Capital allowances on battery storage for business

The tax treatment that makes the after-tax cost lower than the sticker price, explained honestly.

The relief, in plain terms

A business battery is not a sunk cost; it is a capital asset that reduces a rising charge and, through capital allowances, lowers your corporation-tax bill in the year you install it. Battery storage and its associated infrastructure qualify as plant and machinery. That opens two reliefs that stack.

First, the Annual Investment Allowance (AIA) gives 100% relief on the first £1m of qualifying expenditure in the period. Second, because solar and storage are special-rate assets, a 50% first-year allowance applies to qualifying expenditure above the AIA cap. For most single-site commercial batteries the whole spend sits inside the £1m AIA, so effectively 100% is relieved in year one.

Why storage is special-rate, not main-rate, plant

You will see the 100% first-year "full expensing" relief promoted for capital equipment. It applies to main-rate plant and machinery only. Solar and battery storage are special-rate assets, so they use the AIA-then-50%-first-year-allowance route instead. Anyone telling you a commercial battery qualifies for that 100% first-year relief is wrong, and it is exactly the kind of detail that unravels under an accountant's review. We keep the claim accurate so the business case holds up.

A worked illustration

Illustration only, at a 25% corporation-tax rate with the whole spend inside the £1m AIA. Your position depends on your profits, rate, and other capital spend in the period, confirm with your accountant.

See the full cost and payback by size, the wider funding and VAT position, or whether a battery is worth it for your site.