Home Heat Pump Guide

How Much Does a Heat Pump Save Per Year?

The annual savings from a heat pump depend almost entirely on what you are replacing. Switch from an efficient gas boiler and the savings are modest. Switch from oil, LPG, or direct electric heating and the savings can be dramatic — hundreds or even over a thousand pounds per year.

This guide gives you honest, calculated savings figures for each fuel type, explains why some homes save more than others, and shows you how to estimate your own potential savings.

The Savings Formula

Annual savings are calculated as:

Savings = Current heating cost - Heat pump running cost

Your current heating cost depends on your fuel type, fuel price, and boiler or heater efficiency. Your heat pump running cost depends on your heat demand, the heat pump's seasonal COP, and your electricity tariff.

We will use a baseline property with 12,000 kWh annual heat demand (a typical three-bedroom semi-detached house) and a heat pump achieving a seasonal COP of 3.0. The heat pump electricity consumption is therefore 4,000 kWh per year.

Savings vs Gas Boiler

The Calculation

  • Gas boiler cost: 12,000 kWh / 0.92 efficiency x 6.76p/kWh = £882 per year, plus £117 gas standing charge = £999 per year
  • Heat pump cost: 4,000 kWh x 24.50p/kWh = £980 per year
  • Annual saving at standard rates: £19

That is not a typo. At current standard tariff rates, switching from a modern gas boiler to a heat pump saves almost nothing on annual running costs. The electricity-to-gas price ratio in the UK (approximately 3.6:1) largely cancels out the heat pump's efficiency advantage (COP of 3.0).

How to Improve Gas-to-Heat-Pump Savings

The picture changes significantly with these adjustments:

  • Time-of-use electricity tariff (blended 18p/kWh): Heat pump cost drops to £720. Saving: £279 per year
  • Cancel gas supply (save standing charge): Add £117 saving. Combined saving: £396 per year
  • Higher COP of 3.5 plus TOU tariff: Heat pump cost drops to £617. Total saving with gas standing charge: £499 per year

With an optimised setup — good installation, time-of-use tariff, gas supply cancelled — savings of £200 to £500 per year versus gas are realistic. For more on running costs, see our detailed running costs guide.

Savings vs Oil Boiler

The Calculation

  • Oil boiler cost: 12,000 kWh / 0.88 efficiency x 7.50p/kWh (kerosene) = £1,023 per year
  • Heat pump cost (standard rate): £980 per year
  • Annual saving at standard rates: £43

Modest at standard electricity rates. But oil prices are volatile — they spiked to over 10p/kWh in 2022 — and the savings improve dramatically with a time-of-use tariff.

Realistic Oil-to-Heat-Pump Savings

  • With TOU tariff (18p/kWh blended): Heat pump cost £720. Saving: £303 per year
  • With higher oil price (9p/kWh): Oil cost £1,227. Saving at standard electric rate: £247 per year
  • With higher oil price and TOU tariff: Saving: £507 per year
  • Old inefficient oil boiler (75% efficiency) and TOU tariff: Oil cost £1,200. Heat pump cost £720. Saving: £480 per year

Oil boiler owners typically save £500 to £1,200 per year when accounting for realistic oil price fluctuations and an optimised heat pump setup. They also eliminate the hassle of ordering oil deliveries and maintaining a storage tank.

Savings vs LPG Boiler

The Calculation

  • LPG boiler cost: 12,000 kWh / 0.90 efficiency x 9.50p/kWh = £1,267 per year
  • Heat pump cost (standard rate): £980 per year
  • Annual saving at standard rates: £287

LPG is the most expensive piped gas option, so savings are immediate even at standard electricity rates.

Realistic LPG-to-Heat-Pump Savings

  • With TOU tariff: Heat pump cost £720. Saving: £547 per year
  • With higher LPG price (11p/kWh): LPG cost £1,467. Saving at standard rate: £487 per year
  • Optimised (TOU tariff, higher COP, realistic LPG price): Saving: £750 to £1,000 per year

LPG households are among the biggest winners from heat pump installations. The savings often exceed £500 to £1,200 per year, making the payback period on a heat pump very attractive. Check our cost guide for installation prices.

Savings vs Electric Heating

Direct Electric Heaters (Storage Heaters, Panel Heaters)

Direct electric heating operates at COP 1.0 — every kilowatt-hour of electricity produces exactly one kilowatt-hour of heat. A heat pump with COP 3.0 produces three times as much heat from the same electricity. The savings are substantial.

  • Direct electric cost: 12,000 kWh x 24.50p/kWh = £2,940 per year
  • Heat pump cost: 4,000 kWh x 24.50p/kWh = £980 per year
  • Annual saving at standard rates: £1,960

That is nearly £2,000 per year saved. Even with a conservative COP of 2.5, the saving is still £1,740 per year.

Economy 7 Storage Heaters

Economy 7 heaters use cheaper overnight electricity, so the comparison is more nuanced:

  • Economy 7 cost (70% off-peak at 12p, 30% peak at 30p): Blended rate approximately 17.4p/kWh. Annual cost: £2,088
  • Heat pump cost (standard rate): £980 per year
  • Annual saving: £1,108

Households with direct electric heating save £800 to £1,200+ per year by switching to a heat pump. The payback period, even without a grant, can be under 10 years. With the BUS grant, payback can be as quick as 2 to 4 years.

Savings Summary Table

All figures based on 12,000 kWh annual heat demand, three-bedroom semi-detached house:

  • Gas boiler to heat pump: £200 to £500 per year (with TOU tariff and gas standing charge saved)
  • Oil boiler to heat pump: £500 to £1,200 per year (depending on oil price and tariff)
  • LPG boiler to heat pump: £500 to £1,200 per year (depending on LPG price and tariff)
  • Direct electric to heat pump: £800 to £1,200+ per year (even at standard rates)

Factors That Increase Your Savings

Time-of-Use Electricity Tariff

This is the single most impactful thing you can do to improve heat pump savings. Tariffs offering off-peak rates of 7-15p/kWh (compared to 24.50p standard) can reduce running costs by 20-35%. Heat pumps are well-suited to these tariffs because you can pre-heat your home and hot water cylinder during cheap periods.

Higher COP Through Good Installation

A heat pump achieving COP 3.5 uses 14% less electricity than one achieving COP 3.0. That is an extra £130 per year saving on a medium property. This comes from correct sizing, low flow temperatures, weather compensation, and properly sized radiators — all down to installation quality. See our installation guide for what good installation looks like.

Larger Properties

The absolute savings scale with heat demand. A large detached house with 20,000 kWh heat demand switching from oil could save £1,500 to £2,000+ per year. The percentage saving is similar, but the pounds saved are much higher.

Solar Panels

If you have solar panels, some of the heat pump's electricity consumption is effectively free. A 4kW solar array might offset 15-25% of annual heat pump electricity use, adding £100 to £250 per year in savings.

Factors That Reduce Your Savings

Poor Insulation

A badly insulated house has higher heat demand and forces the heat pump to work at higher flow temperatures (lower COP). Both effects increase running costs and reduce the saving versus your old system.

Low COP

A heat pump with a seasonal COP of 2.3 (due to poor installation, high flow temperatures, or frequent defrost cycling) consumes 30% more electricity than one at COP 3.0. This can erase most of the saving versus gas heating.

High Electricity Tariff

If you remain on a standard flat-rate tariff and cannot access cheaper overnight electricity, savings versus gas are minimal. The UK's electricity-to-gas price ratio of approximately 3.6:1 needs to drop below 3.0:1 for heat pumps to show significant savings against gas at standard rates.

For a personalised savings estimate based on your property, try our cost calculator.

Will Savings Increase Over Time?

Several trends suggest heat pump savings will grow:

  • Energy price rebalancing: The government plans to shift levies from electricity to gas, reducing the price ratio
  • Gas price pressure: As the UK's North Sea gas production declines, imported gas costs may rise
  • Carbon pricing: Any future household carbon charge would increase gas, oil, and LPG costs
  • Technology improvements: Newer heat pumps achieve higher COPs, reducing electricity consumption

Conversely, if electricity prices rise faster than gas prices, savings would decrease. However, the long-term policy direction strongly favours electrification of heating. For the full long-term picture, see our guide on whether heat pumps are worth it.

Frequently Asked Questions

Will I definitely save money with a heat pump?

If you are switching from oil, LPG, or direct electric heating — almost certainly yes. If switching from gas, savings depend on achieving a decent COP (2.8+) and ideally using a time-of-use tariff. Without these, gas-to-heat-pump savings are minimal at current prices.

How much will I save if I switch from oil to a heat pump?

For a typical three-bedroom home, expect savings of £500 to £1,200 per year depending on oil prices, your heat pump's efficiency, and whether you use a time-of-use electricity tariff. At current oil prices, savings at the lower end of this range are most realistic.

Do heat pump savings account for the installation cost?

No — the savings figures in this guide are annual running cost savings only. To understand when the installation cost is recouped, divide the net installation cost (after grant) by the annual saving. For example, £4,500 installation cost / £500 annual saving = 9-year payback.

Can I save money by switching from a new gas boiler to a heat pump?

If your gas boiler is new and efficient (90%+), the running cost saving is small at standard electricity rates. The financial case for switching improves if you use a TOU tariff, have solar panels, or factor in the BUS grant making installation very affordable. The environmental case exists regardless of the financial calculation.

How much do heat pump owners actually save in practice?

The Energy Saving Trust and Nesta's Electrification of Heat project found that heat pump owners switching from gas save an average of £200 to £400 per year, while those switching from oil save £400 to £800 per year. These figures broadly align with our calculations above.

Will the government make heat pumps cheaper to run?

The stated policy intention is to rebalance energy levies, reducing electricity costs relative to gas. If implemented, this would significantly increase heat pump savings versus gas. However, the timeline remains uncertain.