Solar Panel Installer
Tax & MTD Guide
CIS deductions and refunds, van and tool expenses, the zero VAT rate on solar installs, NIC and MTD explained for self-employed UK solar PV installers.
- As a self-employed solar installer you pay Income Tax and Class 4 NIC on profit, which is your installation income minus van, tools, PPE and certification costs, not on your gross invoices.
- Most solar work for a main contractor falls under CIS, so 20% is deducted from your labour at source as advance tax; split labour and materials on every invoice because CIS is taken on labour only.
- CIS deductions almost always mean a Self Assessment refund, because the 20% is taken before your expenses and your GBP 12,570 personal allowance are applied.
- Domestic solar installs in Great Britain are zero-rated for VAT until 31 March 2027, but you must still register once taxable turnover passes GBP 90,000 in any rolling 12 months.
- MTD for Income Tax begins April 2026 above GBP 50,000 of gross income, April 2027 above GBP 30,000 and April 2028 above GBP 20,000, with the test on turnover not profit.
Fitting solar PV is a fast-growing trade with a tax profile all of its own. You are a roof-going electrician one day and a groundwork-and-inverter installer the next, working for solar companies, roofers, developers and direct homeowners. That mix matters because most of your work for a larger firm sits inside the Construction Industry Scheme (CIS), where 20% is shaved off your labour before you ever see the money. Get the CIS paperwork and your expenses right and that deduction usually flows back to you as a refund.
This guide is built around how a solar installer actually earns and spends: CIS deductions and the refund they tend to produce, the kit-heavy expense list that defines this trade, the temporary zero VAT rate on domestic solar, and the National Insurance and MTD timing that catch out busy installers. Treat your phone as a receipt scanner and the annual return becomes a formality.
How Tax Works for a Self-Employed Solar Installer
As a sole trader you pay Income Tax on profit, meaning your installation income minus allowable expenses, not on your gross turnover. For 2025/26 the personal allowance covers the first GBP 12,570, then you pay 20% to GBP 50,270, 40% to GBP 125,140 and 45% above, with the personal allowance tapering away between GBP 100,000 and GBP 125,140 to create an effective 60% band. Class 4 National Insurance is 6% on profit between GBP 12,570 and GBP 50,270 and 2% above, with Class 2 NIC settled through Self Assessment.
Scottish installers pay Scottish Income Tax on profit through six bands (19%, 20%, 21%, 42%, 45% and a 48% top rate) and carry an S-prefixed tax code, while National Insurance stays UK-wide. Welsh installers have a C-coded tax code at rates currently matching the rest of the UK. If a CIS refund, a previous PAYE electrician job or an emergency tax code is distorting your code, run it through the tax code checker.
CIS: Why 20% Disappears From Your Labour
Solar installation is construction work, so when you subcontract for a solar firm, roofer or main contractor, the Construction Industry Scheme applies. The contractor paying you must deduct 20% from the labour element of your invoice (30% if you are not CIS-registered) and hand it to HMRC as an advance payment against your eventual tax and National Insurance bill. Register as a CIS subcontractor before you start so you only lose 20%, not 30%.
The single most important habit is to split labour and materials on every invoice. CIS is deducted on labour only. If you supply GBP 4,000 of panels, inverter and rails and charge GBP 2,000 labour, only the GBP 2,000 should suffer the 20% deduction. Bundle it all together and the contractor will deduct 20% from the lot, handing HMRC GBP 800 more of your money than necessary until you claim it back.
Every time a contractor pays you under CIS they must give you a payment and deduction statement showing what they deducted. Keep all of them. They are your evidence at Self Assessment, and without them you cannot reclaim the tax already taken. Our CIS subcontractor guide covers registration, verification and the statements in full.
- CIS deduction statement
- A monthly statement a contractor must give every subcontractor they pay under the Construction Industry Scheme. It shows the gross amount, the cost of materials, the labour the deduction was applied to, and the tax deducted (20% for registered subcontractors, 30% if unregistered). These statements are your proof of tax already paid to HMRC. You add up the deductions on your Self Assessment return and offset them against the tax due, which usually produces a refund for a solar installer once expenses and the personal allowance are applied.
The CIS Refund: Why You Probably Overpaid
Here is the good news that surprises a lot of installers. CIS takes 20% off your labour straight away, before you have deducted a single expense and before you have used your GBP 12,570 personal allowance. Because your real tax bill is calculated on profit after costs, the upfront 20% is almost always more than you actually owe.
Picture an installer with GBP 45,000 of CIS labour income who has suffered GBP 9,000 of deductions across the year. After deducting van, tools, PPE and certification costs and applying the personal allowance, their actual Income Tax and Class 4 NIC might total well under GBP 9,000, so the difference comes back as a refund. File promptly after 6 April and the money can be in your account within weeks. Use the CIS tax calculator to estimate your refund before you file, or the sole trader tax calculator for any direct-to-homeowner work outside CIS.
Allowable Expenses for Solar Installers
An expense is allowable when incurred wholly and exclusively for the business. Solar fitting is a kit-heavy, vehicle-dependent, height-working trade, so your expense list is dominated by the van, access equipment, tools and safety gear rather than an office.
| Expense | What qualifies | Notes |
|---|---|---|
| Van and vehicle | Fuel, insurance, repairs, MOT, road tax, or simplified mileage at 45p/25p | Choose mileage or actual costs and stick with it for that vehicle |
| Power tools and kit | Drills, impact drivers, crimpers, MC4 tools, battery packs, ladders | Tools usually claimed via the Annual Investment Allowance |
| Access equipment | Scaffold tower, MEWP or cherry picker hire, edge protection | Hire is a running cost; bought equipment is capital allowances |
| Safety gear and PPE | Harnesses, fall-arrest lanyards, helmets, gloves, boots, hi-vis | Protective workwear is allowable; everyday clothing is not |
| Test and certification | Multifunction testers, clamp meters, MCS and Part P certification fees | Recalibration and renewal fees are deductible |
| Materials you supply | Panels, inverters, rails, cable, isolators, fixings | Report income gross and claim the materials as a cost |
| Insurance and memberships | Public liability, tools cover, NICEIC/NAPIT, MCS, RECC membership | Trade and competent-person scheme fees are allowable |
| Phone and admin | Business mobile, quoting and job software, a fair share of home admin | Exclude the private share of dual-use costs |
| Training and CPD | Updating PV, battery storage or wiring-regs qualifications | Courses for a brand-new trade are not allowable |
| Accountancy and bank fees | Bookkeeping, Self Assessment, business banking | Fully deductible |
Van, Tools and Capital Allowances in Detail
Your two biggest outlays, the van and the tools, are usually treated as capital rather than day-to-day running costs. The Annual Investment Allowance lets you deduct the full cost of qualifying tools, test equipment and a commercial van in the year you buy them, which can wipe out a large chunk of profit in a year you re-kit. For the van you then choose between claiming actual running costs (fuel, insurance, repairs) or HMRC's simplified mileage rate of 45p a mile for the first 10,000 business miles and 25p after that. You cannot mix mileage and actual costs on the same vehicle, so work out which is better for your annual mileage and commit to it.
What You Cannot Claim
The private share of any dual-use cost must be stripped out, including personal van trips and the home use of your phone. Ordinary commuting from home to a regular base is not allowable, though travel between job sites is. Everyday clothing is never deductible even if you ruin a lot of it on roofs, only genuine PPE and branded workwear count. Fines, for example a parking ticket while loading, are not allowable either.
Worked Example: A Solar Installer on GBP 42,000
Take a CIS-registered installer who invoices GBP 42,000 of labour across the year, suffers GBP 8,400 of CIS deductions, and supplies some of their own materials.
Labour income: GBP 42,000 (CIS deducted at source: GBP 8,400)
Allowable expenses:
- Van running costs / mileage: GBP 5,200
- Power tools and test equipment (AIA): GBP 2,400
- Scaffold tower and MEWP hire: GBP 1,800
- Harnesses, PPE and workwear: GBP 700
- Insurance and scheme memberships: GBP 1,100
- Phone, software and accountancy: GBP 900
- Total expenses: GBP 12,100
Taxable profit: GBP 42,000 minus GBP 12,100 = GBP 29,900
Income Tax: GBP 29,900 minus GBP 12,570 = GBP 17,330 at 20% = GBP 3,466
Class 4 NIC: GBP 17,330 at 6% = GBP 1,040
Tax and NIC due: GBP 4,506. But CIS already took GBP 8,400, so this installer is due a refund of roughly GBP 3,894 once the return is filed. That is the CIS pattern in a nutshell: the upfront deduction outstrips the real bill once expenses and the personal allowance bite. Sanity-check your own figures with the CIS tax calculator.
For a CIS solar installer the danger isn't the tax bill, it's leaving your refund on the table. Split labour from materials on every invoice, hoard your deduction statements, and the money comes back.
VAT for Solar Installers
You must register for VAT once your taxable turnover exceeds GBP 90,000 in any rolling 12-month period. With panels, inverters and batteries flowing through your invoices, a busy installer can reach this faster than they expect, so track your rolling turnover, not just the tax-year total.
Solar has an unusual VAT quirk worth knowing. The installation of qualifying energy-saving materials, including solar panels, in residential homes across Great Britain is zero-rated for VAT until 31 March 2027. So even when you are VAT-registered you charge 0% on qualifying domestic installs, while still being able to reclaim the VAT on your van, tools and materials, which can make registration genuinely advantageous. The rules differ for commercial buildings, standalone battery retrofits and work in Northern Ireland, so check the status of each job rather than assuming everything is zero-rated.
MTD for Income Tax: What Changes for Installers
Making Tax Digital for Income Tax Self Assessment replaces the once-a-year return with quarterly digital submissions and a year-end finalisation. The thresholds are based on gross income, not profit, and crucially the gross figure is measured before CIS deductions:
- April 2026: Combined self-employment and property income over GBP 50,000
- April 2027: Over GBP 30,000
- April 2028: Over GBP 20,000
For an installer this matters because the threshold looks at the full value of your invoices, before the 20% CIS slice and before expenses. A solar fitter turning over GBP 55,000 of labour and materials is in from April 2026 even if their profit is modest. Instead of scrambling each January you will record each invoice, materials cost and CIS statement digitally as it happens and send HMRC a quarterly summary. Our guide to MTD for sole traders walks through the quarterly rhythm.
Common Mistakes Solar Installers Make
Not splitting labour and materials on invoices. Bundle them and the contractor deducts 20% CIS from your materials too, lending HMRC money you have to chase back.
Binning CIS deduction statements. Without them you cannot prove the tax already paid, and your refund shrinks or stalls.
Registering late for CIS. Stay unregistered and you lose 30% instead of 20% at source, hurting your cash flow all year.
Treating the van and tools as running costs only. Big purchases belong in capital allowances via the AIA, which can slash a heavy re-kit year's profit.
Assuming all solar work is zero-rated VAT. The zero rate covers qualifying domestic installs in Great Britain to 31 March 2027; commercial jobs and some battery work do not qualify.
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