Solar Panels vs Savings UK 2026: Where Should £7000 Go?

Solar panels vs savings: where should your £7,000 actually go in 2026?

Updated 28/10/2026 · UK · 14 min read · Rates and rules checked on 28 October 2026, before the Autumn Budget statement

I’ve spent twenty years watching people put spare cash into roofs, banks and building societies, and this question lands in my inbox every time savings rates move: “is solar still worth it, or should I just leave the money in an ISA?” Fair question. So I pulled the actual October 2026 numbers for all three options and ran them side by side. No installer maths, no rose tint, and one correction to how these comparisons are often done, which I’ll get to in a moment.

What a £7,000 solar system actually returns in 2026

Fix the assumptions first, because every dodgy solar quote starts with vague ones. £7,000 buys a 4kWp system, nine or ten modern panels, fully installed at 0% VAT. That sits in the middle of the £5,500 to £7,500 range in our 2026 solar panel cost guide. On a south-facing roof in southern England it generates about 4,000 kWh a year. The Midlands and Wales manage 3,400 to 3,800 kWh, and Scotland 3,000 to 3,400, as our payback period guide shows by region.

Now the two income streams. Half of that generation is used in the home and displaces grid electricity at Ofgem’s capped rate of 26.32p/kWh for October to December 2026. That is 2,000 kWh × 26.32p = £526 a year off your bill. The other 2,000 kWh is exported, and what it earns depends on your Smart Export Guarantee tariff: £140 at 7p, which is the cautious figure we use across our guides, £260 at Fuse Energy’s 13p, or £500 at Good Energy’s 25p Solar Savings Exclusive, which you only get if Good Energy installs the system. Our SEG rate comparison has the full ladder.

4kWp, 4,000 kWh a year, 50% used at home, no battery, flat electricity prices, 0.4% a year panel degradation, one £1,350 inverter swap in year 12. The last column is the equivalent annual interest rate over 25 years.

Two columns, because they answer different questions. The “simple yield” is the one you see in installer brochures: year-one benefit divided by cost. It flatters solar. A savings account hands your £7,000 back at the end, whereas panels do not. The fair comparison is the annualised return: the interest rate a bank would have to pay to match solar’s stream of savings over the system’s life, after the inverter swap. That is the 6.8% to 9.0% in the last column, and it is the number to set against a savings rate.

Even so, 9.0% on £7,000 is a strong return, and it has two properties no bank product can match: it is largely tax-free for owner-occupiers, and it rises when electricity prices rise. Not every roof gets there. Drop to 3,400 kWh, 40% used at home and a 7p export tariff, the sort of shaded or northern set-up I see all the time, and the annualised return falls to about 3.5%. That is below every cash option in this article.

One detail on the 26.32p. Ofgem’s October to December rate excludes VAT, because VAT on household electricity in Great Britain is 0% until 31 March 2027 (our price cap breakdown has the quarter-by-quarter rates). Once VAT returns at 5%, the same unit costs about 27.6p, so each kWh your panels displace is worth slightly more. I’ve kept 26.32p throughout to stay conservative.

Savings accounts and cash ISAs: the benchmark

October 2026 is a decent time to be a saver. The best one-year fixed cash ISA pays 5.00% (Zopa, 27 October), with two-year fixes at 5.10%. Outside an ISA, the best one-year fixed rate was 5.15% on 22 October, though those accounts want £5,000 to £10,000 as a minimum. Easy-access is trickier. The 5.00% headline rates from LemFi and Starling include bonuses: LemFi’s drops to 3.04% after six months. The best no-bonus easy-access rate I found was 4.30% (Oxbury, 5 October). Easy-access cash ISAs reach about 4.9%, again with 12-month bonuses.

On £7,000 that is £350 a year at 5.00% or £301 at 4.30%. Safe, FSCS-protected and, here is the part solar cannot copy, yours to withdraw when life happens. Boiler dies, car fails its MOT, the cash is there that afternoon. Your panels are not.

Two caveats. A fixed rate locks today’s rate for a year, not the future: next October you reinvest at whatever the market offers. And bonus rates fall away, so the rate you start on is rarely the rate you finish on.

Overpaying the mortgage: the guaranteed return nobody prices

The third option is not an investment at all. It deletes a cost. Every £7,000 you overpay saves interest at your mortgage rate until the debt is gone, and because it is money you do not pay rather than money you earn, there is no tax on it.

What is that worth now? Moneyfacts puts the average new two-year fix at 5.93% and the five-year fix at 5.95%, up from 5.59% and 5.63% a month earlier. Overpay £7,000 at 5.93% and you save £415 in year one. Over ten years that is about £4,150 if nothing compounds, or roughly £5,450 once the smaller balance starts earning its keep. Nothing on the high street offers a guaranteed return that high.

The catch is access. Overpaid cash becomes equity, and getting it back means remortgaging or selling. Most fixed deals also cap penalty-free overpayments at 10% of the balance a year, so check your terms before you send a lump sum.

The head-to-head numbers

Same £7,000, five homes for it. The chart shows the annualised return, so solar and cash sit on the same scale:

Illustrative. Solar: 4,000 kWh, 50% used at home, 26.32p, 0.4% annual degradation, no inverter cost in the 10-year column. Cash rows assume today’s rate holds, which is a guess either way.

Read the ten-year column and solar looks miles ahead, but that column hides the capital. Cash is still sitting there afterwards and the panels’ £7,000 is not. By year 25, solar has paid back roughly £15,900 (7p) to £18,700 (13p) on that £7,000 before the inverter swap, which is why the annualised return, not the headline yield, is the honest comparison. Our payback guide goes deeper on the solar side, including the regional spread.

Run your own numbers

Averages only get you so far. Enter your own quote and tariff below. The defaults match the examples above. For sizing a system from your bill, roof direction and region, use our solar panel calculator.

Tax changes the ranking (less than you’d think)

Savings interest is taxable above your Personal Savings Allowance: £1,000 a year for basic-rate taxpayers, £500 for higher-rate and nothing for additional-rate, per gov.uk. Some lower earners get up to £5,000 of interest tax-free through the starting rate for savings. On £7,000 the allowance barely bites: even at 5.00% the interest is £350, inside most people’s allowance. An additional-rate saver is different. They lose 45% today, cutting £350 to £192.50, and from April 2027 the savings rates rise by two points to 22%, 42% and 47%, so the loss grows to 47%. A cash ISA removes the problem. The ISA limit for under-65s is due to fall from £20,000 to £12,000 from April 2027, so use this year’s allowance if the money is going into cash.

Solar has its own shelter. For most owner-occupiers, SEG income is exempt from Income Tax under HMRC’s domestic microgeneration rule, as long as the system is sized for your own home. HMRC’s manual treats generating no more than 20% above your household needs as unlikely to breach that, which is why we use 120% of usage as the working ceiling. Landlords are not covered by the exemption, and a business-owned system is taxed as a business receipt. The conditions are unpacked in our guide to SEG income and tax. Bill savings were never taxable, and mortgage overpayment is a tax-free saving by definition. So for most people all three front-runners are effectively tax-clean, and tax is a tiebreaker rather than a decider.

The 0% VAT deadline is the one date that matters

The 0% VAT rate on domestic solar and battery installs runs until 31 March 2027, then reverts to 5%. On a £7,000 system that is £350 added for exactly the same hardware, about a year of easy-access interest on the whole pot. Two details trip people up. Signing a contract before the deadline does not by itself fix the rate, because the tax point is normally completion, or an earlier invoice or payment. And a deposit paid early is taxed at the rate in force then, while a balance invoiced after 1 April can carry 5%. Get the VAT treatment of the final payment confirmed in writing.

The Autumn Budget statement on 28 October 2026 could in theory change this, and I have seen no confirmed extension. Check the latest position before you rely on the date. Our piece on what the April 2027 VAT rise really costs goes through the mechanics, and buy now or wait covers the price trend.

Risks cash doesn’t carry

• Liquidity. No emergency fund? Build that in easy-access first, whatever the yields say. Solar and mortgage overpayments both fail the boiler-explodes test.
• Moving house. Studies of the sale-price effect vary widely. Government-cited research suggests 1% to 4%, while a 2024 Swansea University study of five million listings found 6.1% to 7.1%. That is an average, not a promise, and it applies to owned systems, not old rent-a-roof leases. Our house value guide and guide to selling with solar cover the detail. Moving within five years? Cash usually wins.
• The roof itself. Shading, a north face or a roof replacement due in eight years can wreck the maths, as the weak-roof bar in the chart shows.
• Export tariff drift. Fuse’s 13p is variable and reviewed quarterly, so it can fall. Fixed deals such as Good Energy’s 25p run for 12 months. Neither is guaranteed for 25 years.
• Hardware life. Panels carry 25-year warranties, but a string inverter typically lasts 10 to 15 years. A like-for-like swap on a 3 to 6kW system costs £900 to £1,800 (inverter replacement costs), and the numbers above already include £1,350.
• Installer risk. MCS certification and an insurance-backed warranty are non-negotiable. Without the MCS certificate you cannot register for SEG payments at all.

So where should your £7,000 go?

After twenty years of these sums, my rule of thumb is blunt:

• Solar, if you will stay eight to ten years or more, your roof faces roughly south, east or west without heavy shade, and your emergency fund is intact. You are buying a roughly 7% to 9% annual return that rises with energy prices and keeps paying after payback, and you are doing it before the 31 March 2027 VAT deadline.
• Mortgage overpayment, if your rate is near today’s 5.9% averages or higher, you value certainty over upside, or your roof fails the survey. It is the best guaranteed return on the high street.
• Savings or an ISA, if you might move within five years, you are still building a buffer, or you sleep better knowing the money is reachable. Shelter it in a cash ISA and take the fixed 5% while it is on offer.
• Or split it. Nothing says the £7k must be monogamous. Panels on half and overpayment or an ISA on the rest suits a household that wants yield and a way out.
• Or borrow for the panels. Some existing Nationwide mortgage customers can borrow £5,000 to £20,000 at a genuine 0% for solar, which lets savings keep earning. Most installer finance costs more, so compare total repayable, as our solar finance guide explains.

Whichever way you lean, run your own numbers before anyone’s calculator does the persuading, including mine. The tool above takes a minute and uses your quote, not a national average.

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