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Air Source Heat Pump Funding: BUS, VAT, Smart Tariffs and Finance
An air source heat pump install attracts more government funding than any other domestic energy product in the UK. The headline number is £7,500 from the Boiler Upgrade Scheme. On top of that there is 0% VAT relief, the Warmer Homes scheme for eligible households, smart tariff savings of 50-70% on running costs, and consumer finance options that often make the install cash-flow neutral from day one. This page walks through the full picture for residential heat pump customers.
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Google Rating: 4.5
Trustpilot: (368) 4.6 Based on 368 reviews The funding stack for a typical install
Take a 4-bed Suffolk home moving from a gas boiler to an 11 kW air source heat pump install. The funding stack looks like this:
| Component | Amount |
|---|---|
| Heat pump install full cost | £14,500 |
| Boiler Upgrade Scheme (BUS) | -£7,500 |
| 0% VAT on energy-saving materials | (already applied) |
| Customer cost after BUS | £7,000 |
| Consumer finance over 60 months at 7.9% APR | ~£142/month |
| Annual running cost on Cosy Octopus + Adia Thermal | £550 |
| Annual saving vs. previous gas bill | £850 |
For most households, the install is cash-flow neutral from year one when you account for the energy bill saving offsetting the finance payment, and pure saving from year 5 onwards once the finance is paid off.
For lower-income households, certain benefit recipients, and properties in EPC bands D-G, the Warmer Homes scheme may cover most or all of the install cost. The Warmer Homes scheme is the UK Government's successor to ECO4 and is now a substantial programme in its own right. Ask us during your survey and we will check your eligibility.
The schemes in detail
Boiler Upgrade Scheme (BUS) - the headline
The BUS pays £7,500 toward an air source heat pump or £6,000 toward a shared ground loop. Available to any owner-occupier in England and Wales replacing a fossil-fuel boiler. No income test, no property size cap, no waiting list under normal operation. Funding confirmed through at least March 2028.
We handle the entire BUS application on your behalf. You sign nothing other than the install agreement. The grant is paid directly to us; the price you sign is the price you pay.
See the BUS grant deep dive for full eligibility, application process and combination with other schemes.
Warmer Homes scheme
For lower-income households and EPC D-G properties, the Warmer Homes scheme (the UK Government's successor to ECO4) may cover heat pump installs in full or in large part. The scheme can combine with BUS for eligible customers, and runs alongside it.
If there is any chance you might be eligible, ask us during your survey and we will check for you.
0% VAT on energy-saving materials
Domestic heat pump installs qualify for 0% VAT under the energy-saving materials relief. This applies to the kit and the labour. The 0% VAT is built into our prices, so the figure on the proposal is the figure you pay.
The relief is currently extended to 31 March 2027. After that, the rate is expected to revert to 5% (the previous reduced rate) unless extended. We will register and apply VAT correctly regardless of date changes.
See the 0% VAT deep dive.
Smart tariffs designed for heat pumps
A heat pump runs on electricity, which means the tariff you choose is one of the biggest factors in the running cost. The right tariff for a heat pump household is rarely the standard variable tariff.
Cosy Octopus has three cheap windows per day (4am-7am, 1pm-4pm, 10pm-12am) at 11-14p per kWh. Heat pumps can be scheduled to do their main heating and hot water cycles during these windows, with the well-insulated house and a buffer/hot water tank coasting through the peak hours.
Octopus Intelligent Octopus Go has a long overnight cheap window (11:30pm-5:30am) at 7p per kWh. Best when paired with a battery that can shift the heat pump's overnight charge into daytime running.
Octopus Agile uses half-hourly dynamic pricing. With Adia Thermal Control reading the prices and scheduling the heat pump accordingly, this can deliver the lowest possible running cost, but it requires a smart inverter / controller that can talk to Agile.
On any of these tariffs, the heat pump running cost typically drops 50-70% compared with a household on a standard variable tariff.
Consumer finance
For the residual cost after BUS (and potentially Warm Homes), we offer consumer finance through Greenscape.
Typical terms:
| Loan amount | Term | APR | Monthly payment |
|---|---|---|---|
| £7,000 | 12 months | 0% | £583 |
| £7,000 | 24 months | 0% | £292 |
| £7,000 | 60 months | 7.9% | £142 |
| £7,000 | 120 months | 7.9% | £85 |
| £10,000 | 12 months | 0% | £833 |
| £10,000 | 24 months | 0% | £417 |
| £10,000 | 60 months | 7.9% | £202 |
| £10,000 | 120 months | 7.9% | £121 |
These figures are indicative. Your actual rate depends on your credit profile. Consumer finance is provided by Zopa Bank. Greenscape Energy Limited is FCA-authorised as a credit broker (FCA registration 690130), not a lender.
See the Consumer Finance page for the full options.
Combining everything
Most customers end up combining the schemes rather than relying on one. The typical paths look like this.
-
Owner-occupier with mains gas, mid-to-high income:
BUS + 0% VAT + smart tariff + (optional) consumer finance. Around £7,000 customer cost on a typical install, finance over 5 years if desired.
-
Owner-occupier off-gas (oil or LPG)
BUS + 0% VAT + smart tariff + consumer finance. The off-gas case is even stronger because oil and LPG prices have risen sharply and the BUS grant remains £7,500.
-
Lower-income household, EPC D-G property
Warmer Homes scheme + BUS + 0% VAT + smart tariff. Potentially £0 customer cost depending on eligibility.
-
Social housing tenant
Warmer Homes scheme funding routed through the landlord. The tenant pays nothing toward the install, just benefits from the lower running cost.
-
Retired homeowner on a pension
Often eligible for Warmer Homes via the lower-income or Pension Credit criteria. BUS still applies on top.
“Do it whilst incentives remain in place — such as the £7,500 BUS grant on ASHP”
What we handle for you
The paperwork side of heat pump funding can look intimidating from outside. From your side as a customer, the actual experience is:
-
Free 90-minute survey with one of our Renewable Energy Specialists
-
Written proposal within 5 working days, with all scheme details and the fixed price already including the BUS deduction
-
You sign the install agreement
-
We file the BUS application with Ofgem
-
We file the Warmer Homes scheme application if you are eligible
-
We confirm 0% VAT on the proposal
-
We arrange consumer finance through Greenscape if needed
-
The install runs (5 to 7 days on site for a typical install)
-
We commission Adia Thermal Control and walk you through it
-
We register the install with MCS and confirm warranty paperwork
You sign one agreement (the install agreement). Everything else is handled.
Frequently asked questions
01 Can I apply for the BUS grant myself if I do not use Greenscape?
Technically the grant is paid to the installer, not the customer, so the application is always installer-led. Whichever installer you use must be MCS certified and willing to handle the application. Most reputable installers do this as standard.
02 What if I move house before the heat pump finance is paid off?
Consumer finance is unsecured personal lending, so it goes with you, not the property. The heat pump stays with the property. We have not seen this be a problem for customers in practice; heat pumps add value at sale (lower EPC, lower running costs) so the property value uplift more than offsets the residual finance.
03 Will the BUS grant still exist in 2027 or 2028?
Yes. The current funding allocation runs through at least March 2028. We will update this page if there are policy changes.
04 Can I get a heat pump without a smart tariff?
Yes. Heat pumps work fine on standard variable tariffs. The running cost is just higher, around £1,100/year for a 4-bed home vs around £550 on Cosy. We strongly recommend a smart tariff but it is not technically required.
05 Do I need a battery to get the smart tariff benefit?
Not for Cosy Octopus (the three cheap windows are long enough for a heat pump to do its main work without needing battery storage). For Intelligent Octopus Go, a battery helps shift the overnight cheap-rate charge into daytime running, but it is not essential.
Our reviews speak for themselves
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