Boiler Upgrade Scheme funding reportedly at risk, Nesta warns
Reports suggest cuts to the £15bn Warm Homes Plan could hit the £7,500 heat pump grant, says Nesta, just as installer demand is picking up.
What's happened
According to Nesta | UK innovation agency for social good, there are reports that the government is considering cuts to the £15 billion Warm Homes Plan, which is due to be devolved to mayors and other strategic authorities in England. Nesta says the Boiler Upgrade Scheme (BUS) — which it puts at around £2.7 billion of that total funding — could be scrapped or reduced as part of those changes.
Nesta argues this would land at an awkward moment for the heat pump market. It reports that July and August 2026 were the two highest months on record for BUS voucher applications, helped by a shift in running-cost economics: the electricity-to-gas price ratio fell from 4.7 in January to 3.3 in October, making heat pumps cheaper to run relative to gas. Oil prices have also risen sharply this year, which is why the BUS has been temporarily increased to £9,000 for households replacing an oil boiler, Nesta notes.
On who the scheme actually benefits, Nesta cites its own evaluation showing 42% of BUS recipients have a household income below £52,000, and that 74% of supported installations would not have happened without the subsidy. It also points to a steady fall in the real cost of installing a heat pump — averaging 2.7% a year since 2022 for the most common 8–10kW size — which it credits partly to the market-building effect of the grant. Nesta warns that scrapping or cutting the BUS now could "wipe out the heat pump industry in England and Wales overnight," pointing to what happened to installers after the Energy Company Obligation and the solar feed-in tariff were withdrawn.
No decision has been confirmed; this is reporting on a proposal, not a policy change.
What this means for your costs right now
Nothing has changed yet for homeowners. As things stand today:
- The £7,500 Boiler Upgrade Scheme grant is still available in England and Wales for an air or ground source heat pump installed by an MCS-certified installer.
- In Scotland, the Home Energy Scotland grant of up to £7,500 is still available, with an optional £7,500 interest-free loan on top.
- 0% VAT still applies to installing heat pumps, insulation, solar panels and batteries, and is due to run until 31 March 2027.
If you're weighing up a heat pump, the current grant has a direct effect on what you'd actually pay. A typical £12,900 installation sits in the £10,100 – £16,800 range before any grant — the £7,500 BUS voucher would be deducted from that at the quote stage, not claimed separately afterwards. See our Air source heat pump for the full breakdown by tier.
Why we're flagging this now
We build our heat pump cost estimates from labour hours at local trade rates plus materials, then check them against market quotes and current installer pricing. Grant funding doesn't change the underlying cost of the equipment or the work — it changes what you net out after the voucher is applied. If the BUS is reduced or scrapped, the gap between the basic tier (£9,700) and premium tier (£15,400) stays the same; what moves is the effective price after subsidy, which could rise by up to £7,500 for an eligible household.
What to do if you're planning an installation
- If you're already getting quotes, there's no reason to delay purely because of this reporting — the scheme is unchanged today, and any policy change would need to go through a formal announcement with its own transition arrangements.
- If you're on the fence, applications are processed on a first-come basis against the current scheme rules, so an installation booked now wouldn't be affected by a future cut.
- Get more than one quote. With several of these schemes bundling grants, VAT treatment and finance together, it's worth checking that a quoted price is genuinely competitive before you commit — our "is my quote fair" tool is built for exactly that comparison.
- Keep an eye on official channels. Any change to the Boiler Upgrade Scheme or the Warm Homes Plan would be confirmed through government announcements, not through industry commentary — we'll update this page if and when that happens.
We'll revisit this piece once there's a confirmed decision on the Warm Homes Plan and the Boiler Upgrade Scheme, rather than speculate further on numbers that haven't been announced.