Care Home Solar Finance 2026 — PPA vs AIA vs Lease
Side-by-side financial comparison of PPA, capital purchase with AIA, hire purchase, and operating lease for UK care home solar in 2026. Worked examples.
Published 15 May 2026 by SEO Dons Editorial
The four main funding routes for care home solar — PPA, capital purchase, hire purchase, operating lease — produce dramatically different cash-flow profiles, tax positions, and balance-sheet treatments. The right choice depends on capital appetite, tax position, ownership horizon, and operator type. This piece compares all four side-by-side with worked examples for a typical 50 kWp install on a 50-bed care home.
The base case — 50 kWp install on a 50-bed nursing home
For consistent comparison, assume:
- 50 kWp solar system installed Q4 2026, commissioned Q1 2027
- Total capex (purchase price): £40,000 including survey, install, commissioning, monitoring
- Annual generation year 1: 47,000 kWh
- Self-consumption rate: 50% (23,500 kWh self-consumed; 23,500 kWh exported)
- Grid import tariff: 27p/kWh (2026 average commercial), rising 3% annually
- SEG export tariff: 8p/kWh, RPI-linked
- Operator: tax-paying limited company at 25% main corporation tax rate
- 25-year operating horizon
Year-1 gross saving on the system (if owned outright, no financing):
- Energy import offset: 23,500 × £0.27 = £6,345
- SEG export income: 23,500 × £0.08 = £1,880
- Total year-1 gross saving: £8,225
Lifetime gross savings (25 years, modest energy inflation, panel degradation): ~£280,000
Route 1 — Capital purchase with AIA
Pay £40,000 upfront. Claim full Annual Investment Allowance in year 1: 100% first-year tax relief on the capex (within £1m AIA limit, which most care home operators sit comfortably under).
| Item | Year 1 | Years 2–10 | Years 11–25 |
|---|---|---|---|
| Initial capex | (£40,000) | — | — |
| AIA tax relief | +£10,000 | — | — |
| Year 1 saving | +£8,225 | — | — |
| Years 2–10 saving (cumulative) | — | +£82,000 | — |
| Years 11–25 saving (cumulative) | — | — | +£190,000 |
Effective net capex: £30,000 (after AIA shield) Simple payback on effective capex: 3.6 years 25-year net position: +£250,000+ Asset on balance sheet: Yes, from day 1 Best for: Tax-paying operators with capital available
Route 2 — Power Purchase Agreement (PPA)
A third party owns the system and sells you electricity at a fixed sub-grid tariff — typically 11p/kWh for a 50 kWp install, RPI-linked, 20-year term.
| Item | Year 1 | Years 2–10 | Years 11–20 |
|---|---|---|---|
| Initial capex | £0 | — | — |
| Self-consumed kWh (PPA) | 23,500 × £0.11 = (£2,585) | — | — |
| Grid alternative (if no solar) | 23,500 × £0.27 = (£6,345) | — | — |
| Net saving on self-consumed | +£3,760 | +£34,000 (modest inflation) | +£42,000 |
| Exported kWh (SEG kept by PPA provider) | — | — | — |
Effective net capex: £0 Year 1 cashflow: Positive from day 1 20-year net position: +£80,000–£95,000 Asset on balance sheet: No (off-balance-sheet) Buyout option: Year 7+ at fair market value (typically £6–£12k for a 7-year-old system) Best for: Operators without capital, charities preserving cash for resident care, group operators wanting balance-sheet-light rollouts
Route 3 — Hire purchase
Finance the £40,000 capex over 6 years at typical commercial rates (around 6.5–7.5% in 2026). 15% deposit (£6,000), monthly payments of £548 (£6,576/year).
| Item | Year 1 | Year 2 | Year 3 | Year 6 | Year 25 |
|---|---|---|---|---|---|
| Deposit | (£6,000) | — | — | — | — |
| Monthly payments | (£6,576) | (£6,576) | (£6,576) | (£6,576) | 0 |
| Annual saving | +£8,225 | +£8,470 | +£8,720 | +£9,540 | +£15,500 |
| Net annual cashflow | (£4,351) | +£1,894 | +£2,144 | +£2,964 | +£15,500 |
| AIA tax relief year 1 | +£10,000 | — | — | — | — |
Year-1 net position: +£3,649 (after AIA, net cash positive) Year 6 cumulative: +£20,500 25-year net position: +£235,000 (own the asset outright from year 7) Asset on balance sheet: Yes, from day 1 Best for: Tax-paying operators wanting ownership but not the immediate cash outlay
Route 4 — Operating lease
A lessor owns the system; you lease for 5–7 years at fixed monthly payments. Typical lease rate: £8,800/year for a £40k system over 6 years.
| Item | Year 1 | Year 6 | End of lease | Years 7–25 |
|---|---|---|---|---|
| Initial capex | £0 | — | — | — |
| Annual lease payments | (£8,800) | (£8,800) | — | — |
| Annual saving | +£8,225 | +£9,540 | — | +£10k–£15k |
| Net annual cashflow | (£575) | +£740 | — | +£10k–£15k |
| Asset purchase at lease end | — | — | (£8,000 fair market value) | — |
Lease period cashflow: Mildly negative year 1, positive from year 3 Year 6 cumulative (after asset purchase): +£12,400 25-year net position: +£220,000 Asset on balance sheet: Off-balance-sheet during lease; on-balance-sheet from purchase Best for: Operators preferring fixed monthly cost over capex; balance-sheet-light during lease term
Side-by-side summary
| Metric | Capex + AIA | PPA | Hire purchase | Operating lease |
|---|---|---|---|---|
| Initial cash outlay | £40k | £0 | £6k | £0 |
| Year 1 net cashflow | +£18,225 (with AIA) | +£3,760 | +£3,649 | -£575 |
| Year 6 cumulative cashflow | +£80k | +£25k | +£20k | +£12k |
| 25-year net position | +£250k | +£90k | +£235k | +£220k |
| Asset ownership | Day 1 | Year 7+ (buyout) | Day 1 | Year 7 (purchase) |
| Tax shield | AIA + WDA | Operating expense | AIA + interest deduction | Operating expense |
| Balance sheet impact | On | Off | On | Off (lease) / On (post-purchase) |
| Right for | Tax-paying, capital available | No capex, simple | Want ownership, prefer financed | Fixed monthly cost preference |
Group operator considerations
For care home groups deploying solar across multiple sites in a single tax year, the AIA is shared across the group of connected companies — not £1m per company. Where annual spend exceeds £1m, the 50% First Year Allowance applies to special-rate-pool expenditure above the AIA cap (50% immediate relief + 6% writing-down allowance on the remainder).
A group spending £2.4m in a tax year captures:
- £1m AIA at 25% = £250k tax saved
- £700k FYA at 50% × 25% = £87.5k tax saved year 1
- £700k continuing WDA at 6% × 25% = £10.5k/year ongoing
Total year-1 tax shield: £337.5k on £2.4m capex = 14% effective discount. Worth careful planning across multi-year programmes.
Charity operators
For charity-owned care homes (hospices, charity-run residential, MHA, ExtraCare Charitable Trust), AIA generally doesn’t apply (the main charity is non-tax-paying). Three routes work:
- Gift-aided capital appeal — preserves donor recognition value, builds onto the charity’s fundraising narrative
- PPA — zero capex, immediate saving freed for resident care
- Trading subsidiary — where the charity operates a trading subsidiary that pays corporation tax, capex via the trading subsidiary captures AIA. Complex structuring required — appropriate for larger charity portfolios
The decision framework in one sentence
For tax-paying operators with capital: capex + AIA. For everyone else: PPA. For groups deploying at scale: capex + AIA + FYA across multiple sites with careful timing. For charities: gift-aid appeal or PPA, depending on donor base.
For more on each route in detail, see solar PPA for care homes, solar leasing, or capital allowances.