Grants and funding for business heat pumps in 2026

What to expect before you plan around a grant

Be realistic about grants. Most businesses that move to a heat pump pay for it without one. The only national grant open to business premises is the Boiler Upgrade Scheme, a fixed £7,500 (£9,000 for some off-gas-grid sites until 31 March 2027), and it stops at 45 kW thermal for a single heat pump (70 kW thermal for a multi-unit system). That rules out most medium and large commercial plant. Within the limit the applicant must own the building, an MCS-certified installer applies for you, hybrid systems are excluded, and a heat pump that has had any other public grant is not eligible (GOV.UK).

Above the limit there is no open central grant. The Public Sector Decarbonisation Scheme closed to new applications in November 2024 and the Industrial Energy Transformation Fund’s last window shut on 19 April 2024, with no successor named for either. Outside England the main devolved routes for a business are loans, not grants: the interest-free Business Energy Scotland SME Loan and the Development Bank of Wales Green Business Loan Scheme. In Northern Ireland the business grants are paused or closed. So price the project on capital allowances and your own running costs first, and treat any grant as a reduction in price rather than the reason the project works. The cost guide and the running-cost calculator help with that.

The Boiler Upgrade Scheme for small non-domestic buildings

Much online advice still says the Boiler Upgrade Scheme (BUS) is for homes only. That is wrong. GOV.UK states that you can use the grant to replace a heating system in your home or in a building used for your business. The rules that matter for a business owner are these:

• Where: England and Wales.
• Size limit: the installed heat pump must be 45 kW thermal or less for a single heat pump (70 kW thermal for a multi-unit system). For a shared ground loop, the collective limit is 300 kW thermal, with each heat pump 45 kW thermal or less. Most medium and large commercial plant is bigger than 45 kW thermal, so the scheme does nothing for those buildings.
• Who applies: the application is made by your MCS-certified installer on your behalf as the owner, and the grant is taken off the quote. You do not apply yourself and then claim it back.
• Ownership: the applicant must own the property; GOV.UK says this includes business premises. Most new builds and social housing are not eligible, only one grant is available per property, and installation must be completed within 120 days of the application.
• Other grants and hybrids: you can get one grant per property, a property is not eligible if the heat pump has had other public grant funding, and GOV.UK says hybrid systems (a gas boiler with an air source heat pump, for example) do not qualify.
• What is replaced: a fossil-fuel or direct-electric system, not an existing heat pump.

Two conditions that older pages still quote have gone. There has been no insulation requirement since 8 May 2024, and there has been no valid-EPC requirement since 28 April 2026. Ofgem can issue vouchers up to 31 December 2029 (S.I. 2026/390).

What the grant is worth

Biomass and air-to-air grants also exist; the air-to-air grant is residential only, so it is not a business route. Because the grant is fixed, it matters most for the smallest sites: a corner shop, a small office, a village hall or a small workshop with a heat load well inside 45 kW thermal. For a 100 kW system it is not available at all. The cost guide shows what published price bands look like at larger sizes.

Capital allowances: what applies and what does not

Space and water heating systems are classed as integral features of a building (Capital Allowances Act 2001 s33A; HMRC manual CA22320). Integral features are special-rate expenditure. In practice:

• Annual Investment Allowance (AIA): 100% relief in the year of spend, up to £1m a year, for companies, sole traders and partnerships.
• 50% first-year allowance: above the AIA, companies can claim 50% on new and unused special-rate plant. The other 50% goes into the special-rate pool, which gets a 6% writing-down allowance.
• Full expensing does not apply. GOV.UK says companies cannot claim full expensing for special-rate assets such as integral features. The 40% first-year allowance from 1 January 2026 covers main-rate plant only.
• Enhanced capital allowances under the Energy Technology List ended in April 2020 and are not available.

The tax you save is the relief multiplied by your corporation tax rate: 25% on profits over £250,000, 19% on the small profits rate, with marginal relief in between. It is not a flat figure per pound. Whether a given installation is a special-rate integral feature, or whether some wiring and ancillary works are classed differently, is a classification question. Confirm it with your accountant before you rely on it.

Schemes that have closed

These are listed because search results still show them as if they were live.

• Public Sector Decarbonisation Scheme (PSDS). Phase 4 closed to new applications in November 2024 and no further phase has been announced. There is no new window. England has no Salix interest-free loan for public bodies. In Scotland the Salix Scotland Recycling Fund is interest-free and matched equally by the public body, and in Wales the Salix Wales Funding Programme lends at a fixed 2.45%.
• Industrial Energy Transformation Fund (IETF). It closed in July 2025 with no successor. The last application window shut on 19 April 2024. See the GOV.UK collection page.
• Green Heat Network Fund (GHNF), Round 12. The GOV.UK page showed this round open until 11.59pm on Friday 25 September 2026, so it has now closed. No later round was announced on that page. GHNF supports heat networks, not individual buildings, and is open to public, private and third-sector organisations in England and Wales; sole traders cannot apply. Check gov.uk for the next round. See heat networks and ambient loops.

Any page that presents PSDS or IETF as a current route is out of date; the GOV.UK collection pages are the check.

Which route fits which building

For the hybrid case, where a heat pump is paired with a retained boiler, see hybrid retrofit. GOV.UK says the Boiler Upgrade Scheme does not pay for a hybrid system, for example a gas boiler combined with an air-source heat pump. Check with your installer and Ofgem before designing around a grant.

In Scotland, Wales and Northern Ireland

Heating funding is devolved, so the route depends on where the building is. The points below were checked against the scheme pages on 3 November 2026; schemes change, so read the current page before you rely on one.

Scotland

• No Boiler Upgrade Scheme. It covers England and Wales only.
• Business Energy Scotland SME Loan. An interest-free loan over up to 8 years, for applications from £1,000 to £130,000, processed on a rolling basis subject to available funds. Air, ground and water source heat pumps attract cashback of 75% of eligible costs up to £10,000, within a £30,000 cashback cap per business. It is a loan with cashback, not a grant, and it needs a free Business Energy Scotland energy assessment first (Business Energy Scotland).
• Charities and community buildings. The CARES Let’s Do Net Zero Community Buildings Fund lists heat pumps as a core technology and pays up to £80,000 at 80% to non-profit organisations that own or lease the building for five years or more, first come first served (Local Energy Scotland).
• Public bodies. The Salix Scotland Recycling Fund gives interest-free repayable funding that the public body matches equally; ask Salix whether your project type qualifies.
• Not for businesses. Home Energy Scotland grants and loans are for homeowners only.
• Planning. Scotland’s non-domestic permitted development class 6I covers ground and water source heat pumps only. There is no non-domestic air source class, so a commercial air source heat pump needs planning permission.

Wales

• The Boiler Upgrade Scheme applies on the same terms as in England.
• Development Bank of Wales Green Business Loan Scheme. Open to limited companies, sole traders and partnerships based in Wales that have traded for two years or more with at least one set of filed accounts. It names air, ground and water source heat pumps among the measures it funds, at a discounted fixed rate (Development Bank of Wales); a Senedd written answer gives loans of £1,000 to £1.5m over up to 15 years.
• Public bodies. The Salix Wales Funding Programme lends at a fixed 2.45%, not interest-free; only its Invest to Save strand, for bodies without borrowing powers, is interest-free.
• Closed. Ynni Cymru 2026/27, which required low-carbon heat as part of a project, closed on 21 May 2026 with no further round announced. The Ymestyn grant window has passed, and it excluded commercial enterprises.
• Planning. Part 43 of the Welsh permitted development order covers non-domestic ground and water source heat pumps up to 45 kW thermal. It has no non-domestic air source class.

Northern Ireland

• No Boiler Upgrade Scheme.
• Invest NI Energy Efficiency Capital Grant is paused: Invest NI says it is not accepting enquiries or new applications, and gives no reopening date.
• NISEP commercial scheme. Power NI’s NISEP-funded commercial energy saving grant (20%) has closed for applications for 2026/27, and its 2026/27 list of measures did not include heat pumps. Power NI expects the next round to open in April 2027, subject to funding approval.
• Non-Domestic Renewable Heat Incentive closed to new applicants in 2016.
• Planning. Part 37 Class C covers non-domestic ground and water source heat pumps. There is no non-domestic air source class.

Capital allowances and VAT rules are UK-wide, so the tax section above applies in all four nations. A business pays VAT at 20% on a heat pump installation, which it can reclaim if VAT-registered; the 0% rate is limited to residential and solely charitable buildings.

If a grant does not fit: how businesses usually pay

For most sites the question is not which grant, but which of these routes. This site explains how they work. It does not arrange or broker finance, and nothing here is an offer of credit or a rate.

• Own funds plus capital allowances. The usual route above 45 kW thermal. The Annual Investment Allowance covers qualifying spend up to £1m a year, and companies can claim a 50% first-year allowance on special-rate plant above that. Test the payback on your own tariffs with the running-cost calculator and the price bands in the cost guide.
• Asset finance, leasing or hire purchase. A finance company pays for the plant and you repay over a fixed term. Under hire purchase you normally own the equipment at the end; under a lease the finance company may keep ownership. A heat pump is plumbed and wired into the building, so ask any provider how it treats fixed plant, and ask your accountant who can claim the capital allowances under each type of agreement.
• Business loans. A loan spreads the cost while you own the plant from the start. In Scotland and Wales there are government-backed green loans, described in the nation section above.
• Buying heat instead of plant. If your site is near a heat network, a connection means paying a heat tariff rather than owning a heat pump; see heat networks and ambient loops. A power purchase agreement is the electricity equivalent: it can fix the price of the electricity a heat pump runs on, but it does not pay for the heat pump itself.

The enquiry form asks which of these you are considering, so the reply can deal with that route. We reply by email.

How to use this before you ask for quotes

Work out your design heat load first, because the 45 kW thermal line decides which column of the table you are in. Then ask each installer in writing whether they are applying for the BUS grant, what the quote is before and after it, and who is claiming any capital allowances. Check their MCS certificate on the public register at mcscertified.com. For the energy-cost side of the decision, use the running-cost calculator, and for the order of magnitude of capital cost see the cost guide.

This site publishes information. It does not apply for grants, install heat pumps or give tax advice. If you send an enquiry through the quote page, we reply by email.

Eligibility checker

The checker below screens a premises against the published conditions; it is indicative only. Ofgem decides eligibility, and your installer applies on your behalf.