Capital allowances on commercial battery storage
A commercial battery is capital plant, not a running cost — and the tax treatment reflects that. Getting the allowances right materially improves the after-tax cost of an install, so it belongs in the business case from the start.
The allowances that can apply
| Allowance | Rate | Applies to |
|---|---|---|
| Annual Investment Allowance (AIA) | 100% | Up to £1,000,000 of qualifying plant spend a year, companies and unincorporated businesses |
| Full expensing | 100% year one | New main-pool plant bought by a company, if the battery is classified as main-pool plant |
| 50% first-year allowance | 50% year one | New special-rate plant bought by a company; the balance goes to the special-rate pool |
| Writing-down allowances | Main or special rate | Any balance not relieved in year one, at the rate for the pool the asset sits in |
Which row applies above the AIA turns on classification. The legislation (CAA 2001 s104A) names solar panels as special-rate expenditure; batteries are not named there, so their treatment depends on the asset and how it is installed, including whether it forms part of the building's electrical system. This site does not give a view on your installation: ask your accountant, and read the gov.uk guidance on full expensing and the 50% first-year allowance.
A worked example
On a £250,000 behind-the-meter install, a limited company can typically claim 100% AIA against the whole amount in year one (it is within the £1m cap), reducing taxable profit by £250,000. At a 25% corporation-tax rate that is a £62,500 first-year tax saving, improving the effective net cost of the system. On a £1.4m install, the first £1m attracts 100% AIA; the treatment of the remaining £400,000 depends on classification. If the battery is main-pool plant, a company could claim full expensing on it in year one; if it is special-rate expenditure, the 50% first-year allowance gives £200,000 in year one, with the balance written down at the special rate. These figures are illustrative: your position depends on your profits, accounting period, other capital spend and the classification your accountant agrees.
What about VAT?
The 0% VAT relief on battery storage applies only to residential accommodation and buildings used solely for a relevant charitable purpose, and it is set to revert to 5% on 1 April 2027. General commercial premises do not qualify — most businesses pay standard-rate VAT and recover it in the normal way. See grants and funding for the full picture.
This page is general information, not tax advice. Capital allowances depend on your specific circumstances and the rules in force for your accounting period — confirm the position with your accountant before relying on it.