Commercial Solar Grants & Funding UK 2026
Complete 2026 guide to grants, tax relief, and funding for commercial solar. AIA, the Improving Farm Productivity grant, devolved Salix loans and SEG explained — with eligibility criteria, and which schemes (PSDS, IETF, FETF) have closed.
Quick Answer
What grants are available for commercial solar in 2026?
The main commercial solar incentives in 2026 are: Annual Investment Allowance (AIA) — 100% first-year tax relief on the full installation cost (worth 19–25% of project cost to a corporation-tax payer); the Improving Farm Productivity grant — 25% of eligible costs for farm solar in England; and SEG export income. Three schemes people still ask about are closed: the Public Sector Decarbonisation Scheme has had no open window since November 2024 (Phase 4 was final), the Industrial Energy Transformation Fund closed in July 2025 with no successor, and FETF closed its last round on 28 April 2026. Salix loans exist only in Scotland (0%) and Wales (low fixed rate). Commercial installs are standard-rated for VAT, recoverable if you are VAT-registered — the 0% rate is domestic-only.
All Commercial Solar Grants and Incentives — Summary Table
| Scheme | Sector | Type | Value | Status 2026 |
|---|---|---|---|---|
| Annual Investment Allowance (AIA) | All businesses | Tax relief | 100% Year 1, up to £1M | Open |
| VAT | Commercial installs | Standard-rated, recoverable if VAT-registered | 0% rate is domestic-only (to 31 Mar 2027) | n/a |
| IETF (Industrial) | Energy-intensive manufacturers | Capital grant | Historic — last window 29 Jan–19 Apr 2024 | Closed July 2025 (no successor) |
| Salix loans | Public sector (Scotland, Wales) | Loan | Scotland 0%; Wales low fixed rate (2.45%, Sept 2026); none in England | Devolved only |
| PSDS (Public Sector) | NHS, councils, schools | Capital grant (heat-led) | Historic — Phases 1–4 | Closed Nov 2024 (final) |
| Improving Farm Productivity (Farming) | Farms (England) | Capital grant | 25% of eligible cost (£15k–£100k grant) | Window-based — check |
| Business Rates Exemption | All commercial | Ongoing saving | No rateable value increase | Permanent |
| Smart Export Guarantee (SEG) | All with export | Revenue | 4–20p/kWh exported | Ongoing |
| Scottish Enterprise Grants | Scottish businesses | Capital grant | Up to 30% (manufacturers) | Varies |
| Welsh Government (NNDR exemption) | Welsh businesses | Rates relief | 100% exemption on solar | Permanent |
Annual Investment Allowance (AIA) — The Universal Grant
The Annual Investment Allowance (AIA) is the single most valuable incentive for commercial solar across all UK business sectors. It provides 100% tax relief on the full cost of the solar installation in Year 1 — up to the AIA limit of £1M per business per year.
How it works: your corporation tax bill is reduced by the AIA amount. At a 25% corporation tax rate, a £200,000 solar installation generates a £50,000 tax saving in Year 1. This effectively reduces your net project cost to £150,000 — a 25% grant equivalent. For businesses paying the 19% small profits rate, the effective saving is £38,000 on the same project.
AIA can be combined with capital grants — a grant such as the Improving Farm Productivity grant reduces the capital cost, and AIA then applies to the post-grant balance. This stacking can reduce effective project cost by 40–65% for eligible businesses.
AIA does not need to be applied for — it is claimed through your annual corporation tax return (form CT600). Your accountant handles the claim. Your installer provides the documentation (MCS certificate, commissioning date, capital cost breakdown) required to support the claim.
Industrial Energy Transformation Fund (IETF) — Closed
The IETF was a government capital grant for energy-intensive industry in England, Wales and Northern Ireland, run in three phases. It funded energy-efficiency upgrades and deep decarbonisation of industrial processes; solar was typically fundable only as part of a wider process-electrification project. The IETF closed in July 2025: after the Spending Review the government decided there would be no further extension and no successor fund, and the planned second Phase 3 window was cancelled — so the spring 2024 window (29 January to 19 April 2024) was the last. Scotland's SIETF has all three of its calls closed. See what the IETF closure means for factory solar.
For an energy-intensive site today, the relief that reduces the cost of solar is the Annual Investment Allowance (100% in year one up to £1m), the 50% special-rate first-year allowance above the cap, and Freeport enhanced capital allowances where the site is inside a tax site.
Salix — Grants in England, Loans in Scotland and Wales
Salix Finance administers public-sector decarbonisation funding. In England it runs grants only — historically the Public Sector Decarbonisation Scheme, the Public Sector Low Carbon Skills Fund and social-housing funds — and there is no public-sector interest-free loan in England. Loans exist in the devolved nations:
- Scotland: the Scottish Public Sector Energy Efficiency Loan Scheme (0% interest, open) and the Scotland Recycling Fund.
- Wales: the Wales Funding Programme — a loan at a low fixed rate (2.45% as of September 2026), not interest-free.
An English school or NHS trust planning solar should therefore budget from capital, PWLB borrowing (councils), a Power Purchase Agreement or an operating lease — not a Salix loan. Check salixfinance.co.uk for any live round before you plan around it.
Public Sector Decarbonisation Scheme (PSDS) — Closed
PSDS was a heat-led capital grant for public-sector buildings in England: it funded the replacement of fossil-fuel heating, with solar PV as supporting infrastructure where it enabled electrified heating. Phase 4 opened in mid-October 2024, closed in November 2024 and was confirmed as the final phase; no successor has been announced as of September 2026. See what public bodies can use instead.
For NHS trusts, councils, and schools undertaking heat pump projects alongside solar, PSDS funding can be substantial. Public bodies should check the current Salix and DESNZ position before assuming grant support — PSDS has had no open window since November 2024.
Farm Grants — FETF Closed, Improving Farm Productivity Live
The Farming Equipment and Technology Fund (FETF) closed its final application round on 28 April 2026. It was a fixed-rate equipment fund — set payments against approved kit items worth roughly £1,000–£25,000 — and was never a percentage capital grant for solar. England's live capital route is the Improving Farm Productivity (IFP) grant, which contributes 25% of eligible project costs where solar powers farm operations. The system must primarily serve an agricultural purpose — milking, ventilation, grain drying, general farm power — not function primarily as a commercial generation asset.
Scottish, Welsh, and Northern Irish farmers have equivalent schemes (Scottish Rural Development Programme, Sustainable Farming Scheme in Wales, and DAERA grants in Northern Ireland). Across the UK, support typically runs 25–40% depending on nation and scheme. Check eligibility with the relevant nation's scheme before you commit.
Smart Export Guarantee (SEG) — Ongoing Solar Revenue
The Smart Export Guarantee requires licensed electricity suppliers to offer an export tariff to solar owners who export electricity to the grid. SEG tariffs range from 4p/kWh (minimum) to 20p/kWh+ (Octopus Agile, which varies by time of day). For commercial solar with export enabled, SEG generates meaningful ongoing revenue.
To access SEG, your system must be: MCS certified, under 5MWp, and equipped with an export meter. Most G99-approved systems automatically qualify. A good installer registers the system for SEG as part of commissioning — check it is in scope. As at July 2026, competitive commercial SEG-style rates sit around 12p/kWh fixed (Octopus's fixed outgoing rate dropped from 15p to 12p on 1 March 2026), with the wider supplier range roughly 4–12p/kWh. Actual income depends on export volume and chosen tariff — check live rates before you commit.
Stacking Multiple Incentives — Example
Illustrative, modelled scenario — not a real project. A Midlands food manufacturer installs a 300kWp solar system costing £235,000. With no capital grant open to it, the incentives stack like this:
- VAT: standard-rated and recovered in full by a VAT-registered business — neutral to the calculation
- AIA at 25% corporation tax on £235,000: –£58,750 Year 1 tax saving
- Business rates: rooftop solar plant is excluded from rateable value in England until 31 March 2035, so the bill does not rise
- Effective net cost in Year 1: approximately £176,250 (vs £235,000 gross)
- Modelled annual energy saving: £83,000/yr
- Effective payback: about 2.1 years (2.8 years before tax relief)
Frequently Asked Questions
Can I combine multiple grants for commercial solar?
Yes — most commercial solar incentives can be stacked. AIA (tax relief) can be combined with a capital grant such as the Improving Farm Productivity grant. The grant reduces your capital cost, and AIA then applies to the post-grant balance. The only restriction is that you cannot claim 100% grant funding for both the full cost and a separate AIA relief on the same spend — but in practice, grants are rarely over 55%, so AIA always applies to the remaining balance.
Do I need to apply for AIA separately?
No. Annual Investment Allowance is claimed through your annual corporation tax return (CT600), not through a separate application. Your accountant includes it as a capital allowance. Your installer provides the MCS certificate, commissioning date and cost breakdown needed to support the claim. There is no application deadline — it's claimed in the tax year the expenditure is incurred.
Is IETF funding still available?
No. The Industrial Energy Transformation Fund closed in July 2025: following the Spending Review the government decided there would be no further extension and no successor fund, and the planned second Phase 3 window was cancelled. The last window closed on 19 April 2024. Scotland's SIETF calls are all closed too. Energy-intensive sites should plan on the Annual Investment Allowance, the 50% special-rate first-year allowance and, inside a Freeport tax site, enhanced capital allowances.
Does commercial solar get 0% VAT?
No. The 0% VAT rate introduced in April 2022 applies to energy-saving materials installed in residential accommodation, and it runs to 31 March 2027. Commercial installations are standard-rated at 20%, which a VAT-registered business recovers through its VAT return — so VAT is cash-flow, not cost, for most companies. Charities and other bodies that cannot recover VAT should price it in.
What is the business rates exemption for solar?
Under Schedule 6 of the Local Government Finance Act 1988, solar panels installed on commercial properties are excluded from the rateable value calculation for business rates. This means your business rates bill does not increase as a result of installing solar panels. In England the exclusion runs from 1 April 2022 to 31 March 2035 (S.I. 2022/405); Wales and Scotland have equivalent exclusions to 31 March 2035.
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