Government ‘Super-Deduction’ Tax Incentive Supports Net Zero Targets


Trying to reduce energy costs is an ongoing challenge faced by most businesses. Add to that the need to reduce emissions to hit looming net zero targets and you’ve potentially got a real headache, especially for many larger operators who will need to make significant investments.


The good news is that the government announced two new tax breaks in the March 2021 budget to help incentivise businesses to make any new plant and machinery investment for the period 1 April 2021 to 31 March 2023. These are:

  • A super-deduction tax providing allowances of 130% on investments that ordinarily qualify for the 18% main rate writing down allowances;

  • A first-year allowance of 50% on other asset investments that ordinarily qualify for 6% special rate writing down allowances.

So as an example if a company spends £1m on investments which meet the qualification criteria they can deduct £1.3m (130% of the initial investment) from their taxable profits. Deducting £1.3m from taxable profits will save the company up to 19% of that – or £247,000 on its corporation tax bill.


The super-deduction scheme also covers all types of new plant and machinery – not just those that promote energy efficiency. As a result, the new scheme is expected to increase the level of business investment by 10%, or around £20 billion a year, according to the Office for Budget Responsibility.


Jason Martin, Energy Manager at Professional Energy Purchasing comments

“We’ve been working with many clients to develop plans that will eliminate energy inefficiencies, reduce emissions, and provide long-term sustainable benefits. These tax incentives should help to provide a great springboard that will help them make that initial investment.”
“Not only is the 130% super-deduction tax an improvement on the existing tax for energy efficient equipment, but it’s also uncapped. This is fantastic news for some of our clients who are considering major projects to make them less reliant on the grid through onsite solar PV and battery storage.”

Energy-related assets that qualify for the super-deduction or special rate tax breaks include:

  • Solar panels, wind turbines and other on-site generation

  • Sub-metering and energy monitoring/management software

  • Building management systems/smart controls

  • Energy storage solutions

  • New energy efficient heating and cooling systems

  • Combined heat and power (CHP) units

  • Motors and drives

  • Compressed air equipment

  • Electrical infrastructure equipment

  • EV charging points

  • LED lighting

  • Heat pumps


For more information about the tax incentive scheme click here.


Get in touch for help with your energy reduction and net zero planning.


0114 327 2645

info@pepgb.com