Commercial Solar Payback Calculator: Simple, Discounted and After Tax
A solar payback calculator for UK businesses that gives the payback period four ways on the same inputs: the simple figure installers quote, the cash figure after running costs and the inverter, the discounted figure at your own cost of capital, and the after-tax figure with capital allowances. Every assumption is editable, nothing is gated, and the maths runs in your browser.
- No email gate
- Four payback measures
- Degradation and price change
- AIA or 50% FYA
Your system, your tariff, your cost of capital
Start with the 100 kWp example, change anything, and read the four payback figures on the right. Nothing is sent anywhere until you choose to send an enquiry.
Sensitivity: cost per kWp against import rate
Cash payback, pre-tax, with every other input as entered above.
Sensitivity: electricity price change
Real change in the import rate each year, above or below general inflation. Pre-tax.
Four payback periods, and which one to trust
Payback is the number most businesses ask for first and the one most often quoted loosely. This commercial solar payback calculator gives the same system four payback periods, each answering a slightly different question, so the quoted figure can be checked against the cautious one.
- Simple payback is the installed cost divided by the first year’s benefit: avoided imports at your unit rate plus exports at your export rate. It is what most quotes mean by payback. It ignores running costs, the inverter, degradation and the time value of money, so it is the shortest of the four.
- Cash payback builds the 25-year cash flow, takes off operations and maintenance every year and the inverter replacement in the year you choose, lets output fall by the degradation rate, and reads off the point at which cumulative cash turns positive. It is the figure to plan around.
- Discounted payback applies your discount rate to each year’s cash before adding it up. It answers a different question: when does the system repay its cost in money that is worth as much as the money you spent? It is always longer than cash payback, and the gap grows with the rate.
- After-tax payback taxes the annual saving at your corporation tax rate and gives relief for the capital allowance in year one. Two versions are shown: the Annual Investment Allowance and the 50% first-year allowance.
All four run on the same engine as the commercial solar ROI calculator, so a system entered on both pages returns identical cash payback, and the first year matches the business solar calculator on the same inputs. If you do not yet have a system size, the commercial solar system size calculator works one out from a bill, an annual kWh figure or a roof area.
Worked example: 100 kWp in the Midlands
With the default inputs (100 kWp at 950 kWh per kWp, 115,000 kWh a year of consumption, 65% used on-site, 26p import, 12p export, £825 per kWp, £10 per kWp a year running costs, an £80 per kWp inverter in year 12, 0.5% degradation, flat real prices and a 6% real discount rate) the system costs £82,500 and returns £20,045 in its first year.
Simple payback is 4.1 years. Cash payback, after running costs and the inverter, is 4.4 years. Discounted payback at 6% is 5.2 years. After tax at the 25% main rate the payback is 4.4 years with the Annual Investment Allowance and 4.9 years with the 50% first-year allowance. Over 25 years the pre-tax net cash is £356,679. These are outputs of a model under stated planning assumptions, not a forecast for any site; the inputs that matter most are the ones from your own bill and your own quote.
Payback by system size at the planning cost bands
| System | Cost per kWp used | Year-1 benefit | Simple payback | Cash payback |
|---|---|---|---|---|
| 30 kWp | £1,000 | £6,014 | 5.0 years | 5.3 years |
| 50 kWp | £825 | £10,022 | 4.1 years | 4.4 years |
| 100 kWp | £825 | £20,045 | 4.1 years | 4.4 years |
| 250 kWp | £825 | £50,112 | 4.1 years | 4.4 years |
Midlands yield, consumption scaled with size so on-site use stays at 65%, pre-tax, default running costs. Cost per kWp is the mid-point of the main calculator’s planning band for each size, not a quote: smaller systems cost more per kWp, which is why the 30 kWp row pays back more slowly.
What moves payback, in order
Run the sensitivity tables above and three inputs do most of the work, in this order.
- Installed cost per kWp. Payback moves almost in proportion to it. Between £750 and £900 per kWp the example’s cash payback runs from 3.3 years to 5.9 years across the import rates shown. This is the number an installer will quote, so it is the first one to replace.
- The import rate and on-site share together. They set what each generated kWh is worth. A kWh used on-site is worth the unit rate on your bill; a kWh exported is worth the export rate, which in Great Britain is set by suppliers under the Smart Export Guarantee (Northern Ireland has no SEG) and is typically well under half the import rate. A site that is busy through the day keeps more of its output at the higher value.
- The electricity price path. The default keeps prices flat in today’s money. A real rise of 2% a year shortens the example’s cash payback to 4.3 years; a real fall of 2% a year stretches it to 4.5 years. Nobody knows the path, which is why the calculator shows both rather than assuming a rise.
Degradation and running costs matter less for payback than for the 25-year total, because most of their effect lands after the payback point. They are still in the model, at 0.5% a year and £10 per kWp a year by default, because leaving them out is the usual reason a quoted payback looks better than the one a finance director later sees.
After tax: what the allowances do and do not do
For capital allowances, solar panels are special-rate plant. A business under the £1 million Annual Investment Allowance limit can usually deduct the whole cost from taxable profit in the year of purchase. Companies can instead claim a 50% first-year allowance on special-rate plant, with the balance written down at 6% a year on a reducing basis (HMRC helpsheet HS252). Full expensing, the 100% first-year allowance for main-rate plant, does not cover solar panels.
The relief is real money: at the 25% main rate (19% small profits rate below £50,000 of profit, with marginal relief between, per GOV.UK) the Annual Investment Allowance on the example system is worth £20,625 in year one. But the saving the panels produce is also taxable, and the arithmetic has a result worth knowing: if the whole cost is relieved in year one at the same rate the saving is taxed, after-tax cumulative cash equals the pre-tax figure times one minus the rate, plus the relief, and that reaches the cost in exactly the same year. So the Annual Investment Allowance leaves the example’s payback at 4.4 years, unchanged from pre-tax, while front-loading the cash and reducing the 25-year total. The 50% first-year allowance relieves half in year one and the rest slowly at 6% a year, so its payback is longer at 4.9 years. The calculator applies both effects in the same year and assumes the business has enough taxable profit to use the relief; a loss-making company, a charity or a public body cannot, and for them the pre-tax figure is the honest one. The solar tax treatment page sets out each allowance in more detail.
Two other tax points sit outside the payback arithmetic. Onsite renewable generation plant in England is exempt from business-rates valuation from 1 April 2022 to 31 March 2035 under S.I. 2022/405, so the panels should not raise the rates bill. And the zero VAT rate on installing energy-saving materials applies to residential accommodation and buildings used solely for a relevant charitable purpose, not to ordinary commercial premises, which pay the standard rate; the VAT checkbox above adds 20% to the cost for a business that cannot reclaim it.
What this payback calculator leaves out
- Finance. Every figure assumes the system is bought outright. Interest, lease rentals and power purchase agreement prices change the cash flow and belong in a comparison of funding routes, which the buy, PPA or lease page sets out for the same 100 kWp system.
- Grid connection. Larger systems need a G99 application to the distribution network operator before connection, and the network can cap export or require reinforcement. Those costs sit outside the cost per kWp.
- The roof and the site. Roof condition, structural checks, scaffolding and any shutdown during installation are site-specific and are not in the per-kWp cost unless your quote puts them there.
- Batteries. Storage raises the on-site share and changes the export; it is not modelled here.
- Timing within the year. Cash is treated as arriving at year end; a system commissioned in spring earns more in its first twelve months than one commissioned in autumn.
Running the numbers in Scotland, Wales or Northern Ireland
The method is the same in every nation, and so are capital allowances and VAT. Four inputs change.
- Yield. Pick Scotland or Wales above, or type your own figure. Northern Ireland is not one of the regions: PVGIS models about 828 kWh per kWp a year for a 10° array in Belfast and 769 in Derry/Londonderry (yield by nation), so choose Custom.
- Export rate. The Smart Export Guarantee covers Great Britain only. In Northern Ireland suppliers set their own export tariff: Power NI pays 11.88p per kWh from 1 October 2026 to 30 September 2027.
- Business rates. Rates are not in the model, and each nation keeps qualifying plant out of valuations in its own way: Scotland excludes onsite renewable generation and storage plant until 31 March 2035 (SSI 2023/32); Wales excepts renewable generation plant from 1 April 2024 to 31 March 2035 (SI 2023/1229); in Northern Ireland, generating plant up to 50 kW is not rateable and larger plant is (Department of Finance).
- Grid connection. Scotland and Wales use the same G98 and G99 rules as England: G98 up to 16 A per phase, G99 above, through SP Energy Networks (central belt and south of Scotland) or SSEN (north of the central belt), and SP Manweb (North Wales) or National Grid Electricity Distribution (South Wales). Northern Ireland has one network operator, NIE Networks, with its own G98/NI and G99/NI process; G99/NI connections, including its Fast Track, need approval before installation.
Where the inputs come from
The regional yields are the planning values from the yields by region page, checked against PVGIS v5.3 for twelve UK cities. The £750 to £900 per kWp band for 50 to 250 kWp and the £900 to £1,100 band below 50 kWp are the main calculator’s planning ranges, not quotes. The 12p export default is a planning figure in line with the better fixed Smart Export Guarantee rates on offer in October 2026; suppliers set their own and some pay far less. The 26p import rate is a default to be replaced by your bill. Running costs, the inverter replacement, degradation and the discount rate are our planning assumptions and are all inputs. Tax references were last checked on 20 October 2026.
Common questions about commercial solar payback
How do you calculate the payback period on commercial solar panels?
Divide the installed cost by what the system saves and earns in its first year: that is simple payback, and with the example inputs it comes to 4.1 years. For a figure you can rely on, build the year-by-year cash flow, take off running costs and the inverter replacement, let output fall with degradation, and read off the year in which cumulative cash turns positive. That cash payback is 4.4 years on the same inputs.
What is a good payback period for business solar?
There is no single threshold. A payback is good if the system goes on paying for long after it, and if the implied return beats what the same cash would earn elsewhere. With our default planning inputs the example system pays back in 4.4 years and then runs for most of its 25-year life at near-zero cost, returning £356,679 net of the capex. Compare the discounted payback with your own hurdle rate rather than a rule of thumb.
What is discounted payback and why is it longer?
Discounted payback values each future year’s cash at less than face value, using the discount rate you enter (6% by default), and finds the year in which the discounted total covers the cost. Because every year after the first is worth less than its cash amount, discounted payback is always longer than cash payback: 5.2 years against 4.4 years on the example inputs.
How does tax relief change solar payback?
Less than most people expect, on payback specifically. Solar panels are special-rate plant for capital allowances. The Annual Investment Allowance usually gives 100% relief in year one for a business under the £1m limit; the 50% first-year allowance is the fallback. But the annual saving is taxable profit too. When the whole cost is relieved in year one at the same rate the saving is taxed, the two effects cancel exactly at the payback point, so the example’s after-tax payback with the Annual Investment Allowance is 4.4 years, the same as pre-tax; what changes is a bigger year one, smaller later years and a lower 25-year total. With only half the cost relieved in year one under the 50% first-year allowance, payback stretches to 4.9 years.
Why is my payback longer than the installer’s figure?
Most quoted paybacks are simple payback: cost divided by the first year’s saving, with no running costs, no inverter replacement, no degradation and often a rising electricity price. This calculator shows that figure alongside cash and discounted payback so the gap is visible. The usual causes are a lower on-site share than assumed, a lower unit rate than assumed, and running costs left out.
Send this result with an enquiry
Optional and separate from the calculator. Your enquiry comes to us by email and we reply by email. No obligation.