Commercial Solar Finance Options — UK 2026

UK commercial solar can be financed in five distinct ways — capital purchase, asset finance / hire purchase, operating lease, Power Purchase Agreement (PPA), and Solar-as-a-Service (SaaS). Each has different cashflow, balance-sheet, ownership, and tax implications. This page maps every route and helps you choose.

The Five UK Commercial Solar Finance Routes

1. Capital Purchase

Structure: You buy the system outright. You own it from day one.

• Capital required: 100% upfront.
• Tax: Annual Investment Allowance (100% Year-1 deduction) or Full Expensing.
• Ownership: You own it. SEG export goes to you. AIA / depreciation accrues to your accounts.
• Cashflow: Year 0: -£100k (for 100kW). Year 1+: +£28k/year. Net cashflow positive from Year 4.
• Best fit: Companies with strong cash position; companies with high taxable profit (AIA value); long-term-hold property owners.
• IRR (typical): 17–22% over 25 years.

2. Asset Finance / Hire Purchase

Structure: Bank or finance provider funds the system; you make monthly repayments over 5–7 years; you take ownership at end of term.

• Capital required: 0–10% deposit typical.
• Tax: AIA / Full Expensing still available (HP treats you as owner from day 1 for tax purposes).
• Cashflow: Year 1+: monthly finance payment ~£1,200/month for 100kW; monthly grid saving ~£2,300/month. Net positive £1,100/month from month 1.
• Term: 5–7 years typical; some providers do 10 years.
• Interest rate: 7–9% APR typical (May 2026).
• Best fit: Companies wanting to preserve working capital; companies with predictable revenue; companies that want eventual ownership.

3. Operating Lease

Structure: Lease company owns the system; you rent it for a contracted term (typically 5–10 years). At end, you can extend, replace, or buy out.

• Capital required: Usually nil.
• Tax: Lease payments are tax-deductible operating expense.
• Balance sheet: Off balance sheet historically; under IFRS 16 (since 2019), most operating leases now appear on balance sheet.
• Cashflow: Pure operating expense — no upfront cost, no end-of-term residual.
• Ownership: Lease company owns; you have use rights only.
• Best fit: Companies that prefer opex over capex; companies that don't want a depreciating asset on the books.

4. Power Purchase Agreement (PPA)

Structure: Third-party PPA provider owns and maintains the system, on your roof. You buy the electricity it generates at a fixed discount to grid (typically 10–25% below grid price). 15–25 year contract.

• Capital required: 0%.
• Tax: PPA payments are operating expense, fully tax-deductible.
• Balance sheet: Off-balance sheet (you don't own the asset).
• Cashflow: Day-one positive — you pay less for solar electricity than you would for grid. £8k–£15k saved per 100kW system per year.
• Ownership: PPA provider owns; at end of term, you can buy out (typically £1) or extend.
• Tariff lock-in: PPA price typically RPI-indexed or fixed at low rate; insulates you from grid volatility.
• Best fit: Companies with no capital; companies wanting zero operational responsibility; companies that prioritise predictable monthly opex over maximum lifetime saving.

5. Solar-as-a-Service (SaaS)

Structure: Subscription model — flat monthly fee for system + maintenance + monitoring + insurance + replacement. The provider owns and operates the system.

• Capital required: Nil.
• Term: 10–25 years.
• What you pay: A flat monthly subscription, usually less than the equivalent grid bill.
• Best fit: Companies wanting maximum simplicity; companies that don't want to manage anything; companies treating solar as a utility.

Cashflow Comparison — 100kW System Over 25 Years

• Capital purchase: -£100k Year 0, +£28k/year. Net 25-year cashflow ~+£600k. Highest lifetime return.
• Asset finance (7-yr term): -£14.4k/year for 7 years (£100k total finance), +£28k/year savings. Net positive ~£13.6k/year for first 7 years; +£28k/year after that. 25-year cashflow ~£575k. Slightly lower IRR than capital purchase due to interest cost.
• PPA: ~£12k/year saving, no capital. 25-year cashflow ~£300k. Lower lifetime return, but no risk and no capital.
• SaaS: ~£10k/year saving (subscription < grid), no capital, no risk. 25-year cashflow ~£250k. Lowest lifetime return; highest simplicity.

Which Should You Choose?

• Cash-rich, profitable limited company: Capital purchase. Maximum IRR; AIA bonus.
• Working-capital-constrained: Asset finance. Net positive from month 1; eventual ownership.
• Public sector / charity: PPA or SaaS — typically the only routes that fit procurement and budget structures.
• Tenant in leased premises: PPA — landlord-friendly structure that doesn't require landlord capex.
• Multi-site portfolio with mixed tenancy: Hybrid — capital on owned sites, PPA on tenanted, asset finance on transitional.

Frequently Asked Questions

Which is the best commercial solar finance option?

It depends on capital availability, tax position, and ownership preference. Capital purchase delivers the highest 25-year IRR. PPA delivers day-one cashflow positive with no capital and no risk. Asset finance sits between.

Can I get commercial solar with no upfront cost?

Yes — through a PPA, operating lease, or Solar-as-a-Service. The provider owns and operates the system; you pay only for the electricity (PPA) or a monthly subscription (SaaS / lease).

Is asset finance for solar tax efficient?

Yes — under hire purchase structures, you are treated as the owner for tax purposes from day 1, so AIA / Full Expensing applies. Interest is also deductible.

How does a Solar PPA work?

A PPA provider funds, owns, and operates a solar system on your roof. You buy the electricity it generates at a fixed discount to grid (typically 10–25% below). Contract is 15–25 years.

Can I switch finance route during the project?

Sometimes — for example, signing a capital purchase then refinancing onto asset finance after install. Less common to switch from PPA back to ownership mid-term, but most PPAs allow buyout.

Related Guides

• Commercial solar financing
• Commercial solar PPA
• AIA & solar
• Solar ROI calculator
• Solar cost UK