Air Conditioning Funding: The £2,500 Air-to-Air Heat Pump Grant, 0% VAT and Finance

In funding terms, "air conditioning" is called an air-to-air heat pump (ATAHP). The unit on the wall in someone's living room is, thermodynamically, a heat pump that exchanges heat between the outside air and the room air. UK Government recognition of this caught up with the technology in 2026 and qualifying air-to-air heat pump installs now attract a £2,500 grant. The important caveat: the grant is for systems that heat the whole home as the primary heating source, replacing a fossil-fuel system. It is not for single-room or supplementary AC installs alongside a working gas, oil or LPG boiler. This page explains the grant, who qualifies, and how the rest of the funding stack (0% VAT, smart tariffs, consumer finance) works for all AC customers, with or without the grant.

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Why air conditioning is called something else in the funding world

A traditional air conditioning unit you might remember from a hotel room in the 1990s was a cooling device. Modern AC, especially the Bosch Climate range, the Daikin Ururu Sarara, Mitsubishi Electric, Toshiba and equivalent inverter-driven units, are something different. They cool in summer (air leaving the room flows over a refrigerant heat exchanger) and they heat in winter (the same refrigerant cycle runs in reverse to extract heat from outside air and deliver it to inside air).

That second function is what makes them air-to-air heat pumps (ATAHPs, or sometimes ATA HPs). The unit literally is a heat pump. The only thing distinguishing it from an air-to-water heat pump (the conventional ASHP that feeds your radiators and hot water cylinder) is what the heat ends up in: room air rather than water in pipes.

For a long time, UK Government policy treated AC as if it was still the 1990s product. Grant funding under the Boiler Upgrade Scheme (BUS) was restricted to air-to-water heat pumps only. Air-to-air systems were excluded, even though they deliver low-carbon heating with similar (often better) efficiency than air-to-water equivalents.

That changed in 2026 with the introduction of a dedicated air-to-air heat pump grant.

A Bosch wall unit blowing cool air down a white wall

A Bosch wall unit on a pink wall below a textured ceiling

A couple in bed under a Clivet wall unit, adjusting the temperature with a remote

Who is eligible

The ATA heat pump grant follows similar eligibility logic to the main Boiler Upgrade Scheme, with some specifics for air-to-air systems:

Property requirements:
- Owner-occupier (or private landlord with tenant agreement) in England or Wales
- Property with a valid EPC, no outstanding cavity wall or loft insulation recommendations
- A fossil-fuel heating system (gas, oil, LPG, solid fuel) being removed or fully replaced as the primary heating source for the property
- Not new build (less than 2 years old generally excluded)
- Not social housing (funded through other routes including the Warmer Homes scheme)
Whole-home heating requirement:
- The ATA system must be sized and designed to heat the whole home as the primary heating source
- Indoor units must cover the main habitable rooms (lounge, kitchen/diner, all bedrooms typically)
- The existing fossil-fuel system must be removed or decommissioned so that the ATA is genuinely the primary heater, not a supplement
- Hot water provision is allowed to remain on a separate system (immersion, hot water heat pump, or gas if not yet replaced)
Product requirements:
- The air-to-air heat pump must be on the MCS approved product list for the ATA category
- The unit must meet the minimum SCOP (Seasonal Coefficient of Performance) required under MCS heat pump certification
- The install must be MCS-certified (which we do as standard)
- The unit must be designed for year-round heating-and-cooling use, not cooling-only
Install requirements:
- Sized appropriately for the WHOLE-PROPERTY heat demand, not single-zone
- Installed by an MCS-certified installer (we are)
- Commissioned to deliver the rated efficiency in heating mode
Most modern Bosch Climate inverter-driven units qualify, as do equivalent inverter-driven systems from Daikin, Mitsubishi Electric, LG and others. We confirm eligibility for your specific install during the survey.

A Bosch wall unit above a sage-green sofa in a living room

What gets funded

The £2,500 grant contributes to the install of the heat pump unit itself (the outdoor unit and the indoor head or heads), commissioning, MCS certification, and standard pipework. It does NOT cover:

Cooling-only operation (the unit must be capable of and designed for heating use)
Aesthetic upgrades or additional indoor heads beyond the design scope
Refrigerant top-ups outside the install scope
Significant electrical reconfiguration beyond standard install requirements

We are clear about what is in and out of the grant scope at proposal stage so you know what you are paying for.

The full AC funding stack in 2026

For a typical residential air-to-air heat pump install in 2026, the funding stack looks like this:

The full AC funding stack in 2026
Component	Approximate value
Air-to-air heat pump grant	£2,500 (for qualifying installs)
0% VAT on energy-saving materials	20% saving on the install (around £550-£1,000 typical)
Smart tariff support (winter heating mode)	Running cost as low as 1.4-1.75p per kWh of useful heat
Self-consumption from solar (where customer has solar)	Summer cooling effectively free on sunny days
Consumer finance	0% APR for 1–2 years, or 7.9% APR for up to 10 years
Warmer Homes scheme (for eligible households)	Up to 100% funded for lower-income households

For most installs the customer-paid cost after grant + 0% VAT lands at £200 to £3,500 depending on system size and complexity. Finance is 0% APR over 1–2 years, or 7.9% APR on longer terms up to 10 years. Over 5 years at 7.9% APR the monthly cost is about £4 to £71.

A worked example: whole-home grant-eligible install

Take a smaller 3-bed bungalow in Suffolk, currently heating on gas central heating, switching to whole-home air-to-air with the gas boiler removed:

A worked example: whole-home grant-eligible install
Cost or benefit	Amount
Whole-home ATA install (5 indoor heads serving lounge, kitchen/diner, 3 bedrooms, on 2 outdoor units)	£9,500 (with 0% VAT)
Hot water heat pump cylinder (replacing the gas-fired cylinder)	£1,800
Total install	£11,300
Air-to-air heat pump grant	-£2,500
Customer-paid amount	£8,800
Optional 84-month finance at 7.9% APR	£137/month
Old gas bill (annual, whole house)	£1,200
New ATAHP whole-home electricity (Cosy Octopus + battery if applicable)	£450
Annual saving on heating	£750
Summer cooling cost (if solar present)	Effectively £0
Effective payback (cash purchase)	11-12 years

The grant covers around a quarter of the install cost. This is the use case the grant is designed for: a whole-home heat-pump conversion using ATA rather than ASHP.

A worked example: typical AC install (no grant)

Take the more common AC customer scenario: a 4-bed family home in Suffolk keeping its existing gas central heating but adding AC for summer cooling and supplementary heating in three main rooms (lounge, master bedroom, home office):

A worked example: typical AC install (no grant)
Cost or benefit	Amount
Bosch Climate 5000i (3 indoor heads on 1 outdoor unit)	£5,000 (with 0% VAT)
Air-to-air heat pump grant	Not eligible (gas boiler still primary heating)
Customer-paid amount	£5,000
Optional 60-month finance at 7.9% APR	£101/month
Net new electricity cost	£80-£150/year (mostly summer cooling, light winter use)
Net gas saving (smaller bills from less use)	£100-£200/year on the rooms with AC heating
Summer cooling cost (if solar present)	Effectively £0

For this customer, the grant does not apply. The install is funded through 0% VAT plus finance, and the financial case rests on the cooling-and-supplementary-heating benefit rather than headline grant savings. This is most of the AC customers we install for.

When the grant does and does not apply

The grant is targeted at a specific use case: whole-home heat-pump conversion using ATA rather than ASHP. It does NOT cover most typical AC installs.

The grant applies to:

Whole-home ATA installs replacing gas, oil, LPG or solid-fuel central heating
Properties where indoor units serve all main habitable rooms (lounge, kitchen, bedrooms)
Installs where the existing fossil-fuel heating system is being removed or decommissioned
Properties that meet the EPC and insulation requirements (same as the BUS rules for ASHP)

The grant does NOT apply to:

Single-room or 2-room AC installs alongside a working gas boiler
Multi-room installs (3-4 indoor heads) where the gas central heating remains the primary system
Cooling-only installs
AC installs in new builds (less than 2 years old)
AC installs in social housing (funded through Warmer Homes routes instead)
Installs supplementing an existing heat pump

The reality of the UK AC market in 2026 is that most customers install AC for summer cooling with supplementary heating in specific rooms. That use case is valuable (the ATA is genuinely cheap to run in heating mode, particularly on smart tariffs) but it does not qualify for the £2,500 grant. The grant is reserved for the small but growing segment of customers committing to whole-home electrification via ATA rather than ASHP.

If you are unsure whether your planned install qualifies, the right answer is to discuss it at the survey. We can structure the install for grant eligibility if your property suits a whole-home ATA approach. We can also be straight with you when it does not.

Air-to-air vs air-to-water: which is right for you?

For households considering low-carbon heating, the choice between an ASHP (air-to-water) and an ATAHP (air-to-air) comes down to a few factors:

Choose an air-to-water heat pump (ASHP) when:

You want to replace whole-house central heating including hot water
You have existing radiators or underfloor heating
The £7,500 BUS grant outweighs the higher install cost
You want to keep the visible kit minimal (the only indoor element is the cylinder)

Choose an air-to-air heat pump (ATAHP) when:

You want to heat specific rooms rather than the whole house
You also want summer cooling (the ATAHP delivers both, the ASHP delivers heating only)
You want a lower upfront cost
You do not need to replace hot water provision (hot water can stay on the existing gas/electric system or shift to a heat pump cylinder later)
The property is small, well-insulated, or has limited space for an ASHP indoor cylinder

Many households end up using both. ATAHPs in the most-used rooms for year-round heating and cooling; ASHP for the main central heating plus hot water; solar plus battery covering most of the running cost. The combined ecosystem delivers running costs that are typically 70-85% lower than a household running gas heating, electric cooling and standard tariff electricity.

0% VAT on energy-saving materials

Domestic AC installs qualify for 0% VAT under the energy-saving materials relief, on the basis that the unit operates as a heat pump in heating mode. This applies to Bosch Climate 3000i, 3200i and 5000i units, and equivalent inverter-driven units from other manufacturers.

A residential single-room AC install at around £2,750 supply and install would cost approximately £3,300 if VAT reverted to 20%. The 0% relief saves the customer around £550 on a typical install, and around £1,000 on a multi-room.

The 0% rate currently runs to 31 March 2027 under existing legislation. We register and apply 0% VAT on every install we deliver.

If you are in a lower-income household, the Warmer Homes scheme may help. Ask us and we will check your eligibility.

A Clivet wall unit above a sofa in a living room with a slate-grey wall

Smart tariffs for heat-pump-mode AC

The single biggest factor in AC running cost during the heating season is the electricity tariff you are on. AC in heat-pump mode delivers around 4-5 kWh of useful heat for every 1 kWh of electricity consumed. Combined with battery-shifted off-peak electricity at 7-11p per kWh, your effective heating cost per kWh of useful heat lands at 1.4 to 1.75p.

Octopus Intelligent Octopus Go (6-hour overnight cheap window at 7p per kWh) suits households where the battery shifts the cheap-rate electricity into daytime heating-mode AC running.

Octopus Cosy (three cheap windows per day at 11-14p per kWh) suits households where AC heats specific rooms during the day in those windows.

Octopus Flux suits solar-and-battery households where peak export earnings complement the heating-mode use.

For most AC customers the right tariff is the same as for our solar and battery customers: match the tariff to the usage pattern, configure the battery or smart controls to charge in the cheap windows, and run the AC from stored cheap-rate electricity.

Consumer finance for AC

Most residential AC installs sit comfortably within the consumer finance options we offer through Greenscape. After the £2,500 ATA heat pump grant:

Consumer finance for AC
Install type	Indicative cost (post-grant)	Term	APR	Monthly payment
Single-room split (Bosch Climate 3200i)	£250-£550	12 months	0%	£21-£46
Single-room split (Bosch Climate 3200i)	£250-£550	24 months	0%	£10-£23
Single-room split (Bosch Climate 3200i)	£250-£550	60 months	7.9%	£5-£11
Single-room split (Bosch Climate 3200i)	£250-£550	120 months	7.9%	£3-£7
Two-room dual-split	£1,700	12 months	0%	£142
Two-room dual-split	£1,700	24 months	0%	£71
Two-room dual-split	£1,700	60 months	7.9%	£34
Two-room dual-split	£1,700	120 months	7.9%	£21
Three-room multi-split (Bosch Climate 5000i)	£2,500	12 months	0%	£208
Three-room multi-split (Bosch Climate 5000i)	£2,500	24 months	0%	£104
Three-room multi-split (Bosch Climate 5000i)	£2,500	60 months	7.9%	£51
Three-room multi-split (Bosch Climate 5000i)	£2,500	120 months	7.9%	£30
Four-room multi-split	£4,300	12 months	0%	£358
Four-room multi-split	£4,300	24 months	0%	£179
Four-room multi-split	£4,300	60 months	7.9%	£87
Four-room multi-split	£4,300	120 months	7.9%	£52

For households not eligible for the grant (cooling-only installs, properties on EPC A-C without fossil heat to replace), the same finance options apply against the pre-grant install cost.

Consumer finance is provided by Zopa Bank. Variable terms, no hidden costs. Greenscape Energy Limited is FCA-authorised as a credit broker (FCA registration 690130), not a lender.

Solar plus AC: summer cooling, effectively free

If you already have Greenscape solar, or are installing it at the same time as AC, the financial case sharpens further. Summer cooling demand peaks between 10am and 6pm, which is exactly when your solar array is generating most. The solar surplus that would otherwise export to grid at 5-15p per kWh powers the AC cooling load at no marginal cost.

For most households with 4-6 kW of solar and a Bosch Climate AC system, summer cooling is effectively free. The AC bumps your summer electricity bill by less than £20-£30 over the cooling season, versus the £100-£200 it would otherwise add without solar.

A man relaxing on a sofa under a Clivet wall unit blowing cool air

A Clivet and a Bosch wall unit side by side on a pale green background

A brick house with solar panels, a Clivet outdoor unit, an inverter and a battery

Combining everything

The typical customer paths look like this in 2026:

Whole-home ATA replacing fossil-fuel central heating

(the use case the grant is designed for): £2,500 ATA grant + 0% VAT + smart tariff + (optional) consumer finance. Around £6,000-£9,000 customer cost on a typical install.
Multi-room or single-room AC alongside existing heating

(most common AC customer): 0% VAT + smart tariff + finance. No ATA grant. Customer pays £2,750-£5,000 depending on number of rooms.
Cooling-only install

0% VAT + smart tariff + finance. No ATA grant. Customer pays the install cost (£2,750-£5,000).
Lower-income household, EPC D-G property

The Warmer Homes scheme may cover whole-home ATA installs alongside other measures. Potentially £0 customer cost depending on eligibility.
Customer with existing solar and battery adding supplementary AC

0% VAT + smart tariff (already configured) + finance. The summer cooling cost is essentially absorbed by the existing solar.

What we handle for you

ATA heat pump grant application for qualifying installs, filed by us on your behalf
MCS certification of the install (required for grant eligibility)
F-Gas compliance (we are F-Gas certified)
0% VAT registration and proper invoicing
DNO notification if the install affects electrical loading
Smart tariff guidance and switching support
Consumer finance application through Greenscape
Warmer Homes scheme application if you qualify

You sign one agreement (the install agreement). Everything else is handled.

Frequently asked questions

01 Will my Bosch AC qualify for the £2,500 grant?

The Bosch Climate range is designed for year-round heating-and-cooling use and the inverter-driven units are on the MCS approved product list for the ATA heat pump grant. The product side is usually fine. The eligibility question is about your install scope: the grant requires the ATA system to be the primary heating source for the whole home, replacing a fossil-fuel boiler. If you are installing AC for cooling or supplementary heating in specific rooms while keeping your gas boiler, you would not qualify for the grant. We confirm individual install eligibility during the survey.

02 Why is the grant £2,500 for AC vs £7,500 for ASHP?

Because the typical ATA install costs less than an ASHP install (£2,750-£6,800 vs £12,000-£18,000) and because ATA installs typically heat specific rooms rather than the whole house. The grant proportionality reflects the policy intent of supporting the partial-heating use case alongside the full-house ASHP route. The ratio of grant to install cost ends up similar in both cases.

03 Can I combine the ATA grant with the BUS grant?

Not on the same install. The two grants are mutually exclusive for any single property installation. However, a household could install both products at different times: ASHP for whole-house central heating with BUS funding, plus a separate ATA install for cooling-and-heating in specific rooms later. We have customers who have done exactly this.

04 Do I have to use the AC as my main heating source to claim the grant?

Yes, and the threshold is high: the ATA system must be the primary heating source for the whole home, with the fossil-fuel boiler removed or fully decommissioned. Indoor units must cover all main habitable rooms (lounge, kitchen, bedrooms). The grant is not available for installs where the gas boiler stays as the primary heating system. This is the most common reason a customer who expected to qualify ends up not qualifying.

05 Can I install AC under the grant in a new build?

Generally no. New build properties (less than 2 years old) are excluded from the ATA heat pump grant on the same basis as the main BUS scheme, on the principle that new builds should meet modern efficiency standards out of the box.

06 Does the ATA grant also apply if I have already had AC installed?

No. The grant applies to new installs only. Existing AC installs cannot be retroactively grant-funded.

07 Will the ATA grant continue beyond 2028?

The current allocation runs through at least March 2028. Beyond that, policy is subject to the normal political process. If you are eligible now, the right time to install is now.

08 What if my AC also needs to do hot water?

Air-to-air heat pumps cannot heat domestic hot water. For hot water on a grant-eligible whole-home ATA install, you need a separate hot water solution: a hot water heat pump cylinder, a small ASHP for hot water only, or an immersion-heated cylinder. The grant rules allow this combination; the requirement is that the ATA handles the space heating, not that it handles the hot water.

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