Commercial heat pump installation and the 45 kWth limit of the Boiler Upgrade Scheme

A common assumption is that the £7,500 Boiler Upgrade Scheme (BUS) is for homes only. It is not: Ofgem describes the scheme as covering heat pumps in homes and non-domestic buildings in England and Wales, and GOV.UK says it can replace a heating system in a building used for a business. It is a flat grant per installation, up to 45 kWth (shared ground loops up to 300 kWth), so it helps small systems, not building-scale plant. Grant amounts on the GOV.UK and Ofgem pages: £7,500 for air-to-water, ground-source or water-source heat pumps, £9,000 for eligible off-gas-grid properties (listed to 31 March 2027), and £2,500 for air-to-air heat pumps in residential properties only. Confirm eligibility with the installer and Ofgem before relying on it. Larger commercial buildings need a different funding playbook, and the alternatives are often larger.

Public Sector Decarbonisation Scheme (PSDS)

For public bodies — NHS trusts, schools, colleges, universities, local authorities, emergency services — the PSDS (administered by Salix) funded low-carbon heating including heat pumps, on a whole-building basis. Grants ran from tens of thousands to multi-million pounds and covered the cost over and above a like-for-like fossil-fuel replacement. Status: there is no open application window. Phase 4 closed in November 2024, and gov.uk lists Phases 1-4 only with no future phase announced. Public bodies should check Salix and gov.uk for any successor before planning around it.

The lesson from PSDS holds for any grant that returns: windows are competitive with fixed completion deadlines, so the install programme and the funding timeline have to be planned together. A grant you cannot spend before the deadline is no use, which is why the survey and any DNO supply work should start early.

Industrial Energy Transformation Fund (IETF)

The IETF supported fuel-switching to industrial heat pumps and waste-heat recovery on eligible industrial sites and data centres. Status: closed. gov.uk states that the planned second Phase 3 window would not take place, that there will be no further extension of the fund and that no successor fund is planned (3 July 2025). Industrial buyers should treat it as a past route and check gov.uk for anything new.

Green Heat Network Fund (GHNF)

For multi-building and campus schemes such as councils, hospitals and large mixed-use developments, the GHNF has funded new low-carbon heat networks and expansions using heat pumps, geothermal, water-source or waste heat, with the grant share and award size set per round. Status: Round 12 closed on 25 September 2026 (per the gov.uk page last updated in June 2026), and funding can be drawn down until the 2029 to 2030 financial year. Check gov.uk for any later round. Heat networks are moving under Ofgem regulation, so scheme design and metering must anticipate that.

Capital allowances — the route open to every business

Even without a grant, every UK business buying a heat pump gets a tax lever. Heat-pump plant commonly forms an integral feature of the building, so the primary route is the Annual Investment Allowance: 100% relief on up to £1m of qualifying spend a year (with a special-rate 50% first-year allowance on any balance). Full expensing is for main-rate plant, so it does not apply to special-rate heating plant; the route is the AIA. See the capital allowances page for a worked example.

What about VAT?

The 0% VAT relief on heat pumps is residential and relevant-charitable only, and reverts to 5% on 1 April 2027. General commercial premises pay standard-rate VAT and recover it normally — so VAT is not a commercial funding route.

Putting it together

Route	Who it’s for	Typical value
Boiler Upgrade Scheme	Homes and small non-domestic buildings (up to 45 kWth), England and Wales	£7,500 flat; £9,000 off-gas-grid tier to 31 Mar 2027
PSDS	Public sector	Closed: no open window since Phase 4 (Nov 2024)
IETF	Eligible industry	Closed: no successor planned
Green Heat Network Fund	Multi-building schemes	Set per round; Round 12 closed 25 Sep 2026
Capital allowances (AIA)	Any business	100% on first £1m

The right route depends on what kind of organisation you are and what you are heating. Check each scheme’s current status on gov.uk, and align any application with the delivery programme, because a funded scheme is only worth having if it can actually be built on the funder’s timeline.

See the full grants and funding breakdown, or send your consumption data for a desk assessment.

For the technical side of each system, see the commercial air source heat pump sizing and siting guide and the commercial ground source heat pump guide.

The domestic and non-domestic position is explained against commercial systems in commercial heat pump vs domestic heat pump.

For the full process, see the commercial heat pump installation overview.