Air source heat pumps (ASHPs) are the main low-carbon alternative to a gas or oil boiler in UK homes, and with a £7,500 government grant available in England and Wales, they have become financially viable for many households.1 But they are not the right choice for every property, and understanding when they work well (and when they do not) is essential before committing to what is a significant installation.

How Much Does an Air Source Heat Pump Cost?

An ASHP extracts heat from the outside air and concentrates it to heat your home and hot water. Even when outdoor temperatures drop to -5°C or below, a modern heat pump can still operate effectively.

Typical installed costs in 2026:

Property typeInstalled cost before grant (inc. VAT)
2-bed flat / small terraced house£8,000–£11,000 (before grant; Boiler Upgrade Scheme grant: £7,500)
3-bed semi-detached£9,000–£13,000 (before grant; Boiler Upgrade Scheme grant: £7,500)
4-bed detached£11,000–£17,000 (before grant; Boiler Upgrade Scheme grant: £7,500)
Large detached / old farmhouse£14,000–£22,000 (before grant; Boiler Upgrade Scheme grant: £7,500)

These figures include the heat pump unit itself, installation labour, hot water cylinder, controls, and associated plumbing work. They do not include radiator upgrades, underfloor heating installation, or electrical work beyond connecting the unit, these are common additional costs in older properties.

The Energy Saving Trust puts the typical cost of installing an air source heat pump at around £12,000 (before grant; Boiler Upgrade Scheme grant: £7,500).2 The government’s business case for the Boiler Upgrade Scheme gives a median installed cost of about £12,500 in 2024/25 (before grant; Boiler Upgrade Scheme grant: £7,500).3 For a home heated by oil or LPG with no mains gas connection, the grant is £9,000 until March 2027.1

Installing a heat pump in a home is zero-rated for VAT until 31 March 2027; from 1 April 2027 it reverts to the reduced rate of 5%.4

The Boiler Upgrade Scheme (BUS)

The Boiler Upgrade Scheme provides a £7,500 grant towards the cost of an air source heat pump (and £7,500 for ground source heat pumps).1 Until March 2027, you can get an extra £1,500 if the property is heated by oil or LPG and has no mains gas connection.1 The grant is applied by the installer and deducted from your invoice, so you never see the money directly.5

To be eligible:

  • The property must be in England or Wales6
  • You no longer need an Energy Performance Certificate (EPC) to apply. Since 28 April 2026 a valid EPC has not been required, although if the property has one its certificate number must be given.7 Insulating the loft and cavity walls first is still worth doing
  • The installer must be MCS-certified8
  • The heat pump must replace a fossil fuel heating system such as oil, gas, electric or LPG; hybrid systems that pair a heat pump with a gas boiler do not qualify1
  • You can get one grant per property, and a property that has already had government funding for a heat pump or biomass boiler is not eligible9

Applications are made by the installer on your behalf through Ofgem, and there is no income limit or means test: the grant is open to any eligible property owner, including landlords and owners of second homes.9

Running Costs: The Real Picture

An ASHP is not simply “cheaper to run than a boiler.” Running costs depend heavily on:

  1. Your current fuel, ASHPs reliably beat LPG and storage heaters on running cost. On a standard electricity tariff they can cost slightly more to run than a new gas or oil boiler, and a heat pump time-of-use tariff is what usually tips the balance.2
  2. Your property’s insulation, a heat pump works best in a well-insulated home. Poor insulation means the system runs harder and the efficiency (COP) drops.
  3. Electricity tariff, the running cost calculation hinges on electricity price vs. your current fuel price. Economy 7 or heat pump-specific tariffs (such as Octopus Cosy or similar time-of-use tariffs) can significantly improve the economics.

Indicative annual heating bill comparison (3-bed semi, 2026 energy prices):

Heating systemTypical annual costNotes
Mains gas condensing boiler£900–£1,400Well-maintained, modern boiler
Air source heat pump (standard tariff)£860–£1,320Seasonal efficiency ~2.9
Air source heat pump (TOU/off-peak tariff)£700–£1,200COP assumed ~3.2 with smart controls
Oil boiler£760–£1,160Oil price volatile; about 6.7p per kWh
LPG boiler£1,070–£1,640LPG about 9.5p per kWh
Electric storage heaters£1,600–£2,600Economy 7 rate assumed

The gas, oil, LPG and standard-tariff heat pump rows are worked from the same heat demand, about 9,500–14,500 kWh of heat a year, with boilers at 84% efficiency and the heat pump at a seasonal 2.9, counting unit rates only (standing charges are left out). The oil and LPG notes use the Energy Saving Trust’s average fuel prices for England, Scotland and Wales, which put heating oil at about 6.7p per kWh and LPG at about 9.5p.10

A key metric is the Coefficient of Performance (COP), for every 1 unit of electricity consumed, a heat pump delivers 2.5–4 units of heat. Over a whole year the figure that matters is seasonal performance: the government-funded Electrification of Heat trial found an average efficiency of 293% across the air source heat pumps it monitored, a seasonal figure of about 2.9, and well-designed systems in well-insulated homes do better.11 At the price cap unit rates for October to December 2026, 26.32p per kWh for electricity and 7.97p for gas, a heat pump at that average efficiency produces heat for about 9p per kWh.12 Gas burned at the 84% boiler efficiency the same report treats as typical costs about 9.5p per kWh of heat, so against mains gas the result is finely balanced and your tariff decides it.11

Is Your Home Suitable?

Before installing an ASHP, a competent installer should carry out a heat loss calculation to size the system correctly. Key factors:

Insulation, the single most important factor. If your loft is uninsulated or your walls are solid (pre-1920 construction), insulating before installing the heat pump will substantially reduce the system size needed and your running costs. An underinsulated home may require a heat pump that is oversized and therefore less efficient.

Radiators, ASHPs work at lower flow temperatures (typically 45–55°C) than gas boilers (65–75°C). In some older properties with undersized radiators, the existing radiators will not adequately heat rooms at these lower temperatures. Larger replacement radiators may be required. Underfloor heating is ideal but rarely necessary to retrofit.

Hot water cylinder, ASHPs heat water indirectly and require a hot water cylinder (typically 180–250 litres). Homes with combination boilers will need a cylinder installed; it is included in the installed costs above, but it needs space. A standard 210-litre unvented cylinder costs from about £650 to buy on its own.13

Outdoor space, the external unit (similar in size to an air conditioning condenser) must be positioned with adequate airflow. In England an air source heat pump on a house is usually Permitted Development under Part 14, Class G of the General Permitted Development Order, provided it complies with the MCS Planning Standards and its outdoor unit is no larger than 1.5 cubic metres.14 It is not permitted development on a listed building, and in a conservation area or World Heritage Site the unit cannot go on a wall or roof that fronts a highway.14 Blocks of flats have their own limits, including a 0.6 cubic metre cap on the unit.14

Pros and Cons

Advantages:

  • Lower carbon emissions than any fossil-fuel heating system
  • Significant grant available under the Boiler Upgrade Scheme
  • Lower running costs than LPG and storage heaters, and potentially than gas or oil on a heat pump time-of-use tariff
  • Low maintenance, with no annual Gas Safe requirement (check the maker’s warranty for any servicing condition)
  • 15–20 year equipment lifespan with proper maintenance

Disadvantages:

  • Higher upfront cost even after the grant, compared with a new gas boiler (£2,000–£4,000)3
  • Running cost advantage over mains gas is marginal at current electricity-to-gas price ratios
  • May require radiator upgrades and a new hot water cylinder
  • Less effective in poorly insulated properties
  • Requires MCS-certified installer (limits availability in some areas)

Finding an Installer

Use an MCS-certified installer, this is a requirement for the BUS grant. The MCS website has a postcode search for certified heat pump installers.8 Get at least two quotes; costs vary substantially between installers even for the same equipment. Ask each installer to provide a full heat loss calculation and system design document, not just a price.

The Heat Pump Association (HPA) and Microgeneration Certification Scheme (MCS) both publish guidance on what a competent survey and installation should include. An installer who quotes without visiting the property or carrying out a heat loss calculation should be treated with caution.

For homes replacing LPG or electric storage heating in a reasonably insulated property, an air source heat pump with the BUS grant makes strong financial and environmental sense in 2026. For oil, the £9,000 grant brings the upfront cost close to that of a replacement boiler, but running costs are close at current prices, so the tariff decides the savings. For homes on mains gas with older, solid-wall construction, the case is more finely balanced and the insulation work should come first.

References (14)

Figures in this note were checked against the sources below on 2 October 2026. Superscript numbers in the text point to them. Every source the site cites, by topic.

  1. 1costvery strongGOV.UK.RN-9EFNVZA price, true at 2026-09. The grant values: £7,500 towards an air source heat pump, £7,500 towards a ground source heat pump including water source heat pumps and those on shared ground loops, and £5,000 towards a biomass boiler. A further £1,500 is available until March 2027 where the property is heated by oil or LPG and has no mains gas connection. Only one grant is available per property. Capacity limits are 45kWth for an individual system, 70kWth for multiple heat pumps and 300kWth for shared ground loops. Hybrid systems pairing a gas boiler with a heat pump are not eligible, and an existing low carbon heating system cannot be replaced under the scheme.
  2. 2costfairEnergy Saving Trust.RN-X9NXFYA price, true at 2026-09. Energy Saving Trust advice page on air source heat pumps, giving the typical installed cost for a UK home.
  3. 3costvery strongDepartment for Energy Security and Net Zero.RN-AC5XPIA price, true at 2025-03. The summary business case for the Boiler Upgrade Scheme 2026 to 2030. Sets out the grant amounts, the budget, expected installation volumes and the department's reasoning for continuing the scheme. This is where the scheme's own numbers come from, as opposed to the application page, which tells a householder what to do but not what it is expected to cost the state or how long the money lasts.
  4. 4technicalvery strongHM Revenue & Customs, guidance.RN-1HRJJ7Section 2.1 sets a zero rate of VAT on the installation of energy-saving materials in residential accommodation from 1 May 2023 to 31 March 2027, after which the rate reverts to the 5% reduced rate; section 2.22 extended it to buildings used solely for relevant charitable purposes from 1 February 2024. Section 2.7 lists the qualifying materials: central heating and hot water controls, draught stripping, insulation to walls, floors, ceilings, roofs, lofts and pipes, solar panels, wind turbines, water turbines, ground source heat pumps, air source heat pumps, micro combined heat and power units and wood-fuelled boilers, with water source heat pumps, batteries for energy storage and smart diverters added on 1 February 2024. Section 2.3 is the critical rule for a renovation note: relief applies to an installation service, or materials supplied and installed together, but materials bought without installation stay standard-rated at 20%.
  5. 5technicalvery strongGOV.UK (Department for Energy Security and Net Zero), guidance.RN-11Y5WOThe official GOV.UK page on applying for the Boiler Upgrade Scheme. It settles that the installer applies through Ofgem and the grant is taken off the installation price on the quote and invoice.
  6. 6technicalvery strongGOV.UK (Department for Energy Security and Net Zero), a government page.RN-DJPZSBThe Boiler Upgrade Scheme application page: the grant amounts for an air source heat pump, ground source heat pump and biomass boiler, who is eligible, and the fact that the installer applies on the householder's behalf rather than the householder claiming it back. This is the official statement of the grant, so it is the figure to use rather than an installer's summary of it.
  7. 7technicalvery strongOfgem, guidance.RN-FAJTUKOfgem's scheme guidance for Boiler Upgrade Scheme installers, version 5.1. It settles that from 28 April 2026 a valid EPC is no longer needed, though an existing EPC's number must be supplied.
  8. 8technicalvery strongOfgem, guidance.RN-UZL6XFOfgem's page for property owners using the Boiler Upgrade Scheme. It settles that the installer must be MCS certified and that installers can be found on the MCS website.
  9. 9technicalvery strongGOV.UK.RN-ZAQ300You must own the property, which can be a business premises, second home or rental, and you must be replacing a fossil fuel heating system such as oil, gas, electric or LPG. Properties that have already had government funding for a heat pump or biomass boiler, social housing, and most new builds still under construction are excluded, though a finished new build with a fossil fuel boiler and an owner-built self build can qualify. A biomass boiler additionally requires the property to be off the gas grid, in a rural location as defined in Ofgem guidance, and the boiler to hold an emissions certificate. The installer must commission and install the heat pump within 120 days of applying for the grant or it will not be eligible, and the application is made through an MCS certified installer.
  10. 10costfairEnergy Saving Trust.RN-2BXHT7A price, true at 2026-09. The Energy Saving Trust's published fuel price assumptions for Great Britain, including the average off-peak Economy 7 electricity price of 14.4p/kWh used in its savings figures.
  11. 11technicalfairHeat Pump Association, guidance.RN-HK0HXPThe Heat Pump Association's summary of the DESNZ-funded Electrification of Heat trial of 742 heat pumps. It settles the measured average ASHP efficiency of 293% against 84% for a typical fossil fuel system.
  12. 12technicalvery strongOfgem.RN-YYE8U2The live source for any running-cost sum in a heating note. For 1 October to 31 December 2026 the direct debit cap is 26.32p per kWh for electricity with a 54.83p daily standing charge, and 7.97p per kWh for gas with a 29.68p daily standing charge, giving a typical annual dual fuel bill of £1,723, a 4% rise on the previous period. Ofgem states these are the average unit rate and standing charge for direct debit customers in England, Scotland and Wales; gas prices include 5% VAT while electricity carried no VAT in this period. The cap is reset every three months, so any note quoting a pence-per-kWh figure should be dated against this page.
  13. 13costsupplier figureToolstation.RN-GQN5E1A price, true at 2026-09. Toolstation product page for a 210-litre indirect unvented hot water cylinder, priced at £649.99 including VAT, supply only.
  14. 14technicalvery strongThe National Archives, guidance.RN-MOUFL8The permitted development right for air source heat pumps on houses and blocks of flats in England. It sets the MCS Planning Standards condition, the unit volume caps and the listed building and conservation area limits.

  1. Apply for the Boiler Upgrade Scheme: What you can get, GOV.UK (Department for Energy Security and Net Zero), accessed 15 September 2026. Priced at 2026-09, so no calibration is needed. gov.uk

  2. Air source heat pumps, Energy Saving Trust, accessed 30 September 2026. Priced at 2026-09 and left there. energysavingtrust.org.uk

  3. Boiler Upgrade Scheme: summary business case, Department for Energy Security and Net Zero, accessed 30 September 2026. Priced at 2025-03 and left there. assets.publishing.service.gov.uk

  4. Energy-saving materials and heating equipment (VAT Notice 708/6), HM Revenue & Customs, accessed 29 September 2026. gov.uk

  5. Apply for the Boiler Upgrade Scheme: How to apply, GOV.UK (Department for Energy Security and Net Zero), accessed 29 September 2026. gov.uk

  6. Apply for the Boiler Upgrade Scheme, GOV.UK (Department for Energy Security and Net Zero), accessed 29 September 2026. gov.uk

  7. Boiler Upgrade Scheme: Installer Guidance V5.1, Ofgem, accessed 29 September 2026. ofgem.gov.uk

  8. Boiler Upgrade Scheme (BUS) - Property owners, Ofgem, accessed 29 September 2026. ofgem.gov.uk

  9. Apply for the Boiler Upgrade Scheme: Check if you’re eligible, GOV.UK (Department for Energy Security and Net Zero), accessed 29 September 2026. gov.uk

  10. Our data, Energy Saving Trust, accessed 30 September 2026. Priced at 2026-09 and left there. energysavingtrust.org.uk

  11. Improvement in Heat Pump Performance highlighted by new Electrification of Heat Demonstration Report, Heat Pump Association, accessed 29 September 2026. hpauk.org.uk

  12. Energy price cap unit rates and standing charges, Ofgem, accessed 29 September 2026. ofgem.gov.uk

  13. Joule Invacyl Unvented Indirect Cylinder 210L, Toolstation, accessed 30 September 2026. Priced at 2026-09 and left there. toolstation.com

  14. The Town and Country Planning (General Permitted Development) (England) Order 2015, Schedule 2, Part 14, Class G, The National Archives, accessed 29 September 2026. legislation.gov.uk