Solar for Small Businesses UK: Where to Start

For many UK small businesses, electricity is one of the largest controllable overheads. Non-domestic electricity rates have hovered in the 20–35p/kWh range in recent years, and unlike households, businesses are not protected by Ofgem's domestic price cap. Installing a rooftop solar array lets you generate power at close to zero marginal cost during the day — exactly when most commercial premises are using it. Here is a practical starting point for any SME considering the switch.

What system size does a small business typically need?

Most SME installations fall in the 10–50 kWp range. A small office or shop with a reasonable roof might install 10–20 kWp; a light-industrial unit, warehouse or farm building could run to 30–50 kWp. As a rough guide, every kWp of well-oriented panels generates around 850–950 kWh per year in England (less in Scotland, slightly more in the South West). A 20 kWp array therefore produces roughly 17,000–19,000 kWh annually.

Installed costs for commercial systems typically run from around £800–£1,100 per kWp (ex-VAT) for systems in the 10–50 kWp range, so a 20 kWp system might cost £16,000–£22,000 before tax relief. Larger systems attract lower per-kWp pricing because scaffolding and labour costs are spread across more panels.

For more context on how system size affects cost, see our guide to solar panel costs by system size.

What is the realistic payback period?

For a well-configured commercial system, most SMEs see payback in four to seven years. Three factors drive this more than any other:

• Self-consumption rate: solar electricity you use directly avoids buying grid power at 20–35p/kWh. A daytime business that uses 70–80% of its generated output will see a much faster return than a warehouse that is empty during daylight hours.
• Tax relief: the Annual Investment Allowance (AIA) lets most businesses deduct the full installation cost from taxable profit in year one, effectively reducing a 25% corporation tax payer's net cost by a quarter. A £20,000 system becomes closer to £15,000 after AIA relief — this alone can shorten payback by 12–18 months.
• Export income: surplus power exported to the grid earns income via the Smart Export Guarantee (SEG). Business tariff rates vary by supplier, typically in the 4–15p/kWh range in 2026.

To understand how these numbers stack up on a domestic scale, our solar payback period guide explains the underlying maths in detail.

Tax reliefs and financial incentives

Annual Investment Allowance (AIA)

Solar PV systems are classed as plant and machinery for capital allowances purposes. Under the AIA, UK businesses (limited companies, partnerships and sole traders) can deduct up to £1,000,000 of qualifying capital expenditure — including a solar installation — from taxable profits in the year of purchase. For a typical SME system well below £1 million, this means the entire capital cost is written off in year one, reducing your corporation tax bill immediately. HMRC's Capital Allowances Manual (CA22335) confirms solar panels qualify under the special rate pool.

Business rates relief for rooftop solar

Since April 2023, eligible plant and machinery used for on-site renewable energy generation — including rooftop solar panels — has been exempt from business rates until 31 March 2035. This means your solar installation will not increase your rateable value, removing a historic barrier that once made commercial solar less attractive for businesses that lease premises with rates-inclusive leases.

Zero VAT on installation

Solar panel installations on commercial buildings currently attract 0% VAT under HMRC's energy-saving materials rules (VAT Notice 708/6), providing a further cost reduction compared with standard 20% VAT.

Salix Finance (public sector organisations)

If your organisation is a school, college, NHS trust, local authority or similar public sector body, Salix Finance offers interest-free loans via its Recycling Fund specifically for energy efficiency and renewable energy projects, including solar PV. Repayments are structured to match the energy savings delivered, meaning the loan is effectively self-funding.

The zero-capital route: Power Purchase Agreements

If upfront capital is a barrier, a Power Purchase Agreement (PPA) lets you benefit from rooftop solar with no capital expenditure. Under a PPA, a third-party developer owns and installs the solar system on your roof at no cost to you. In return, you agree to buy the electricity generated at a fixed rate — typically 20–30% below your current grid tariff — for a contract term of 20–25 years. At the end of the term you can often take ownership of the system.

PPAs work best for businesses with consistent daytime electricity demand and stable, long-term site occupancy. They are less suitable for short-term leaseholders or businesses with very variable daytime energy use.

Earning from surplus: the Smart Export Guarantee

Any electricity your system generates but cannot use on-site can be sold back to the grid via the Smart Export Guarantee. All licensed suppliers with 150,000 or more domestic customers are legally required to offer an SEG tariff. For non-domestic connections the scheme is voluntary for suppliers, but several major suppliers — including Octopus Energy, EDF and British Gas — do offer business export tariffs. Rates in mid-2026 typically range from 4p to 15p/kWh, depending on the supplier and tariff structure.

What to check before getting quotes

Before approaching installers, work through this checklist to avoid wasted time and unexpected complications:

• Do you own the roof? If you lease your premises, check whether your lease permits structural alterations. You will also need your landlord's written consent before any installation can begin.
• Check your DNO connection: Systems above a certain size (typically 3.68 kW per phase for single-phase, 11 kW for three-phase) require a G99 application to your Distribution Network Operator (DNO) before commissioning. Larger commercial systems may require a full connection agreement and grid study, which can add several months to the project timeline.
• Roof condition and orientation: south, south-east or south-west facing roofs at a 30–35° pitch are optimal; flat roofs can work well with ballasted mounting frames. Have a structural survey carried out if the roof is more than 20 years old.
• Planning permission: most rooftop solar on commercial buildings in England qualifies as permitted development under Class A, Part 14 of the Town and Country Planning (General Permitted Development) (England) Order 2015. The previous 1 MW generation cap was removed in November 2023, meaning large arrays can now qualify. Exceptions apply to listed buildings, conservation areas and National Parks — always verify with your local planning authority.
• MCS-certified installer: ensure your installer holds Microgeneration Certification Scheme (MCS) accreditation. This is required to access SEG export payments and to demonstrate quality assurance.

Getting quotes and comparing proposals

Aim for at least three quotes from MCS-accredited commercial installers. Ask each installer to provide a site-specific yield estimate (not a generic calculation), a breakdown of self-consumption vs. export, a cash-flow projection including AIA relief, and details of monitoring hardware included. Be wary of proposals that rely entirely on export income rather than self-consumption — the strongest business cases are built on avoided grid purchases.

You can also explore the broader landscape of solar grants and funding routes in the UK to see whether your business might qualify for additional support beyond AIA. For a full breakdown of every grant and tax relief route available to UK businesses in 2026, including UKSPF local council grants, Salix Finance for the public sector, and devolved-nation schemes, see our detailed guide to business solar grants UK.

Sources — verified 2026-06-08

1. HMRC Capital Allowances Manual CA22335 — Plant and Machinery: Solar panels
2. GOV.UK — Business Rates Review: technical consultation (plant and machinery exemption)
3. HMRC — VAT on energy-saving materials and heating equipment (Notice 708/6)
4. Town and Country Planning (General Permitted Development) (England) Order 2015 — Part 14 (solar)
5. Salix Finance — public sector interest-free loans for solar PV
6. Planning Portal — Solar panels (non-domestic) planning permission guide