Tax and PV Solar - How Does it Work?
The UK government is continually encouraging both domestic and commercial properties to use renewable, green energy systems with solar PV panels being just one example. However, the initial expense of the installation and materials can see solar panels cost in excess of £10,000 and with this significant sum the government have offered several tax breaks in order to promote solar energy power.
Feed-In Tariff Scheme
The Feed-In Tariff Scheme (FITs) rewards solar panel owners by paying for the renewable energy they produce, even when it is used within that property. For every unit of electricity, kilowatt, produced the government pays 41.3 pence to the owner. An additional bonus payment of 3.1 pence is paid for any excess electricity produced which is returned to the national grid and most importantly, FITs payments are not liable for income tax. Considering domestic solar panels owners stand to earn in excess of £1,000 a year and the fact the government has backed the scheme for 25 years, this will eventually equate to a substantial tax free sum. It should, however, be noted that if a homeowner rents out their property containing PV solar panels their FITs payments become taxable. Also, if a grant or loan has been received in order to install a solar panel system then the owner is no longer eligible to receive FITs payment. In the majority of cases the company who initially gave the grant will receive the payments.
What about Commercial Properties with PV Solar Panels?
In order for solar panel technology to really take off it needs to be seen as a viable option in the business world. As a result the government introduced the Annual Investment Allowance. This allows companies to reclaim their tax spent on solar panel equipment up to £25,000. Although, this allowance has recently been reduced from £100,000 it still allows a small business to install a solar panel system tax free and systems up to 50kW are also still eligible to receive FITs payment.
Solar PV panels are being hailed as the solution to our energy crisis and with their relative expensive installation it is little wonder the government offers tax breaks for both domestic and commercial systems. Domestic solar panel owners stand to make over £25,000 under the Feed-In Tariff scheme, which is exempt from income tax. Commercial owners too can claim the majority of, if not all, tax back from the government. There is no doubt such tax relief is a major attraction for PV solar panel technology.