Boilert Upgrade Scheme? Home Energy Scotland Loan? Understand Funding for your Heat Pump Project

If you’re considering installing a heat pump in your UK home, there are several heat pump grants available to help make the transition to low-carbon heating more affordable. These grants provide financial support and incentives to homeowners, making it easier to invest in energy-efficient heating systems. In this blog, we will explore the various heat pump grants currently available in the UK.

By understanding these grants, you can take advantage of the opportunities they offer and make informed decisions about improving your home’s heating efficiency. It’s important to note that the availability of heat pump funding is subject to the specific scheme’s budget and demand. Grants are typically allocated on a first-come, first-served basis.

Heat Pump Grants Currently Available in the UK:

England

Boiler Upgrade Scheme

The government’s Boiler Upgrade Scheme (BUS) is part of a £3.9 billion funding package unveiled as part of the Heat and Buildings Strategy to help reduce the carbon footprint of homes. It aims to provide financial support to homeowners in England and Wales for transitioning from fossil fuel heating systems to more efficient, low-carbon alternatives, such as air source heat pumps, ground source heat pumps, and, in limited circumstances, biomass boilers.

Scheme Details:

  • The Boiler Upgrade Scheme offers grants to encourage property owners to replace existing fossil fuel heating systems with more efficient, low-carbon heating systems.
  • Eligible heating systems include air source heat pumps, ground source heat pumps, and biomass boilers (in rural locations and properties off the gas grid).
  • The scheme allows heating system commissioning starting from 1st April 2022, and applications for grants opened from 23rd May 2022.
  • The scheme has confirmed funding of £450 million and will run until 2028.
  • By replacing your current heating system with a heat pump, you can significantly reduce your carbon footprint.
  • The scheme operates through a voucher system, providing financial contributions towards the cost of the heating system installation.
  • The voucher amounts are as follows:
    • £7,500 towards an air source heat pump
    • £7,500 towards a ground source heat pump (including water source heat pumps and those on shared ground loops)
    • £5,000 towards a biomass boiler
  • The application process is facilitated by your chosen MCS Certified installer, who will make the application on your behalf.
  • Vouchers are redeemed following the commissioning of your chosen heat pump system and when a valid Energy Performance Certificate (EPC) is available for your property. Check here to see if your home has a valid Energy Performance Certificate (EPC).

Eligibility for the Boiler Upgrade Scheme:

  • Homes and small non-domestic properties in England and Wales are eligible for the scheme.
  • The maximum installation capacity of up to 45kWth covers most of these properties.
  • Self-build and custom-build homes are eligible for the scheme.
  • Your property must have a valid Energy Performance Certificate (EPC) with no outstanding recommendations for loft or cavity wall insulation. Note: Having loft or cavity wall insulation in place helps optimize the efficiency of your heating system.
  • Biomass boilers are only eligible in rural locations and properties off the gas grid.
  • Heat pumps are eligible for properties either on or off the gas grid.
  • The commissioning date of your low-carbon heating system must be on or after 1st April 2022 by an MCS accredited installer such as IMS Heat Pumps.
  • You must be fully replacing an existing fossil fuel heating system, such as oil, gas, or direct electric, or installing a brand-new heat pump system in a self-build or custom-build home.
  • Funding is not available for the replacement of existing low-carbon heat systems or cases where the heat pump does not provide 100% of the heat for the property.
  • New build homes and social housing are not eligible for the Boiler Upgrade Scheme, although self-build and custom-build properties are.

Scotland

Home Energy Scotland Scheme:

The Home Energy Scotland (HES) Grant and Loan scheme helps with energy efficiency improvements for homes in Scotland. It offers two options for financial support: interest-free loans and grants for necessary home improvements. Funding is available for a range of energy efficiency measures, including double glazing, insulation, and renewable energy systems such as
heat pumps.

You can now apply for grant funding without taking out a loan. A rural uplift is also available to provide extra support to rural and island homes which can face increased costs to install home improvements. The rural uplift is available to households in Remote Rural and Island areas, as well as off-gas Accessible Rural areas, as defined by the Urban Rural Classification.

Scheme Details:

  • The grant will cover up to £7,500 for the installation of a heat pump, with an additional 0% Interest loan of up to £7,500. Properties classified as rural can qualify for an additional grant of £1,500.
  • The payback period varies depending on the amount borrowed but can be as long
    as 12 years.
  • It is possible to borrow additional funds for other home improvements simultaneously, increasing the cashback amount received.
  • Loans are administered by the Energy Saving Trust, and there is an administrative fee of 1.5% (up to a maximum of £150).
  • Certain improvements, such as heat pumps, require the use of MCS certified installers such as ourselves at IMS Heat Pumps Ltd.
  • To apply for the loan, an approved quotation from an MCS accredited installer is necessary.
  • Once approved, homeowners can arrange for the installation of their heat pump.
  • Following installation, the installer will provide the necessary certificate and documentation to facilitate loan drawdown and cashback claim.
  • Grant funding for energy efficiency improvements is up to 75% of the combined cost of the improvements, up to the maximum grant amount of £7,500, or £9,000 for households which qualify for the rural uplift. The remainder of funding requested can be taken up as an optional interest-free loan.

Application and Eligibility:

  • Funding is allocated on a first-come, first-served basis, subject to availability and until the end of the financial year, whichever comes first.
  • Applications undergo an eligibility assessment, including affordability and credit checks. If the application is successful, a written funding offer is provided.
  • Work on installations must not commence until the funding offer is received.
  • Once a funding offer is received within the financial year, homeowners have up to nine months to carry out the work and claim the funding.
  • Homeowners and self-builders are eligible to apply for renewable energy systems under the funding scheme.
  • Existing homeowners require an EPC and an energy report recommending the upgrades they are applying for.
  • Self-builders need to provide their planning permission documents.
  • There is a nine-month timeframe from loan approval to drawdown for heat pump installations, with the possibility of extensions.
  • Funding for solar PV and energy storage systems will only be available as part of a package together with a heat pump or high heat retention storage heaters. As a result, applications for solar PV and/or energy storage systems only will no longer be eligible.

VAT On Heat Pumps

From the 1st of April 2022 Heat Pump installs, including the associated works required for a completed working system now zero rated for VAT in existing properties, self, and custom builds.

Other Options for Financing

Besides the grants available for heat pumps, there are other ways you can get financial support from install a heat pump. For instance, some banks like Barclays offer a £2000 reward for mortgage customers who install Low Carbon Heating, while Lloyds provides a £1000 reward for qualifying mortgage customers who get a heat pump. Check with your bank or mortgage provider to see if they have a similar scheme on offer.

In some regions of the UK there are Government funded schemes to help low-income homeowners in the UK improve the energy efficiency of their homes, for example the Green Homes Grant. Check with your local authority to see if there are any grants or schemes running in your area and if you may be eligible.

Great British Insulation Scheme

The Great British Insulation Scheme (GBIS) was launched in September 2023, offering support to 300,000 families looking to improve their home’s energy efficiency. It provides upgrades such as roof, loft, or cavity wall insulation for homes in lower council tax bands, potentially reducing annual energy bills by around £300 to £400.

To be eligible for GBIS, your home should be in council tax bands A-D in England, A-E in Scotland and Wales, with an Energy Performance Certificate (EPC) rating of D or lower. Check your eligibility using the new online checker tool.