Business Heat Pump Grants & Funding 2026

Heat pump grants and funding for businesses in 2026

The single most common misconception about heat pumps for businesses is that the £7,500 grant everyone has heard of will help pay for them. It will not. The Boiler Upgrade Scheme is domestic-only and does nothing for a commercial or non-domestic building. That is not a technicality, it is the line that separates two completely different funding worlds, and almost every competitor page blurs it. The good news is that the commercial funding routes, while less famous, are often substantially larger. This guide sets out which schemes actually apply to a business in 2026, who qualifies for each, and how to assemble a funding package rather than chasing a grant that was never yours to claim.

All values below are illustrative of published scheme parameters and change between funding rounds, so treat them as a map rather than a quotation. The right route depends on what kind of organisation you are and what kind of building you run.

First, the myth: the Boiler Upgrade Scheme is domestic-only

The Boiler Upgrade Scheme (BUS) offers £7,500 towards an air-source or ground-source heat pump, but only for domestic properties in England and Wales. BUS terms and the eligible technologies change, so check the current rates on gov.uk, but the central point holds: it does not cover commercial premises, full stop. Businesses ask about it constantly, which is exactly why we name it first and set the expectation clearly: if you run a commercial or public-sector building, BUS is not your route. Spending time on it is wasted effort. The schemes below are.

Public Sector Decarbonisation Scheme (PSDS)

If you are a public-sector body, this is almost certainly your starting point. The Public Sector Decarbonisation Scheme, administered by Salix Finance for DESNZ, funds low-carbon heating, including heat pumps and heat-network connections, for NHS trusts, schools, colleges, universities, local authorities and emergency services in England. It takes a whole-building approach, pairing the heating measure with demand-reduction work.

The grant pays for the difference between the heat pump and a like-for-like fossil-fuel replacement, with capital awards running from tens of thousands into the multi-millions. It is competitive and time-bound: applications open in windows, and funded projects must complete within the phase deadline, so the application has to be ready when the window opens. PSDS is public-sector only, so it does not help a private commercial building. For a council leisure centre or a school estate replacing end-of-life gas plant, it is the most significant route available.

Industrial Energy Transformation Fund (IETF)

For industrial sites, the Industrial Energy Transformation Fund supports fuel-switching to industrial heat pumps and waste-heat recovery. It runs in phases and is open to industrial sites and data centres in England, Wales and Northern Ireland whose SIC code falls in an eligible sector, manufacturing, recovery and recycling, data centres, and newer additions including controlled-environment horticulture, industrial laundries and textile renting. The fund’s terms (grant rates, minimum grant sizes, technology readiness and eligibility windows) vary by funding round, so check the current scheme guidance on gov.uk.

The grant covers a share of project cost up to a published intervention rate, with a minimum grant size and a requirement that the technology is sufficiently mature, and competition windows are periodic, so eligibility and timing both need checking early on gov.uk. This is large-scale industrial and process heat, not ordinary office heating, and it pairs naturally with industrial and process heat pumps delivering high-temperature flow. An eligible laundry or food producer raising process water with gas is exactly the profile IETF was designed for.

Green Heat Network Fund (GHNF)

Where the project serves several buildings, a campus, or a district, the Green Heat Network Fund is the route. It supports public, private and third-sector bodies in England developing new low-carbon heat networks, or retrofitting and expanding existing ones, using heat pumps, geothermal, water-source or waste heat.

GHNF provides a capital grant towards eligible commercialisation and construction costs, with awards regularly running to several million pounds per scheme. Its terms (grant rates, minimums and eligibility windows) vary by funding round and the scheme is time-limited, so confirm the current rates and deadlines on gov.uk. It suits universities, hospitals, councils and large mixed-use developments rather than single buildings. Note that heat networks are moving under Ofgem regulation as the new market regulator, which is part of the wider professionalisation of the sector and worth factoring into scheme design from the outset.

Capital allowances: full expensing and the AIA

Every business, regardless of sector, can use capital tax relief, and it is the one route that does not depend on a competitive window. Heat pumps qualify as plant and machinery.

Under full expensing, a company paying UK corporation tax buying new, unused qualifying plant can take a 100% first-year deduction with no upper cap. The relief is made permanent from April 2026 and is worth up to 25p of tax saved per £1 spent for a company at the 25% corporation-tax rate. Full expensing is for companies only; sole traders and partnerships instead use the Annual Investment Allowance, which covers up to £1m of qualifying spend at 100%. Wiring and ancillary works may fall outside full expensing but usually qualify for the AIA, so always confirm the exact treatment with your accountant. Because this relief stacks on top of a grant, it should be modelled into every business case, not treated as an afterthought, and the after-tax numbers feed straight into the cost guide and the savings calculator.

How to assemble a funding package

The practical approach is to start from what you are, not from a grant you have heard of. A public body looks first at PSDS. An eligible industrial site looks at IETF. A multi-building or campus scheme looks at GHNF. And every one of them layers capital allowances on top of whatever grant applies. The mistake is to treat funding as a single source. In practice it is a package: a grant that reduces the gross capital, plus tax relief that reduces the net cost further, modelled against a running-cost saving driven by the system’s seasonal efficiency.

That is why the funding conversation belongs at feasibility, alongside the heat-loss survey, rather than bolted on after a system has been specified. Scheme eligibility can shape the design, the timing, and even the technology choice.

Find your route

The funding maze is navigable once you know which doors are open to you. See the full breakdown of every scheme, eligibility and value on the grants and funding page, model the after-tax case on the savings calculator, check the headline economics on the cost guide, and when you want a route mapped to your specific organisation, request a feasibility study. We map which routes you genuinely qualify for and build the application around the project, rather than around a grant that was only ever domestic.