Annual Investment Allowance for business solar

Available to all UK businesses paying Income Tax or Corporation Tax — sole traders, most partnerships and limited companies. The asset must be new/unused and qualifying plant and machinery used in the business. Solar PV counts as plant and machinery, so a commercial rooftop system qualifies. Not available to partnerships with a corporate member, and the £1m limit is shared across a group of companies.

100% of qualifying expenditure deducted from taxable profits in the year of purchase, up to a permanent annual cap of £1,000,000 (£1m). For a typical SME commercial solar project well under £1m, the whole installed cost can usually be relieved in year one via AIA. Where total qualifying spend in the year exceeds £1m, the excess attributable to solar panels (special-rate) can then attract the 50% special-rate first-year allowance, with the remaining balance going to the 6% special-rate pool. HMRC's own worked example: £1m AIA claimed across a £500k electrical system + £500k of panels, then 50% FYA on a further £100k of panel spend giving an extra £50k allowance.

No pre-approval or application — AIA is claimed through your normal tax return (Company Tax Return CT600 for companies, or Self Assessment for sole traders/partnerships). Keep the installer invoice showing the split between the panels (special-rate) and other qualifying plant such as the electrical/wiring system. Claim the AIA in the accounting period in which the expenditure is incurred (broadly when you become unconditionally obliged to pay). Have your accountant confirm the £1m cap isn't already used by other capital spend in the same period, and coordinate with the 50% special-rate FYA if total spend exceeds £1m.