Three financing routes for UK farm solar in 2026: capital purchase with 100% Annual Investment Allowance, asset finance over 5–10 years, and Power Purchase Agreement (PPA). Each suits a different farm operation. Here's how to choose.
Capital purchase with 100% AIA
The simplest route for farms with capital available. Pay full system capex upfront; claim 100% Annual Investment Allowance against year-one trading profit. For a limited company at 25% corporation tax, that's roughly 25% effective tax saving in year one. Asset is owned outright from day one; all generated kWh saves at full grid retail; all SEG export income flows to the farm. Best for: farms with strong balance sheet and significant taxable trading profit in the install year.
Asset finance (5–10 year term)
Bank or specialist lender provides capital; farm pays a fixed monthly amount typically over 5–10 years. Farm owns the system from day one (it's secured against the asset and any associated guarantees rather than being lease-style ownership). Most farm installs above 100 kW with strong daytime baseload are EBITDA-positive from month one — the monthly grid-cost saving exceeds the monthly finance payment from the install date. Lenders active in this space: AIB Group Solar Farm Finance, Praetura Commercial Solar, Hampshire Trust Bank, mainstream lenders (Lloyds, NatWest, Barclays) with PV-compatible products. Documentation typically takes 3–5 weeks alongside project design. Best for: capital-light farms with strong cash flow; farms preferring to preserve capital for other priorities.
Power Purchase Agreement (PPA)
Third-party developer funds, installs, owns, and operates the PV system on the farm's roof or land. The farm buys the generated electricity from the developer at a discount-rate to grid retail (typically 35–45% below retail) for 15–25 years. Zero capex from the farm. Most PPA offers cover systems above 250 kW only. Best for: farms with strong roof potential but limited capital flexibility; farms unwilling or unable to commit balance-sheet capacity to renewable assets.
Side-by-side economics
For a representative 200 kW dairy install costing £160,000:
- **Capital + AIA:** £160,000 upfront, ~£40,000 year-one tax saving, full lifetime saving £950,000+ over 25 years, simple payback 3.2 years after AIA.
- **Asset finance (7-yr term):** £0 upfront, £1,950/month for 84 months (~£164,000 total finance cost), but monthly grid-saving £3,400 — net positive £1,450/month from day one.
- **PPA (20-yr term):** £0 upfront, electricity from PV bought at 14p/kWh vs 25p grid retail. Annual saving £18,000, total 20-year saving £360,000 — meaningful but lower than capital or finance routes.
How to choose
Most UK farms in 2026 use capital + AIA (smaller incorporated farms) or asset finance (capital-light operations). PPA is rare on rooftop installs and more common on ground-mount above 500 kW. We model all three in every fixed-price proposal so the farm can compare like-for-like.
For mixed-asset financing strategies — capital on one building, finance on another, PPA on ground-mount — we structure the full programme as a single coordinated project. Talk to us about your specific cash-flow position and we'll help size the optimal mix.