.

Why hand more cash over to HMRC than you need to?

Redirect that tax liability into a revenue-generating solar system and enjoy the double benefits of lower energy bills, and a reduced tax bill.