Tax & Incentives 2025: What Every SME Should Know About Energy Efficiency Funding

Energy efficiency isn’t just about sustainability; it’s about saving money and building resilience. In 2025, UK SMEs have more opportunities than ever to access tax reliefs, grants and incentives to upgrade their operations. This guide explains the main schemes, how they work and how to get started.

1. Why Energy Efficiency Matters for SMEs

• Lower Operating Costs: Cutting energy use can directly improve margins.• Competitive Edge: Many procurement processes now reward low-carbon suppliers.• Regulatory Pressure: Net zero targets and ESG disclosure requirements are expanding to smaller firms.

2. The Big Picture: UK Tax and Incentive Landscape 2025

• Full Expensing: SMEs can deduct 100% of qualifying plant and machinery costs in year one.• Enhanced Capital Allowances (ECAs): Still available for some energy-saving and low-carbon equipment.• Super Deduction Transition: Some investments made before April 2025 may still benefit from previous super-deduction rules.

3. Grants and Regional Support

• Local Authority Schemes: Many councils and LEPs offer decarbonisation grants for SMEs.• Industrial Energy Transformation Fund (IETF): Supports efficiency upgrades in energy-intensive sectors.• UK Infrastructure Bank and Green Finance: Specialist lenders offer low-cost finance for renewable and efficiency projects.

4. How to Access the Incentives

• Energy Audit First: Most grant or tax schemes require evidence of current energy use.• Approved Equipment Lists: For ECAs, equipment must be on HMRC or BEIS-approved lists.• Professional Advice: Accountants or energy consultants can help ensure you maximise allowances.

5. Combining Funding with Smart Procurement

• Fixed vs. Flexible Contracts: Even with new equipment, lock in predictable rates for remaining grid supply.• Onsite Generation: Use tax breaks to fund solar, heat pumps or storage, hedging against volatility.• Demand Management: Use smart controls to shift load to cheaper periods.

6. First Steps for SMEs to Secure Funding

1. Identify Priority Upgrades: Lighting, HVAC, insulation, process improvements.2. Gather Data: Meter readings, energy bills, and site information.3. Check Eligibility: Review local and national schemes.4. Prepare Financial Models: Include tax relief and grant income in ROI calculations.5. Apply Early: Many grant funds are limited and competitive.

7. The Bottom Line

The government wants SMEs to lead on energy efficiency. Generous tax reliefs, grants and green finance products are designed to make upgrades affordable. By acting now, SMEs can lower their bills, reduce carbon and secure a stronger competitive position.

Ready to cut costs and unlock funding for your energy efficiency projects? HP Connections helps SMEs across the UK identify tax breaks, secure grants, and implement renewable energy solutions.Contact us today for a free initial consultation and find out how much support you could access.