Home Heat Pump Guide

Government Heat Pump Incentives: Past, Present, Future

The UK government has been incentivising heat pump adoption for over a decade, yet the landscape of support schemes has been anything but consistent. Programmes have launched, expanded, been cut, and replaced — sometimes leaving homeowners confused about what is actually available to them right now.

This guide walks you through every major government heat pump incentive from the earliest days of the Renewable Heat Incentive through to the current Boiler Upgrade Scheme, and looks ahead at what future policy is likely to bring. Whether you are considering a heat pump today or planning for the next few years, understanding this timeline will help you make the most of the financial support on offer.

Why the Government Subsidises Heat Pumps

Before diving into the individual schemes, it helps to understand the underlying motivation. The UK has legally binding targets to reach net zero carbon emissions by 2050. Heating buildings accounts for roughly 21% of the UK's total carbon output — almost all of it from burning natural gas, oil, and LPG in boilers.

Heat pumps are the government's primary solution. They run on electricity (which is getting progressively greener as renewable generation grows) and deliver between two and four units of heat for every unit of electricity consumed. The government's target is to install 600,000 heat pumps per year by 2028, up from around 55,000 in 2023.

The problem is cost. A heat pump installation typically costs between £8,000 and £15,000 — significantly more than replacing a gas boiler. Without financial incentives, most homeowners would not voluntarily make the switch. That is why every government since 2011 has offered some form of subsidy.

The Renewable Heat Incentive (RHI): 2014–2022

The Renewable Heat Incentive was the UK's first major financial support scheme specifically for heat pumps. The domestic RHI launched in April 2014 (following a non-domestic version in 2011) and ran until March 2022.

How the RHI Worked

Unlike a grant that reduces your upfront cost, the RHI was a quarterly payment based on how much renewable heat your system was estimated to produce. After installing a heat pump and registering with Ofgem, you received payments every three months for seven years.

The payment rates varied over the life of the scheme, but typical rates for an air source heat pump were around 10.85p per kWh of renewable heat generated. For a typical three-bedroom house producing 12,000 kWh of heat per year, this worked out at roughly £1,300 per year — or over £9,000 across the full seven-year payment period.

RHI Strengths and Weaknesses

The RHI was generous for those who used it. Over seven years, total payments often exceeded the original installation cost, making the heat pump essentially free — or even profitable. However, the scheme had significant drawbacks:

  • Upfront cost barrier: You still had to pay the full installation cost upfront and wait years to recoup it
  • Complexity: The application process was bureaucratic, requiring energy assessments and ongoing meter readings
  • Low awareness: Many homeowners simply did not know the scheme existed
  • Slow uptake: Despite generous payments, the RHI never achieved the installation volumes the government hoped for

The domestic RHI closed to new applications on 31 March 2022, though existing participants continue to receive their quarterly payments until their seven-year term expires.

The Green Homes Grant: 2020–2021

The Green Homes Grant Voucher Scheme launched in September 2020 as part of the government's post-Covid economic recovery plan. It offered homeowners in England vouchers worth up to £5,000 (or £10,000 for low-income households) towards energy efficiency improvements, including heat pumps.

Why It Failed

The Green Homes Grant is widely regarded as one of the worst-executed government energy schemes in UK history. It was scrapped after just six months, in March 2021, having issued a fraction of the vouchers originally planned. The problems were numerous:

  • Overwhelmed administration: The American company contracted to run the scheme (ICF) could not handle the volume of applications
  • Installer shortages: Not enough TrustMark and MCS-certified installers were available to carry out the work
  • Expiring vouchers: Vouchers had a tight deadline and many expired before work could be completed
  • Confusing rules: Primary and secondary measure requirements confused applicants and installers alike

The scheme's failure set back consumer confidence in government heat pump support and wasted an estimated £50 million in administration costs with minimal carbon savings to show for it.

The Boiler Upgrade Scheme (BUS): 2022–2028

The Boiler Upgrade Scheme launched in April 2022 as the direct replacement for the RHI. Learning from past mistakes, the government designed it as a simple, upfront grant rather than a long-term payment scheme.

BUS Grant Amounts

  • April 2022 – September 2023: £5,000 for air source heat pumps, £6,000 for ground source heat pumps
  • October 2023 onwards: £7,500 for both air source and ground source heat pumps

The increase to £7,500 was a significant boost. For many properties, it reduces the net cost of a heat pump installation to between £500 and £7,500 depending on the system size and complexity.

How the BUS Works

The BUS is far simpler than the RHI. Your MCS-certified installer applies to Ofgem on your behalf. If approved, the grant is deducted directly from your invoice — you never need to handle the money yourself. The whole process typically takes two to three weeks from application to approval.

BUS Eligibility

To qualify, you need to own the property, have a valid EPC with no outstanding loft or cavity wall insulation recommendations, and be replacing an existing fossil fuel heating system. The scheme covers England and Wales. Scotland has its own equivalent through Home Energy Scotland.

The BUS was originally due to close in March 2025 but has been extended to March 2028, giving homeowners several more years to take advantage of the funding.

BUS Uptake and Impact

Take-up of the BUS was initially slow but has accelerated significantly since the grant increase. In 2025, over 40,000 applications were approved — roughly double the 2023 figure. The scheme is now the primary driver of domestic heat pump installations in England and Wales.

Other Current Incentives

ECO4 Scheme

The Energy Company Obligation (ECO4) scheme requires large energy suppliers to fund energy efficiency improvements for low-income and vulnerable households. Heat pumps are an eligible measure, and qualifying households can receive fully funded installations — worth £10,000 or more — at no personal cost.

ECO4 runs until March 2026, with a successor scheme expected to follow. Eligibility is based on receiving certain means-tested benefits and having a low EPC rating.

Home Energy Scotland

Scottish homeowners can access grants of up to £7,500 plus interest-free loans of up to £7,500 through Home Energy Scotland. This is arguably the most generous package in the UK, potentially covering the entire cost of a heat pump installation.

Nest Scheme (Wales)

In addition to the BUS grant, Welsh homeowners on low incomes may qualify for the Nest scheme, which can provide free or heavily subsidised heat pump installations.

Reduced VAT

Heat pump installations in the UK currently attract 0% VAT (reduced from 5%, which was itself reduced from 20%). This applies to installations in residential properties and runs until at least March 2027. On a £12,000 installation, this saves you £2,400 compared to the standard 20% rate.

What Is Coming Next?

Government policy is always subject to change, but several trends give us a reasonable picture of what future heat pump incentives might look like.

The Clean Heat Market Mechanism

The Clean Heat Market Mechanism (CHMM), expected to take effect in 2026, will require boiler manufacturers to sell a certain percentage of heat pumps relative to their boiler sales. Manufacturers who fall short will face financial penalties. This is not a direct consumer incentive, but it should drive down heat pump prices as manufacturers compete for market share and invest in scaling production.

Electricity Price Rebalancing

One of the biggest barriers to heat pump economics is the ratio of electricity to gas prices. Currently, electricity costs roughly 3.5 times as much as gas per unit. The government has committed to rebalancing this — potentially by shifting green levies from electricity bills to gas bills, or to general taxation. If electricity prices fall relative to gas, heat pump running costs become dramatically more competitive.

Post-2028 Grant Support

The BUS is funded until March 2028. What comes after is uncertain, but most industry analysts expect some form of continued grant support, potentially at a lower level as installation costs fall. The government's 600,000-per-year target is nowhere near being met, so withdrawing support entirely would be counterproductive.

Potential Future Gas Boiler Restrictions

The government has discussed restricting or banning new gas boiler installations in certain circumstances. While a blanket ban is politically unlikely in the near term, we may see requirements for new-build homes to install heat pumps (already the case in some planning authorities) and restrictions on replacing gas boilers in properties with good insulation.

Making the Most of Current Incentives

If you are considering a heat pump, the current incentive landscape is the most favourable it has ever been. Here is how to maximise your financial support:

  • Apply for the BUS grant: Your MCS-certified installer handles this. Ensure they apply before starting work.
  • Check your EPC: Use the suitability checker to confirm your property qualifies.
  • Explore additional funding: If you are in Scotland, apply through Home Energy Scotland. If you are on a low income, check ECO4 eligibility.
  • Take advantage of 0% VAT: This applies automatically but confirm with your installer that it is reflected in their quote.
  • Use the heat pump calculator to estimate your total costs after grants.

Frequently Asked Questions

Can I still apply for the Renewable Heat Incentive?

No. The domestic RHI closed to new applications on 31 March 2022. If you already have an active RHI registration, you will continue to receive payments until your seven-year term ends.

Is the Boiler Upgrade Scheme still running?

Yes. The BUS has been extended to March 2028 and currently offers £7,500 towards air source and ground source heat pump installations in England and Wales.

Will the heat pump grant increase beyond £7,500?

There are no current plans to increase the BUS grant beyond £7,500. However, the government is exploring other ways to reduce costs, including the Clean Heat Market Mechanism and electricity price rebalancing.

What happens if government incentives are withdrawn?

Even without grants, heat pump costs are falling year on year as the market matures. The combination of falling equipment costs, improved efficiency, and likely electricity price reductions should make heat pumps cost-competitive with gas boilers within the next five to ten years regardless of grant support.

Can I combine multiple incentives?

You cannot combine the BUS grant with ECO4 funding for the same installation. However, you can combine the BUS grant with 0% VAT, and Scottish homeowners can combine Home Energy Scotland grants with loans. Check the specific rules for each scheme before applying.

Are heat pump incentives available for landlords?

Yes. Landlords can apply for the BUS grant provided they meet the standard eligibility criteria. The property must have a valid EPC and an existing fossil fuel heating system being replaced.