Heating oil households get BUS boost but the sums still need to add up

The Boiler Upgrade Scheme has quietly extended its reach to households burning heating oil, a move that could affect roughly 1.5 million homes off the mains gas grid. From October 2024, any home currently using oil, LPG, or coal can claim the full £7,500 grant toward an air source or ground source heat pump. The catch is that oil-heated homes typically need more expensive installations than their gas-heated neighbours, and the grant alone may not bridge the gap.

As reported by the Cooling Post, the Department for Energy Security and Net Zero confirmed the expansion in late September. It follows months of lobbying from rural campaign groups who argued that oil users were being left out of the clean heat transition while paying some of the highest heating costs in the country.

Who qualifies, and who doesn’t

Eligibility is straightforward: you must own your home (or have landlord consent), have a valid Energy Performance Certificate with no outstanding loft or cavity wall insulation recommendations, and be replacing an existing oil, LPG, coal, or direct electric heating system. The scheme runs until March 2028, with the £7,500 amount fixed for the duration. The grant covers air source heat pumps, ground source heat pumps, and, in limited cases, water source heat pumps. Biomass boilers are excluded unless you live in a self-contained flat or a rural area without gas.

What this misses: homes that already have good insulation but still use oil. The EPC requirement means anyone with a drafty loft or unfilled cavity wall must fix those first, at their own cost, before they can apply. That can add £1,000–£3,000 to the upfront bill, depending on the property.

What it costs a typical 3-bed semi

A typical 3-bed semi-detached house in rural England, currently heated by oil, uses around 18,000 kWh of heat per year. An air source heat pump with a Seasonal Coefficient of Performance of 3.0 would need roughly 6,000 kWh of electricity to deliver that heat. At current electricity prices (around 27p/kWh on standard variable tariffs), the annual running cost is about £1,620. A modern oil boiler at 90% efficiency burning oil at 65p/litre costs roughly £2,250 per year. That’s a saving of £630 annually, before you factor in the heat pump’s maintenance costs and the fact that electricity prices tend to rise faster than oil.

Installation costs for an oil-to-heat-pump conversion are typically £12,000–£15,000, including the unit, labour, a new hot water cylinder, and any necessary electrical upgrades. After the £7,500 grant, the homeowner pays £4,500–£7,500 upfront. Payback period: roughly 7–12 years, assuming no further grant changes and stable energy prices.

EPC impact and property value

Switching from oil to a heat pump can lift an EPC rating from a typical D or E to a B or C. That matters because from 2025, landlords will need a minimum C rating for new tenancies, and homeowners with a C or above can access lower-rate green mortgages from lenders such as Nationwide and Barclays. The Energy Saving Trust estimates that moving from an oil boiler to an A-rated heat pump can add 5–10% to a property’s value in some regions, though the effect varies by local market.

But the EPC methodology still penalises heat pumps for using electricity, even when the heat pump is three times more efficient than a gas boiler. The government’s planned revision to the EPC system, due in 2025, may address this, but for now, some homes with heat pumps still show lower scores than their oil-boiler neighbours on paper, which is absurd.

The hidden barriers

Three practical issues remain. First, oil-heated homes often lack the space for an outdoor heat pump unit, many are in terraces or have small gardens. Second, most oil systems use radiators designed for high-flow temperatures (60–70°C), while heat pumps work best with larger radiators or underfloor heating running at 35–45°C. Replacing radiators can add £2,000–£4,000 to the job. Third, hot water cylinders are standard with heat pumps, but many oil homes have combi boilers with no cylinder space. Installing a cylinder in an airing cupboard or utility room can cost £1,000–£2,000 extra.

The grant covers the heat pump installation but not these ancillary works. The total bill for a fully functional system can therefore reach £18,000–£22,000, leaving the homeowner with £10,500–£14,500 after the grant. At those figures, the payback stretches beyond 15 years, too long for many households to justify.

What to do now

Households on heating oil should start by getting an EPC assessment and addressing any insulation recommendations. Then contact at least three MCS-certified installers for quotes, the grant requires an MCS-certified installer to claim the £7,500. Ofgem administers the scheme, and applications open on 23 October 2024. The grant is deducted from the installer’s invoice, so you pay the net amount. Do not pay the full price and claim back, the installer handles the paperwork. The deadline for installations to be completed and claimed is 31 March 2028, though the government may extend it. Book an installer now; lead times in rural areas can be 6–12 months.