How heat pumps work – and how to get up to £9,000 off the cost of installation
The government wants Britain to install more heat pumps as part of its drive to decarbonise the UK economy – but how do they work and can you get help paying for them?
The popularity of heat pumps has surged in recent years, but you might not be aware of how they work and the financial help you can get setting one up in your home.
Just 1% of homes in England have a heat pump installed, according to the latest English Housing Survey (2023/24) published in May 2025. But uptake is on the rise.
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Ruth Emery installed a heat pump in her home. She qualified for the £7,500 government grant, part of the Boiler Upgrade Scheme (BUS). Ruth has shared five lessons she's learnt after getting a heat pump in a separate article.
How do heat pumps work?
Heat pumps generally work by taking heat from the ground or air and transferring it to your central heating system.
Crucially, they allow you to heat your home and provide hot water in an environmentally-friendly way, are significantly more efficient than gas boilers and produce less CO2 emissions than other heating systems.
According to the Energy Saving Trust, for every unit of electricity a heat pump uses, it produces three units of heat.
Heat pumps also last longer than gas boilers, typically running for 20 years compared to the 10 to 15 years you'll get from a boiler.
There are two main types of heat pump: air source and ground source.
Air source pumps heat the air outside, and are the most common in the UK. They’re sometimes known as air-to-water heat pumps.
Ground source, sometimes known as ground-to-water, heat pumps, transfer heat from the ground outside to heat your home.
You can also get air-to-air heat pumps which heat your home as well as cool it during hotter weather. These generally don’t provide hot water for your taps and shower.
How much does it cost to install a heat pump?
The average cost of installing an air source heat pump is around £13,000, according to official figures. Ground source heat pumps are considerably more, at about £27,000 on average.
The government’s Boiler Upgrade Scheme offers a grant of up to £9,000 towards this cost, which means you could still pay around £4,000 for an air source heat pump (based on the average installation cost).
However, for some customers, the cost can be thousands more depending on the type and size of their home. A larger property may need a bigger, more expensive heat pump, for example. Replacing radiators or adding insulation can also push the price up.
According to Octopus Energy, about a third of homes require scaffolding – this is usually required when the hot water cylinder is installed at a height, either upstairs or in the loft. This can add on an extra £800 to £1,000. Planning permission may also be needed, which can cost between £250 and £330.
On the other hand, the bill can come in a lot cheaper for some people. Octopus Energy says most of its heat pump quotes are lower than £5,000 (once the £7,500 grant is deducted).
Newer homes, smaller homes, better insulated properties, those with low energy usage, and those which require fewer changes (like radiator swaps) to make the switch, often get a cheaper heat pump quote.
Which heat pump is best for you depends on your needs, although the latest government data on applications through the BUS reveals the vast majority of households are applying for air source models.
Note though, while ground source heat pumps cost more to install, they do generally save you more on your energy bills over time than air source models.
You can find out what type of heat pump works best for you through this quiz on the Nesta website.
How does the government’s up to £9,000 grant work?
The government’s Boiler Upgrade Scheme gives eligible households up to £9,000 off the cost of installing an air source or ground source heat pump.
If you’re buying a heat pump for a home or small non-domestic building in England or Wales, and you’re replacing an existing fossil fuel system (such as a gas boiler, or storage or panel heaters), you should be eligible for £7,500.
Those replacing an oil or a Liquefied Petroleum Gas (LPG) system can get up to £9,000 grants until March 2027.
Note that the property must not be a new-build or social housing, although self-build properties are eligible.
The heat pump installer – who must be MCS-certified – applies for the grant and takes it off the price you pay.
From April 28 2026, grants of up to £2,500 are also available to people wanting to install air-to-air heat pumps in their homes. These grants can be applied for via the Ofgem website.
If you live in Scotland, the Home Energy Scotland grant and loan scheme pays up to £7,500 for air-source heat pumps, plus a further £1,500 for households that qualify for a rural uplift. An extra £7,500 of funding is available as an optional interest-free loan.
What other discounts are available?
In addition to the £9,000 government grant, there are some lesser-known incentives and discounts for installing a heat pump. The biggest ones could come from your mortgage provider. Here are some of the deals available:
- Halifax mortgage customers can get £2,000 via the bank’s “Green Living offers”. You’ll need to have applied for a mortgage or additional borrowing with Halifax after 31 July 2024, and have a Halifax or Bank of Scotland current account, to qualify.
- Lloyds customers can get £2,000 cashback with the Eco Home Reward for installing an air or ground source heat pump. To qualify, you’ll need to have applied for a new Lloyds mortgage, additional borrowing, or switched to a new deal, after 31 July 2024; installed the heat pump within one year of completing the borrowing, and hold a Club Lloyds bank account.
- Barclays’ Greener Home Reward scheme also pays £1,000 cashback for customers installing a heat pump. To be eligible, you must have a Barclays residential mortgage and the heat pump must be installed by a MCS-certified business.
- Nationwide offers its mortgage customers interest-free loans worth between £5,000 and £20,000 to pay for energy-efficient improvements, such as air source heat pumps and insulation. Borrowers can enjoy a 0% period for the first two or five years.
- Ovo offers up to a year of free heating for customers planning to get a heat pump in future. The energy supplier’s Beyond scheme allows customers to “bank” one month of free heating for every two months they are with Ovo; the money can be redeemed (worth a maximum of £630) when a heat pump is purchased from Ovo.
- E.on offers interest-free finance for heat pump installation.
- The government will offer low and zero-interest loans to people installing heat pumps in their homes through the Warm Homes Plan. Exact details on these loans are yet to be unveiled by the government, correct at the time of writing on 27 April 2026.
How heat pump installation rules have changed
The government relaxed the rules on installing heat pumps from 29 May, 2025.
The rule that no air source heat pump can be fitted within one metre of the boundary of a property under permitted development was scrapped.
The maximum size of an air source heat pump allowable under permitted development was increased from 0.6 m3 to 1.5 m3. The government also doubled the number of air source heat pumps permitted, from one to two for detached houses.
Plus, it now allows air-to-air heat pumps that can also provide a cooling function to benefit from the same permitted development rights as air-to-water heat pumps.
According to Propertymark, the professional body for property agents, the previous requirements would often block installations for flats, terraced homes, and properties with small outdoor spaces.
