Government Incentives for Ground Source Heat Pumps

Boiler Upgrade Scheme (BUS)

The main government incentive for ground source heat pumps is the Boiler Upgrade Scheme, which provides a grant of £7,500 towards the cost of installation. This scheme has been extended until 2030 and is available to homeowners in England and Wales who are replacing fossil fuel heating systems.

From 2026, the EPC insulation requirement has been removed, making it easier for more homeowners to qualify. The grant is applied at the point of installation, so you pay the reduced price rather than claiming money back afterwards. Your MCS-certified installer will handle the application on your behalf.

0% VAT on Heat Pumps

Since 2022, heat pump installations in the UK benefit from 0% VAT, reduced from the standard 20%. This applies to both the equipment and installation costs, providing a significant saving. For a typical ground source heat pump installation costing £20,000-£35,000, this represents a saving of £4,000-£7,000.

The 0% VAT rate is expected to remain in place until at least 2027, making now an excellent time to invest in ground source heating technology.

Smart Export Guarantee (SEG)

If you combine your ground source heat pump with solar panels, you can also benefit from the Smart Export Guarantee. This pays you for any excess electricity you generate and export back to the grid, providing an additional income stream.

While not directly related to heat pumps, pairing solar PV with a heat pump is an increasingly popular approach that can further reduce running costs and provide greater energy independence.