As of 2024, commercial companies in the UK investing in renewable energy systems can benefit from various tax reliefs and incentives through HMRC. Key measures include:
Capital Allowances: Businesses
investing in energy-efficient or low-carbon technology can claim capital allowances. Specifically, companies can benefit from "full expensing" for plant and machinery, allowing them to deduct 100% of the cost of qualifying investments from their taxable profits in the year the expense is incurred. This relief is available from April 2023 until March 2026, encouraging investment in energy-saving equipment such as solar panels, heat pumps, and more (GOV.UK).
VAT Relief: From February 2024, a VAT zero rate applies to certain energy-saving materials (ESMs). This includes technologies like solar panel diverters, water-source heat pumps, and retrofitted electrical battery storage, expanding the scope of tax benefits for renewable energy installations (Welcome to ICAEW.com).
Renewable Heat Incentive (RHI): While the RHI scheme has closed to new applicants, businesses already benefiting from it continue to receive payments. These payments are typically treated as reductions in energy costs for tax purposes, and any profits from the incentive are taxable (GOV.UK).
These policies align with the UK government's push towards net-zero emissions by 2050 and provide significant incentives for businesses to adopt renewable technologies. For more specific guidance, it's recommended to consult with a tax advisor or directly refer to HMRC's detailed rules.
Since taking office in July 2024, the Labour government has prioritized green initiatives, focusing on energy transformation, carbon reduction, and sustainable investments. These efforts are split between incentives aimed at businesses and those directed towards individuals.
Incentives for Businesses:
Great British Energy: Labour has committed £8.3 billion to establish Great British Energy, a public entity designed to partner with private industry and trade unions to co-invest in clean energy technologies. This initiative aims to catalyse investments in renewables such as wind, solar, and hydrogen, with the goal of developing UK-based energy production and reducing reliance on imports (New Statesman)(Knight Frank).
National Wealth Fund: As part of a broader industrial strategy, Labour plans to deploy £1 billion for carbon capture and £500 million for green hydrogen development. These funds will support large-scale, capital-intensive projects critical to meeting the UK's net-zero targets (LabourList) )(Knight Frank).
Energy Efficiency and Net Zero Targets: Businesses must meet more stringent energy efficiency standards, with upcoming policies mandating improvements in building efficiency and stricter regulations on carbon emissions. Companies will also benefit from enhanced Green Finance policies, which aim to make the UK a global hub for sustainable finance.
Incentives for Individuals (Residential):
Warm Homes Plan: Labour has allocated £6.6 billion to retrofit five million homes with insulation, solar panels, and low-carbon heating solutions. Grants and low-interest loans will be provided to households, aiming to reduce energy bills and emissions. This plan is part of a larger ambition to improve energy efficiency, particularly in homes with energy performance ratings below EPC C.
Energy Efficiency Standards in Private Rentals: Labour has committed to restoring stricter Minimum Energy Efficiency Standards (MEES) by 2030, requiring private rental properties to meet or exceed EPC C ratings. This is a reversal of previous relaxations in energy standards and aims to address fuel poverty and reduce energy waste (Knight Frank).
These initiatives reflect Labour's focus on fostering a greener economy and reducing emissions through state-backed investments and stringent regulatory frameworks. The government is expected to pass key legislation related to these initiatives within the current parliamentary term, with Great British Energy and the National Wealth Fund slated for implementation in 2025 (LabourList)