Solar Tax Credits and Incentives for Solar Energy in the UK (2025 Guide)

Jade Fury
Nov 11
4 min read

Updated: 17 hours ago

Switching to solar energy has never been more rewarding for UK homeowners. Thanks to government-backed incentives and lower VAT rates, installing solar panels is now more affordable, and profitable, than ever before.

In this guide, our team at Newpower will break down the key UK solar incentives in 2025, including the Smart Export Guarantee (SEG), 0% VAT, and local grant schemes, so you can understand exactly how to make the most of your investment in clean energy.

Why the UK Supports Solar Energy

The UK government is committed to reaching net zero carbon emissions by 2050, and household solar energy plays a major role in that mission.

By supporting solar adoption through financial incentives, the government helps:

Reduce reliance on fossil fuels
Lower household energy bills
Encourage renewable energy generation across the country

In short, solar panels don’t just benefit your wallet, they help power a more sustainable future for everyone.

1. The Smart Export Guarantee (SEG)

Introduced in 2020, the Smart Export Guarantee (SEG) replaced the old Feed-in Tariff (FiT) and remains the main national incentive for solar panel owners in 2025.

What Is It?

The SEG allows homeowners to get paid for the excess electricity they export back to the National Grid.

How It Works:

Your solar panels generate electricity during daylight hours.
You use what you need in your home.
Any surplus electricity is exported to the grid.
Your energy supplier pays you for each unit (kWh) exported.

Typical SEG Rates (2025)

Export rates vary by supplier, but as of 2025 most offer between £0.04 and £0.15 per kWh.

Supplier	SEG Tariff (per kWh)	Notes
Octopus Energy	15p	Highest fixed rate available (Octopus Flux tariff)
British Gas	6.4p	Fixed rate
EDF Energy	5p	Variable export rate
E.ON Next	8p	Based on time-of-day usage

Note: Rates can change, always check with your energy provider.

What You’ll Need to Qualify:

MCS-certified solar panels and installation
A smart meter capable of measuring export electricity
A contract with a licensed SEG energy supplier

You can find more information on the costs of solar panel here: How Much Do Solar Panels Cost in the UK in 2025?

2. 0% VAT on Solar Panels and Battery Storage

To make renewable energy more accessible, the UK government extended the 0% VAT rate on domestic solar installations until March 2027.

What It Means for You:

No VAT charged on solar panels, battery systems, or installation labour.
Savings of up to £1,000 or more on a typical 4 kW system.
Applies to both solar PV and solar thermal (water heating) systems.

If you add a solar battery at the same time, the 0% VAT applies to that too.

3. Local Authority and Energy Company Grants

While there’s no national feed-in scheme anymore, many local councils and energy suppliers offer regional grants or low-interest loans for renewable energy improvements.

Examples (as of 2025):

Home Upgrade Grant (HUG): For low-income households without mains gas, covering insulation and renewables like solar. Check eligability here.
ECO4 Scheme: Run by energy suppliers, providing support for home energy efficiency upgrades including solar panels in some areas. Check eligibility.
Local Authority Solar Initiatives: Councils in regions like Greater Manchester, Bristol, and London have periodically offered solar funding or discounts.

Check your local council’s website or the Energy Saving Trust for current opportunities.

4. Solar Batteries and Time-of-Use Tariffs

While not a government incentive, pairing your solar panels with a battery and time-of-use tariff can significantly boost your savings.

Here’s how:

Store daytime energy for use at night.
Use “off-peak” electricity when grid prices are lower.
Reduce your reliance on grid imports even further.

Some suppliers, like Octopus Energy, now offer dynamic tariffs that reward solar battery owners for supporting the grid during peak times, effectively turning your home into a mini power station.

Example: How Incentives Add Up

Let’s say you install a 4 kW solar system in 2025 at a cost of £6,800.

Incentive	Savings/Benefit	Notes
0% VAT	£1,000 saved upfront	No tax on installation or equipment
SEG Payments	£120/year	Based on 1,000 kWh exported at 12p/kWh
Energy Bill Savings	£450/year	From self-consumed electricity
Total Yearly Benefit	£570	Average UK home
Payback Period	10–11 years	Then free electricity for 15+ more

Why UK Solar Incentives Matter

These incentives make solar energy not only sustainable but financially viable for most UK households.

Together, they help:

Lower upfront costs
Shorten payback periods
Reward clean energy generation
Encourage energy independence

In 2025, it’s never been easier, or smarter, to go solar.

While the UK doesn’t offer direct “tax credits” like in the US, the Smart Export Guarantee, 0% VAT, and regional grants still make solar energy one of the best long-term investments for homeowners.

By combining these incentives with the falling cost of solar panels, most homes can expect to save thousands of pounds over their system’s lifetime, all while reducing carbon emissions and boosting property value. Contact Newpower today for more information on solar panels grants and incentives.