Grants and funding for heat pumps for businesses

The first thing to clear up, because it is the question we are asked most, is the £7,500 Boiler Upgrade Scheme. It is domestic-only. It does not cover commercial or non-domestic buildings, full stop. If a salesperson tells you your office, care home or factory can claim it, walk away. Commercial buildings have their own funding routes, and several of them are larger than the domestic grant, but they are competitive, deadline-driven and paperwork-heavy. Knowing which one fits your building, and building the application around the project from the start, is where a specialist earns their keep.

Below is each route that genuinely applies to commercial and public-sector heat pumps in 2026, who qualifies, what it is worth, and how the routes stack together.

Public Sector Decarbonisation Scheme (PSDS)

If you are a public body, a council, an NHS trust, a school, college or university, this is usually the primary route. Administered by Salix Finance for the Department for Energy Security and Net Zero, the Public Sector Decarbonisation Scheme funds low-carbon heating and the demand-reduction measures that go with it, taking a whole-building approach. Grants run from tens of thousands to several million pounds and cover the cost over and above a like-for-like fossil-fuel replacement. The catch is that it runs in competitive application windows and projects must complete within the phase deadline, so timing the design and procurement around the window is critical. It is public sector only, private commercial buildings cannot use it.

Industrial Energy Transformation Fund (IETF)

For industrial sites and data centres in eligible SIC codes, manufacturing, recovery and recycling, data centres, and newer sectors including controlled-environment horticulture and industrial laundries, the Industrial Energy Transformation Fund supports fuel-switching to industrial heat pumps and waste-heat recovery. Phase 3 has up to £185m to allocate across 2024 to 2028, with a minimum SME grant of £75,000 and typical intervention rates of 30 to 50%. The technology must be at Technology Readiness Level 7 or above, which high-temperature commercial heat pumps comfortably are. It runs in periodic competition windows and projects must complete by 31 March 2028. This is for genuine process and industrial heat, not ordinary office heating.

Green Heat Network Fund (GHNF)

Where the project serves more than one building, a campus, a hospital site, a council estate, a large mixed-use development, the Green Heat Network Fund offers capital grants of up to 50% of eligible commercialisation and construction costs, with awards regularly running to several million pounds per scheme. Funding rounds run through to 2029/30. It suits central energy centres using heat pumps, geothermal, water-source or waste heat. Note that heat networks are moving under Ofgem regulation and must follow the Heat Network (Metering and Billing) Regulations, so the compliance overhead is higher than a single-building install.

Full expensing and the Annual Investment Allowance

This is the route open to every business, and it is often overlooked. Heat pumps qualify as plant and machinery, so a company paying UK corporation tax can claim full expensing: a 100% first-year deduction with no upper cap, made permanent from April 2026 and worth up to 25p of tax saved for every pound spent at the 25% rate. Full expensing is for companies only; sole traders and partnerships use the Annual Investment Allowance instead, which gives 100% relief on up to £1m of qualifying spend. Some ancillary wiring works may fall outside full expensing but still qualify for the AIA. Always confirm the treatment with your accountant, and read the detail in the government's capital allowances guidance.

How the routes stack

The routes are not mutually exclusive, but they do not all combine freely either. A public body might pair a PSDS capital grant with its own borrowing for the balance. An industrial site can take an IETF grant and then claim capital allowances on the unfunded portion of qualifying spend. A private commercial building with no access to PSDS, IETF or GHNF still has full expensing or the AIA, which on its own can reshape the business case. What you cannot do is claim grant funding and tax relief on the same pound of expenditure, so the modelling matters: we work out the combination that gives the best net position for your specific organisation type.

Timelines, pitfalls and what we need from you

The grants are competitive and window-driven, so the most common and costly mistake is leaving the application until the design is finished. PSDS and IETF in particular reward applications that are technically credible and ready to deliver within the deadline, which means the heat-loss survey, the modelled SCOP and carbon savings, and the cost breakdown all need to exist before the window opens. To build a strong application we need at least twelve months of your gas or oil consumption data, your building drawings, and a clear picture of your organisation's eligibility status. We have prepared applications across these schemes and we will tell you honestly if your project is unlikely to win, rather than burn your time on a long shot.

If you are not sure which route fits, the quickest way to find out is to talk it through. Start with a free consultation and we will map the funding landscape against your building before you commit to anything.