UK Government to boost heat pump fund to £295m

The UK Government will make £295m in grant funding available to homes switching from gas boilers to heat pumps in the next financial year – almost double the £150m available over the current period.
This major uplift in the budget for the Boiler Upgrade Scheme (BUS) is part of a broader package of measures intended to improve the energy efficiency of homes and decarbonise home heating known as the ‘Warm Homes Plan’.
Under the BUS, first launched in 2021, homes can claim up to £7,500 of grants towards the upfront cost of a new heat pump.
The UK Government has further pledged to remove a planning rule stipulating that heat pumps cannot be installed within one meter of a property boundary as energy providers warned ministers that challenges relating to this and other planning rules discourage as many as one-third of heat pump customers.
Centrica CEO Chris O’Shea called the rule “outdated” and said he was “delighted” with the package of measures set out by the Department for Energy Security and Net-Zero (DESNZ).
The move has also been welcomed by other energy suppliers, heating system manufacturers and civil society groups.
Energy UK’s CEO Dhara Vyas said: “This is a clear recommitment to heat decarbonisation, which will play a vital role in improving energy security and reducing our reliance on gas. The BUS is enabling consumers to install heat pumps at record rates, with demand for low carbon technologies increasing.”
Ministers have also confirmed that there will be no further delay to the Clean Heat Market Mechanism (CHMM), following a one-year delay to 2025 made under the previous government.
The CHMM mandates heating system manufacturers to ensure that heat pumps account for at least 4% of sales made in 2025. Failure to do so will lead to a £3,000 fine per unit. Percentage targets will increase every year thereafter.
Ministers are also being urged to reform policy levies on energy bills, switching more of the costs from electricity to gas which would reduce the running costs of electrified technologies such as heat pumps.
The Warm Homes Plan has an overarching commitment, announced today, to invest £3.2bn of public money across 2025-6 in home energy efficiency which should affect in the region of 300,000 homes, with a specific focus on social housing.
Social housing residents, lower-income householders and renters to are set to receive grant-funded energy efficiency upgrades – including insulation and low-carbon heating – through the Warm Homes: Social Housing Fund and Warm Homes: Local Grant respectively.
Labour promised in its general election manifesto to spend twice as much on energy efficiency this Parliament as the Tories did in their last term in power. The Government will need to spend more than £12bn to keep this promise.
Reacting to the Warm Homes Package in its entirety, The Energy and Climate Intelligence Unit’s head of analysis Dr Simon Cran-McGreehin said: “Households being helped to switch to heat pumps, away from boilers, is essential if the UK is not to become increasingly dependent on foreign gas as the North Sea, moratorium or not, continues its decline.”
Syntegra MD Alan King said: “We support any move which enables homes and businesses to become more energy efficient and therefore environmentally friendly.
“Individual steps might seem small but they add up and lead to a better climate impact. We would encourage anyone eligible to seek the funding and we will help navigate the transformation process.”