Hotel Solar Capital Allowances 2026 — AIA & FYA

UK hotel solar PV capital allowances in 2026 sit at the centre of the after-tax economics. Get the tax position right and the effective net capex is 17-25% below headline; get it wrong and the project payback shifts by 1-2 years.

The three relevant reliefs

Annual Investment Allowance (AIA): 100% first-year relief on qualifying plant up to £1m per company per year. Solar PV qualifies as general-pool plant. For a £200,000 hotel solar install, AIA delivers £50,000 corporation tax saving in year one (at 25% main corporation tax rate) — effectively a 25% capex discount.

50% First Year Allowance (FYA): 50% first-year relief on special-rate pool expenditure above the £1m AIA cap. Permanent from April 2026. For group operators investing across multiple UK properties simultaneously.

Writing Down Allowance (WDA): Continuing annual relief on the remaining pool balance at the special-rate pool 6%/year. Applies to the 50% of FYA-eligible spend not relieved in year one.

Worked example — single property £200,000 install

Headline capex: £200,000. AIA fully absorbs the spend.

• Tax relief: 100% × £200,000 × 25% corporation tax = £50,000
• Effective net capex: £150,000
• Year-1 saving from solar: £45,000
• Simple payback on net capex: 3.3 years

Worked example — group investing £2.8m across 12 properties

Headline group capex: £2,800,000.

• AIA on first £1m: 100% × £1,000,000 × 25% = £250,000 tax relief
• FYA on next £1,800,000: 50% × £1,800,000 × 25% = £225,000 tax relief
• Remaining £900,000 enters special-rate pool at 6% WDA: £13,500 year-2 tax relief, continuing
• Year-1 tax relief: £475,000
• Effective net capex: £2,325,000 (17% effective discount)

When AIA is constrained

Group operators investing across multiple UK companies (typical structure for chain hotel franchises and multi-property groups) need to allocate AIA carefully across the company structure. AIA is per-company, not per-group — so a 12-property group with each property in a separate company captures 12×£1m = £12m of combined AIA capacity per tax year.

Practical tax planning

Three practical recommendations for hotel solar capex tax planning:

1. Time installations to fit the AIA window — installing in March before year-end versus April after year-end can materially affect when tax shield value crystallises
2. Coordinate with accountant during feasibility — we model the AIA position with your accountant before quote sign-off
3. Multi-property groups should phase across tax years — spreading £2.8m of capex across two tax years can sometimes deliver better cumulative tax position than single-year deployment

See hotel solar cost and grants and funding for the broader funding context.