The £2.7bn figure is the headline, but the real story for UK homeowners is what wasn’t announced. No ban on new gas boilers. No mandated switchover date. Just a pot of money and a clear directional signal: heat pumps are the future, but the government is not yet willing to force the pace.
As reported by The Guardian, the plan allocates £1.8bn for heat pump grants and £900m for wider home energy upgrades including insulation. The Boiler Upgrade Scheme (BUS), which offers £7,500 off an air-source heat pump installation, will continue until 2028. That is a meaningful sum, roughly half the typical cost of a heat pump install on a 3-bed semi.
What it costs a typical 3-bed semi
For a household currently running a gas boiler and using 12,000 kWh of gas per year, a heat pump installation typically costs between £7,000 and £13,000 before the BUS grant. With the £7,500 subsidy, the net cost drops to roughly £0–£5,500. Annual running costs, depending on heat pump efficiency (typically a Seasonal Coefficient of Performance of 3.0–3.5), are often 10–30% lower than gas, though the exact saving depends on current gas and electricity tariffs. Ofgem’s price cap currently sets electricity at roughly 24.5p/kWh and gas at 6.0p/kWh, so the heat pump’s efficiency advantage is critical.
But the catch is upfront cost. Even after the grant, a heat pump can cost £4,000–£5,500 more than a new gas boiler (£1,500–£3,000 fitted). The government is betting that falling installation costs, driven by the growing market and the new investment, will close that gap over the next three years.
Who qualifies, and who doesn’t
The BUS grant is available to homeowners and self-builders in England and Wales. Landlords are excluded, though the government has separately committed £900m for social housing upgrades. Off-gas-grid homes, around 4 million UK households using oil, LPG or electric heating, are a priority, as they face the highest carbon emissions and costs. For those homes, the grant is the same £7,500, but the savings against oil (currently about 7.5p/kWh) are more immediate.
What this misses is the 1.5 million homes on standard variable tariffs who may not have the cash flow for the upfront cost, even with the grant. The Energy Saving Trust notes that heat pump suitability also depends on property size, insulation levels and radiator system, a well-insulated home with large radiators or underfloor heating is ideal. Homes with poor insulation (EPC band D or below) may need £5,000–£10,000 of additional fabric upgrades before a heat pump becomes cost-effective.
No ban, but a clear direction
The absence of a boiler ban is politically significant. The previous government had floated a 2035 phase-out of new gas boiler installations. This plan drops that target, instead relying on financial incentives and market growth. For homeowners, this means no forced timeline, but it also means the policy signal is weaker. The risk is that households delay decisions, hoping for larger grants or cheaper technology, while the clock ticks on the BUS budget (limited to 90,000 installations per year currently).
Yet the £2.7bn figure is not small. It represents roughly a tripling of the previous BUS budget. If deployment hits targets, heat pump installations could rise from 55,000 per year to 150,000 by 2028. That scale should bring down unit costs through supply chain economies and installer competition, a pattern seen in other countries like Sweden and Norway, where heat pumps now dominate new heating installations.
Homeowners considering a boiler replacement in the next 12 months should check eligibility now. The grant is first-come, first-served. Waiting two years may mean better technology and lower costs, but also the risk that the grant is reduced or redirected. The most pragmatic step: get an EPC assessment and a heat pump quote from an MCS-certified installer this autumn. If the numbers work, the £7,500 is there. If not, a new gas boiler remains legal, for now.
Frequently Asked Questions
Typically no. A heat pump installation for a 3-bed semi costs £7,000–£13,000. The £7,500 grant covers roughly half to two-thirds of the total, leaving a net cost of £0–£5,500 depending on property complexity and existing insulation.
No. The government has dropped the 2035 ban, so there is no forced timeline. However, the £7,500 Boiler Upgrade Scheme grant is limited to 90,000 installations per year and may fill up. If your boiler is over 15 years old, getting a heat pump quote now locks in the subsidy.
