Is a Farm Solar Grant Worth Its Face Value After Tax?

When a grant round closes before a farm gets its application in, the natural reaction is to feel that money has been left on the table. With farm solar in 2026 that feeling is mostly misplaced. England’s Improving Farm Productivity grant, which paid up to 25% towards rooftop solar, has closed, and none of the current schemes in Scotland, Wales or Northern Ireland lists solar panels — our page of solar grants for farmers has the dated, nation-by-nation position. But a grant is worth a good deal less than its face value to a farm that pays tax, and this post shows why, with the numbers.

This is a worked illustration of how the rules interact, not tax advice for a particular business. An accountant will apply them to your figures.

The rule that shrinks a grant

Farm solar panels qualify for capital allowances — tax relief on capital spending — and for almost every farm the Annual Investment Allowance lets the whole cost be deducted from profits in the year of purchase, up to £1 million a year. That relief is on the cost the farm actually bears.

A grant changes what that cost is. Section 532 of the Capital Allowances Act 2001 says a person is treated as not having incurred expenditure to the extent that it has been, or is to be, met by a public body. HMRC’s own manual puts it simply: the contribution is deducted from the expenditure, and the business gets capital allowances on the net amount. So every pound of grant is a pound you cannot claim tax relief on.

That means the grant’s real value is the grant minus the tax relief it displaces. For a farm paying tax at rate r, a grant of G is worth G × (1 − r).

The worked example

Take a 50 kW array on a farm-building roof. DESNZ’s cost data for 2025/26 put the median price of a 10–50 kW system at £1,262 per kW, so the system costs £63,100. If a 25% grant were available, it would be £15,775 — just above the £15,000 minimum the last English grant set.

Tax position	Net cost, no grant	Net cost, with grant	Grant’s value after tax
Company, 19% small profits rate	£51,111	£38,333	£12,778 (81%)
Sole trader or partner, 20% basic rate	£50,480	£37,860	£12,620 (80%)
Company, 25% main rate	£47,325	£35,494	£11,831 (75%)
Sole trader or partner, 40% higher rate	£37,860	£28,395	£9,465 (60%)
Sole trader or partner, 45% additional rate	£34,705	£26,029	£8,676 (55%)

Assumptions: 100% Annual Investment Allowance, profits large enough to absorb it, income-tax rates for England, Wales and Northern Ireland (Scotland’s bands differ), National Insurance ignored. Price: DESNZ Solar PV cost data 2025/26, median for 10–50 kW systems.

The pattern is the point. The higher your tax rate, the less a grant is worth, because the tax relief it displaces is worth more. A farming partner paying 40% income tax gets only 60% of a grant’s face value; the other 40% would have come back through the tax return anyway.

When a grant is worth more

The picture flips for a farm that is not paying much tax. If profits are low or the business is making a loss, the Annual Investment Allowance does not produce an immediate tax saving — it creates or increases a trading loss, which is relieved against other income or in other years rather than straight away. For that farm a grant is worth close to its full value, and the loss of a grant round hurts more. It is also why a sensible comparison of “grant now versus no grant” always starts with the farm’s own tax position, not the headline percentage.

The cost of waiting for a round that may not come

The other half of the sum is time. Every month an array is not installed is a month of electricity bought from the grid instead of generated on the roof. On PVGIS, a south-facing 30° roof near York generates about 960 kWh per kWp a year, so our 50 kW array would produce around 48,000 kWh. If the farm used 80% of that itself instead of buying it at 25p per kWh, and exported the rest at 5p, the array would be worth roughly £10,080 a year — close to what the grant itself would be worth after tax to a company.

So a farm that holds off for a year waiting for a grant round can easily lose as much in electricity as the grant would have added. In September 2026 no English round has been announced at all. Your own numbers will differ — self-use depends on when the farm uses power, and import prices vary — but that is the comparison worth making.

What to do instead

1. Work out the case without a grant. Use twelve months of half-hourly meter data to estimate how much of the output the farm would use. Our agricultural solar panel cost guide shows what systems cost and generate.
2. Put the tax relief in the case from the start. Our guide to capital allowances on solar panels explains the Annual Investment Allowance, the 50% first-year allowance for companies and why the new 40% allowance does not apply to solar.
3. In Wales, look at the loan. The Sustainable Agriculture Loan Scheme lends £25,001 to £1 million at a fixed 3% for renewable generation on farms.
4. If a grant round does open, apply — but do not wait for one. The rules of the last English round (roof or reservoir only, nothing ordered before the grant agreement) are set out on our grants page.

If you want the numbers run for your own farm, ask for a free desk feasibility — a matched MCS-certified installer will model generation, self-use and the tax position.

Sources

• Capital Allowances Act 2001, section 532 (legislation.gov.uk) and HMRC Capital Allowances Manual CA14100.
• Capital Allowances Act 2001, section 51A (Annual Investment Allowance, £1 million).
• gov.uk, Improving Farm Productivity grant round 2 applicant guidance (updated 2 March 2026).
• DESNZ, Solar PV cost data 2025/26.
• PVGIS v5.3 (EU Joint Research Centre), York, 30° south-facing roof.
• gov.wales, “Welsh farms access low-interest loans for sustainable investment” (29 June 2026).