More than 54,500 UK homeowners with solar panels face automatic £100 fines from HMRC this month for failing to submit tax returns by the January 31 deadline. The issue stems from undeclared income earned by selling surplus electricity back to the national grid through the Smart Export Guarantee scheme.
The tax trap affects households whose total supplementary income exceeds HMRC's £1,000 tax-free trading allowance. Many solar panel owners earn £300 or more annually from SEG payments. When combined with other side income, this quickly pushes them over the threshold, requiring them to register for self-assessment and declare their earnings.
The automatic £100 late-filing penalty could wipe out around a third of typical annual SEG earnings for affected households. With around nine per cent of taxpayers historically missing the deadline, the financial impact is significant for families already managing tight budgets.
Record solar installations drive problem
Following a record-breaking year for installations in 2025, approximately 1.6 million UK households now have solar panels. An estimated 605,966 of these solar owners potentially exceed the £1,000 allowance when all supplementary income is combined.
George Penny, founder of The Solar Co, warned: «After a record-breaking year for solar installations in 2025, around 1.6 million UK households now have solar panels, with more homeowners than ever earning money by selling unused electricity back to the grid.»
He explained the tax threshold issue: «While households may receive £300 or more annually through the Smart Export Guarantee, those earning additional income can quickly exceed HMRC's £1,000 tax-free trading allowance.»
Urgent action needed before deadline
Around 39 per cent of people in the UK operate some form of side hustle, increasing the likelihood that solar panel owners will need to submit a return. Penny emphasized the urgency: «Ahead of the deadline, it's vital that solar panel owners check exactly how much they've earned, including Smart Export Guarantee payments.»
He added: «If total supplementary income exceeded £1,000 between April 2024 and April 2025, it must be declared to avoid penalties.»
Households are advised to review their most recent energy supplier statements, which detail earnings from exporting electricity to the grid. HMRC has consistently stated that individuals are responsible for understanding their tax obligations.
Note: This article was created with Artificial Intelligence (AI).