Thousands Of UK Solar Homeowners Face Tax Fines

It’s a scenario few UK homeowners expected when they first installed solar panels: a looming tax deadline, the risk of an automatic £100 fine, and the sudden need to grapple with self assessment forms. Yet, as January 31, 2026, approaches, more than 54,000 households across Britain find themselves caught in exactly this predicament, according to multiple reports including The WP Times and Express. The culprit? Income earned from exporting surplus electricity back to the grid through the Smart Export Guarantee (SEG)—and a tax rule that’s catching thousands unawares.

Britain’s solar revolution has been nothing short of remarkable. Following a record-breaking year for installations in 2025, an estimated 1.6 million UK homes now boast rooftop photovoltaic systems, as noted by George Penny, founder of The Solar Co, in statements to Express and other outlets. These panels don’t just slash energy bills—they’re also turning households into small-scale energy producers, with many earning £200 to £500 a year by selling unused electricity back to the grid. For some, it’s a tidy bonus in an era of rising living costs and environmental consciousness.

But here’s the catch: the money earned through the SEG is real income in the eyes of HM Revenue & Customs (HMRC). And that means it can be taxable, especially when combined with other side earnings—a detail that’s proving both confusing and costly for thousands of unsuspecting homeowners.

The key tax principle at play is the £1,000 trading allowance. As The WP Times explains, any UK resident who earns more than £1,000 in total supplementary income during the 2024-25 tax year (from April 6, 2024, to April 5, 2025) is legally required to file a self assessment tax return. This threshold isn’t just about solar income; it covers all untaxed side earnings, from freelance work to online sales and gig economy jobs. So, if a homeowner brings in £300 from SEG payments and another £900 from tutoring or Etsy sales, they’ve crossed the line and must declare their income to HMRC.

It’s a rule that’s catching many off-guard. As George Penny told Express, “While households can earn £300 or more a year through the Smart Export Guarantee (SEG), those that earn additional income on top of this through side hustles can quickly exceed HMRC’s £1,000 tax-free trading allowance, creating a legal requirement to declare the income.”

Industry estimates suggest the issue is widespread. With around 39% of Brits now running some form of side hustle, it’s believed that over 600,000 solar panel owners could be exceeding the tax-free allowance and need to file a return by January 31, 2026. Yet HMRC figures indicate that about 9% of taxpayers miss the annual deadline, meaning more than 54,500 solar households are at risk of an automatic £100 late-filing fine—potentially wiping out a third of their annual SEG earnings.

“More than 54,500 solar households could face an automatic £100 late-filing fine, which could wipe out around a third of their annual SEG earnings,” Penny warned, underlining the financial sting of missing the deadline. The fine applies even if no tax is ultimately owed, and penalties escalate for further delays, with additional charges after three, six, and twelve months.

Why are so many homeowners caught off guard? The answer lies in the nature of SEG payments and the lack of direct warnings from HMRC. Unlike salary income, which is taxed at source, SEG payments arrive quietly via energy suppliers, with no automatic tax deduction and no heads-up from the taxman. Many people assume that because the panels are on their private home, any earnings are automatically tax-free. But as The WP Times makes clear, “HMRC looks at the overall intention and total income, not just the existence of solar panels.”

Not every penny connected with solar panels creates a tax liability. Savings on one’s own electricity bill or using generated power at home aren’t taxable. However, SEG payments that, when combined with other untaxed income, exceed £1,000 do create a legal obligation to file. The crucial step is to calculate total supplementary income for the relevant tax year and compare it to the trading allowance.

To help clarify the situation, The WP Times offers practical scenarios. For example, if someone receives £400 in SEG payments but has no other side income, there’s no need to file. But if they earn £800 from SEG and £500 from online sales, they must file a return. Even those already registered for self assessment must include their SEG income in their returns.

So, what should solar panel owners do as the deadline looms? Tax specialists advise several immediate steps: review energy supplier statements for all SEG payments between April 6, 2024, and April 5, 2025; add up any other untaxed income from freelance work, online sales, or casual jobs; and compare the total to the £1,000 allowance. If it’s above the threshold, register for self assessment and file before January 31, 2026.

When it comes time to file, SEG payments are typically entered as miscellaneous income on the self assessment form. Good record-keeping is essential, including annual export payment summaries, supplier statements, records of related expenses, and meter readings. As The WP Times notes, “Good record-keeping is essential in case HMRC ever asks for proof.”

Those who miss the deadline face automatic penalties, regardless of whether they actually owe tax. The initial £100 fine is just the beginning—additional daily penalties may follow, and interest can accrue on any unpaid tax. HMRC can pursue late filers even years down the line, making it all the more important to act now.

Despite the potential for confusion and penalties, solar panels remain a smart long-term investment for most households, helping to cut energy bills and support the shift to renewable power. But as the tax rules around export income become more prominent, a little awareness and timely action can make all the difference. Tax advisers recommend three simple principles: don’t ignore small amounts of income, file early, and when in doubt, declare it.

For those still unsure, help is available. Homeowners can contact the HMRC Self Assessment helpline at 0300 200 3310, visit gov.uk/self-assessment, or seek independent advice from Citizens Advice or qualified accountants.

As the January 31 deadline approaches, the message is clear: take a few minutes to check your SEG earnings and total supplementary income. A simple oversight could turn a small environmental bonus into an unnecessary financial headache—one that’s entirely avoidable with just a bit of preparation.