Commercial Solar Grants & Funding UK 2026
Complete 2026 guide to grants, tax relief, and funding for commercial solar. AIA, devolved Salix loans and SEG explained — with eligibility criteria, and which schemes (PSDS, IETF, IFP, 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); and SEG export income. Four 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, the FETF 2026 round closed on 12 May 2026, and round 2 of the Improving Farm Productivity grant (25% for farm solar) closed in July 2025 with no new round announced. 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 | Round 2: 25% of eligible solar cost (£15k–£100k grant) | Closed July 2025 (no new round announced) |
| Business Rates (solar plant exclusion) | All commercial | Valuation exclusion | Panels excluded from rateable value (supports and land can still be valued) | To 31 Mar 2035 |
| Smart Export Guarantee (SEG) | All with export | Revenue | About 3–15p/kWh exported | Ongoing |
| Scottish Enterprise Grants | Scottish businesses | Capital grant | Up to 40%/30%/20% by company size; minimum grant £150,000; not solar-specific | Large capital projects only |
| Welsh Government (NNDR exemption) | Welsh businesses | Rates relief | Solar plant excluded from rateable value (from Apr 2024) | To 31 Mar 2035 |
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 — where a capital grant is available, it reduces the capital cost and AIA applies only to the part you pay for yourself, because grant-funded spend does not qualify for capital allowances. No standing solar capital grant is open to English businesses at the time of writing (checked 7 October 2026), so most projects are planned on AIA alone.
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 and Improving Farm Productivity Both Closed
The Farming Equipment and Technology Fund (FETF) 2026 closed to applications at midday on 12 May 2026; Defra described it as the final standalone round in its current form and plans a combined grant offer from 2027. FETF paid set amounts against approved kit items (£1,000–£25,000 per theme) and was never a percentage capital grant for solar. The grant that did fund farm solar, round 2 of the Improving Farm Productivity (IFP) grant (25% of eligible solar costs, £15,000–£100,000), was invite-only and closed to applications at the end of July 2025; no further round has been announced (checked 7 October 2026). Plan a farm project on AIA and self-consumption, and treat any future Defra grant as a bonus.
Scotland, Wales and Northern Ireland run their own farm support schemes. Check the relevant government's rural-payments service for any open capital grant before you budget on one.
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. Suppliers set their own rates, which must stay above zero: business export tariffs read in October 2026 ran from about 3p/kWh (variable tariffs open to anyone) to 15p/kWh (EDF's fixed tariff for its own electricity customers). For commercial solar with export enabled, SEG adds income on top of the bill saving.
SEG covers systems up to 5 MW with an export meter. Up to 50 kW, suppliers require MCS (or equivalent) certification of the installation and installer; from 50 kW to 5 MW each supplier decides what certification evidence it accepts. Ask whether the installer registers the system with your chosen supplier as part of commissioning. Octopus's fixed Outgoing rate is 12p/kWh (down from 15p on 1 March 2026), British Gas pays its business supply customers up to 8p, and tariffs open to anyone sit around 3p. 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 where one is available: the grant reduces your capital cost, and AIA applies only to the part you pay for yourself, because grant-funded spend does not qualify for capital allowances. No standing solar capital grant is open to English businesses at the time of writing, so most projects rely on AIA, SEG income and the bill saving.
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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