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The Routes to Relief, Correctly
| Route | Relief on solar | Notes |
|---|---|---|
| Annual Investment Allowance (AIA) | 100% in year one | Up to £1m of qualifying plant per year. The route most businesses actually use |
| Full expensing (main rate) | Does not apply to solar | Solar is not main rate plant |
| 50% First Year Allowance (special rate) | 50% in year one | The full expensing regime’s special rate arm. Remainder into the special rate pool at 6% writing down |
A worked example. A company spends £100,000 on rooftop solar. Through AIA it deducts the full £100,000 from taxable profits in year one, worth £25,000 at the main corporation tax rate. If its AIA allowance is already consumed by other plant, the 50 percent first year allowance deducts £50,000 now and relieves the rest gradually.
Why So Many Pages Get This Wrong
Full expensing made headlines as 100 percent relief on plant and machinery, and plenty of solar marketing repeated the headline without the footnote: the 100 percent rate applies to main rate assets, while solar sits in the special rate category alongside integral features and long life assets. Capital allowance specialists are blunt about it, and so are we, because a board that discovers the difference after signing does not stay a happy client.
For most businesses the distinction is academic anyway, AIA delivers the same 100 percent outcome up to its generous limit.
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One Honest Caveat
Tax positions differ, groups share AIA limits, and rules move with Finance Acts. We provide the capital allowance breakdown with every commercial quote, and your accountant confirms the treatment for your specific position. Between the two, the number in the board paper is right.
