How to pay for commercial solar

The four routes side by side

Buying outright

You pay for the system and keep every pound it saves, plus any export income, for its whole life. For a site that uses most of its solar, the calculator typically shows payback of around four to seven years, and the system keeps generating for 25 years or more.

Buying works best when you have capital available, a site you expect to occupy for many years, and a tax bill that can use the capital allowances below.

Asset finance and loans

A lender pays for the system and you repay over a fixed term, often three to ten years. Under hire purchase you become the owner at the end, and in most cases you can claim capital allowances as if you had bought it outright. On a well-sized system the energy savings can cover most or all of the repayments from day one.

Leasing

A lessor buys the system and rents it to you for a fixed monthly payment. Leasing used to be attractive for keeping assets off the balance sheet, but under IFRS 16, and the updated UK standard FRS 102 for periods from 2026, most leases now appear on the balance sheet. Check the accounting treatment with your auditor before choosing a lease for that reason.

Power Purchase Agreements (PPAs)

With an on-site PPA, a funder designs, installs, owns, insures and maintains the system on your roof or land. You pay only for the electricity you use, at an agreed rate per kWh that is usually below your grid price. Contracts run for 10 to 25 years, and the rate typically rises each year by a fixed percentage or with inflation.

Before you sign, check:

• The rate and how it rises. A low starting rate with a steep escalator can end up dearer than the grid.
• What happens at the end. Transfer to you, an extension, or removal.
• Roof access and works. What happens if you need to repair or replace the roof during the contract.
• Leaving early. Termination costs if you sell or move.
• Your lease. If you rent the building, the landlord will need to agree, and your lease should outlast the PPA.

Funders will check your credit and usually want a site you expect to occupy for the full term.

Tax, VAT and business rates

Capital allowances

For tax purposes, solar panels are special rate plant and machinery. That means:

• Companies can claim a 50% first-year allowance on new solar, with the rest going into the special rate pool at 6% a year. This allowance was made permanent alongside full expensing.
• Any business can instead use the Annual Investment Allowance, which gives 100% relief on up to £1 million of qualifying spend a year.
• Full expensing (100%) and the new 40% first-year allowance from January 2026 apply to main rate assets, so they do not cover solar panels themselves.

Which relief suits you depends on your other spending and tax position. Speak to your accountant before you commit.

VAT

Commercial solar installations are charged VAT at the standard rate of 20%. VAT-registered organisations can normally reclaim it in the usual way. The calculator shows all costs before VAT.

Business rates

In England, on-site renewable generation such as rooftop solar, and batteries used with it, is exempt from business rates from 1 April 2022 to 31 March 2035. Rules differ in Scotland, Wales and Northern Ireland.

Funding for the public sector

The Public Sector Decarbonisation Scheme, run by Salix, was a major source of grants for councils, schools and the NHS. The government decided in the June 2025 Spending Review not to fund new rounds beyond 2027/28. Projects already awarded are still being delivered.

Great British Energy is now the main new source of support. Its Local Power Plan, published in February 2026, commits up to £1 billion to local and community energy, including solar and batteries on public buildings. Its earlier £255 million Solar Partnerships Scheme is funding solar on more than 250 schools and 260 NHS sites. See our pages on the NHS and councils and cities for more.

Which route suits you?

• You have capital and pay corporation tax: buying outright usually gives the best return.
• You want ownership but not the upfront cost: asset finance.
• You have no capital, or capital is earmarked elsewhere: a PPA.
• You are a public body: check Great British Energy funding first, then compare buying with a PPA through an approved procurement route.

The calculator shows buying and a PPA side by side for your site, so you can see the difference in pounds.

Common questions