Tax Breaks for Solar Panels

The Government is offering 50% tax breaks on the capital cost of solar panels for businesses

Tax breaks for solar panels

On 31 March 2021, The Chancellor of the Exchequer, Rishi Sunak, announced two new tax relief measures: The 130% Super-Deduction and the 50% First Year Allowance (FYA).

The measures are intended to kick-start the UK Economy and help British businesses build back better in the wake of the COVID-19 pandemic. It is the biggest two-year tax cut in British history.

To claim their tax break, Businesses must invest in qualifying plant and machinery by 31 March 2023. Solar Panels are qualifying assets under the 50% First Year Allowance.

This means that by investing in solar, you will only pay corporation tax on your operating profits minus 50% of the value of your solar investment.

If you are considering solar for your business, Joju Solar is on hand to offer advice on your investment and to guide you through the process.

Save money on your energy bills, do your bit for the planet and fuel the UK’s economic recovery – all whilst keeping more of your hard-earned profit.

Claim tax benefitsfor installing solar panels

Solar electricity is the cheapest power for your building

Government assistance to help the environment

  De-risk your business from volatile energy prices

  • Salisbury Cathedral, solar, spire
    The Salisbury Cathedral Solar Roof
  • Prodrive to the moon and back
  • On the grounds of Chilworth Manor
  • Marks and Spencer – Community Energy Scheme
  • Pepsi turns Copella Green
  • solar roof tiles, integrated solar, BIPV, ThamesWey
    ThamesWey’s Innovative Battery Microgrid
  • Egni Coop, Graint Thomas Velodrome, Newport Councl, largest solar roof in Wales,
    Egni Coop’s Welsh Community Solar Programme
  • Noah'sArk, Green roof, biosolar, aerial, BArnet
    A Biosolar Roof for Noah’s Ark
  • Oxford Brookes, Sunset, Solar PAnels, Salix Finance
    A Hub of High Efficiency at Oxford Brookes University
  • S Georges' SPorts Centre, Scott Brown Rigg, Architects
    St George’s College Iconic Solar Sports Hall
  • Aldi Supermarket Botley Road, Oxford
  • Norbar Tools
  • Oxford Bus Company

How much is the 50% First Year Allowance for solar panels worth?

 

The 50% First Year Allowance means that you only pay corporation tax on your profits minus 50% of the value of the solar roof.  Here’s a simple example.

  • Your Solar PV investment is £240,000.00
  • You get a 50% capital allowance on this = £120,000.00
  • You apply the corporate tax rate (19%) to the capital allowance = £22,800.00
  • Your tax saving by investing in solar is £22,800.00!

As a rough rule of thumb, the tax saving is roughly equivalent to 1 year of benefits of your solar array.

Contact Joju Solar today to discuss your project

How does the 50% tax break for solar panels work?

To demonstrate this in more detail:

  1. Let’s say your operating profit (chosen at random) = £1,600,000.00
  2. Corporation tax (19%) on this amount (£1,600,000.00 x 0.19) means you pay = £304,000.00 in taxes

Investing in solar would provide you with a capital allowance to reduce your tax bill:

  1. Your solar investment is: £240,000.00
  2. You get a 50% capital allowance on this (£240,000.00 x 0.5) = £120,000.00
  3. You deduct your capital allowance (£120,000.00) from your operating profit (£1,600,000.00) so you only pay tax on operating profits of (£1,600,000.00 – £120,000.00) = £1,480,000.00
  4. You apply the corporate tax rate (19%) to your adjusted operating profits (£1,480,000.00). This means you only pay (£1,480,000.00 x 0.19) = £281,200.00 in taxes
  5. Your tax saving with the capital allowance is (£304,000.00 – £281,200.00) = £22,800.00!

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