Government Grants and Incentives for Heat Pumps in the UK

The UK government is strongly committed to reducing carbon emissions from home heating, which currently accounts for a significant proportion of national energy use and household carbon output. Traditional gas, oil and LPG boilers are being phased out in favour of cleaner, more efficient technologies, and air source heat pumps (ASHPs) are at the heart of this transition.

To accelerate adoption, the government and devolved administrations have introduced a wide range of grants, loans, tax reductions, and regional incentives. These schemes are designed to reduce upfront installation costs, improve affordability, and shorten payback periods for homeowners and landlords alike.

This guide explains the main heat pump support schemes available across England, Scotland, Wales and Northern Ireland, who is eligible for each, how they work together, and why they make heat pumps a realistic option for far more households than many people realise.

Boiler Upgrade Scheme (BUS) – England & Wales

The Boiler Upgrade Scheme (BUS) is the flagship UK government incentive for low-carbon heating in England and Wales. It is designed to encourage households to replace fossil fuel heating systems with air source or ground source heat pumps.

What the Scheme Offers

Under the BUS, homeowners and landlords can receive:

• £7,500 grant towards the installation of an air source heat pump

• The grant is paid directly to the installer, not the homeowner

• The value of the grant is deducted from the final installation cost, reducing upfront expenditure

• The scheme runs until at least 2028, with government funding already allocated

This direct installer payment simplifies the process for homeowners and removes the need to claim money back after installation.

Who Is Eligible?

To qualify for the Boiler Upgrade Scheme, the following conditions generally apply:

• The property must be located in England or Wales

• The home must be an existing property, not a standard new-build

• The heat pump must replace an existing fossil fuel or electric heating system, such as:

  • Gas boilers

  • Oil boilers

  • LPG systems

  • Direct electric heating

• The property must have a valid Energy Performance Certificate (EPC)

• The heat pump must be installed by an MCS-certified installer

• The system must meet minimum performance and efficiency standards

New-build properties are usually excluded because developers are already required to meet low-carbon building standards, although there are limited exceptions (such as self-builds).

Why the BUS Is So Important

The £7,500 grant is transformational for many households. Typical air source heat pump installations cost between £11,000 and £15,000, depending on property size and complexity. The BUS can therefore reduce upfront costs by 30–50%, bringing heat pumps much closer in cost to conventional boiler replacements.

By lowering initial investment, the scheme improves affordability, shortens payback periods, and removes one of the biggest barriers to adoption: upfront cost anxiety.

Home Energy Scotland Grants & Loans – Scotland

Scotland offers some of the most generous heat pump support in the UK, reflecting its ambitious climate targets and strong focus on decarbonising home heating.

What’s Available

Through Home Energy Scotland, eligible households can access:

• Up to £7,500 grant for an air source heat pump

• An additional £7,500 interest-free loan

• Rural and island uplift funding, increasing support in harder-to-treat areas

• Potential additional funding for insulation and energy efficiency upgrades

In many cases, households can combine the grant and loan, dramatically reducing the amount they need to fund upfront.

Who Can Apply?

Eligibility typically includes:

• Owner-occupiers living in Scotland

• Private landlords, subject to conditions and tenancy requirements

• Homes replacing oil, gas, LPG or electric heating systems

• Properties meeting minimum efficiency and technical criteria

The application process is overseen by Home Energy Scotland advisors, who guide applicants through assessments and funding options.

Why Scotland’s Support Stands Out

The combination of non-repayable grants and interest-free loans means many Scottish households can install a heat pump with minimal immediate cost. For some properties, especially rural or off-gas homes, upfront expenses can be reduced to very low levels.

This makes heat pumps not just an environmentally responsible choice, but a financially attractive one.

Support in Wales

Wales currently relies primarily on the Boiler Upgrade Scheme, but additional layers of support may be available depending on location and household circumstances.

Additional Welsh Support Options

Some households may also benefit from:

• Local authority funding

• Area-based retrofit programmes

• Energy Company Obligation (ECO) schemes

• Community energy and low-carbon pilot projects

These schemes often target older housing stock, fuel-poor households, or specific geographic areas.

Why Local Advice Matters

Because support varies by council and funding rounds can open and close quickly, homeowners in Wales are encouraged to seek local authority or installer advice. Many programmes can be combined with the BUS to further reduce costs.

Northern Ireland Incentives

Northern Ireland does not currently have a single nationwide heat pump grant equivalent to the Boiler Upgrade Scheme, but support options still exist.

What Support Is Available?

Homeowners may be able to access:

• Local council-led energy efficiency schemes

• Housing association upgrade programmes

• Energy efficiency grants

• Low-interest or green finance options

• Pilot projects targeting fuel poverty and emissions reduction

Staying Up to Date

Funding in Northern Ireland can change frequently, and schemes may be time-limited. Homeowners should regularly check with local councils, housing bodies, or accredited installers for the latest opportunities.

Energy Company Obligation (ECO4)

The ECO4 scheme is designed to support low-income and vulnerable households across Great Britain by improving energy efficiency and reducing fuel poverty.

What ECO4 Can Cover

ECO4 funding may include:

• Loft, cavity wall and solid wall insulation

• Heating system upgrades

• Low-carbon heating solutions, including heat pumps in some cases

• Ventilation and energy efficiency improvements

In many cases, insulation upgrades are carried out alongside heating improvements to ensure the property is suitable for a heat pump.

Who Is Eligible?

Eligibility depends on factors such as:

• Household income

• Receipt of certain benefits

• EPC rating of the property

• Health or vulnerability considerations

For qualifying households, ECO4 can cover a large proportion—or in some cases the majority—of installation and insulation costs, making heat pumps accessible to those who might otherwise be excluded.

Local Authority and Regional Schemes

Beyond national programmes, many local councils and regional authorities offer additional incentives.

Types of Local Support

These may include:

• Retrofit grants

• Low-carbon heating pilot schemes

• Area-based energy efficiency funding

• Neighbourhood or estate-wide upgrade projects

How These Schemes Work

Local schemes often:

• Work alongside BUS or ECO

• Have limited funding windows

• Prioritise inefficient or older housing stock

• Target specific streets or postcodes

Because funding is often competitive and time-limited, early engagement is key.

VAT Reduction on Heat Pumps

One of the most significant but often overlooked incentives is the 0% VAT rate applied to heat pump installations.

What the VAT Reduction Covers

The zero-rate VAT applies to:

• The heat pump unit itself

• Installation labour

• Associated equipment, such as cylinders and controls

Why This Matters

Previously, heating installations were subject to VAT, increasing costs by thousands of pounds. The 0% VAT rate further improves affordability and stacks alongside grants to reduce overall project costs substantially.

How Grants Improve Payback Time

Without financial support, heat pump installations can take 10–15 years to pay back through energy savings alone.

With incentives such as:

• £7,500 BUS grant

• Interest-free loans

• 0% VAT

• Lower running costs

• Rising fossil fuel prices

Payback periods can fall to 5–8 years, particularly for off-gas properties or homes previously using oil or LPG.

How to Apply for Heat Pump Grants

In most cases, your installer handles the application process.

Typical Application Process

1. Choose an MCS-certified installer

2. Installer carries out a home survey and heat loss calculation

3. Grant eligibility is confirmed

4. Grant value is deducted from the quoted cost

5. Installation and commissioning are completed

For homeowners, the process is usually straightforward and requires minimal paperwork.

Why Government Support Will Continue

The UK government has committed to:

• Installing 600,000 heat pumps per year by 2028

• Reducing reliance on imported gas

• Achieving net-zero carbon emissions by 2050

Because of these goals, heat pump incentives are expected to remain a central part of UK energy policy and may expand further over time.

Government grants and incentives have transformed the economics of air source heat pumps. With schemes like the Boiler Upgrade Scheme, Home Energy Scotland funding, ECO4, 0% VAT, and local authority support, the financial barrier to low-carbon heating has never been lower.

For many households, these grants are the difference between considering a heat pump and confidently installing one. With long-term policy backing and rising fossil fuel costs, heat pumps are increasingly not just an environmental upgrade, but a smart financial decision. If your ready to upgrade your current heating system to an air source heat pump then contact Newpower today.