Commercial heat pump grants: why there's no £7,500 for business

One of the most common — and most misleading — assumptions we hear is that a business can claim the £7,500 heat-pump grant. It cannot. The Boiler Upgrade Scheme is domestic-only, capped at 45 kWth, for homes in England and Wales. Commercial buildings need an entirely different funding playbook, and the good news is that 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) funds low-carbon heating including heat pumps, on a whole-building basis. Grants run from tens of thousands to multi-million pounds and cover the cost over and above a like-for-like fossil-fuel replacement.

The catch is delivery: PSDS runs in competitive windows 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 we start the survey and any DNO supply work early.

Industrial Energy Transformation Fund (IETF)

For industrial sites and data centres in eligible SIC codes — manufacturing, recovery/recycling, data centres, controlled-environment horticulture, industrial laundries — the IETF supports fuel-switching to industrial heat pumps and waste-heat recovery. Intervention rates are typically 30-50%, with an SME minimum grant of £75,000, and projects must complete by 31 March 2028. The technology must be proven (TRL 7+).

Green Heat Network Fund (GHNF)

For multi-building and campus schemes — councils, hospitals, large mixed-use developments — the GHNF funds new low-carbon heat networks (or expansions) using heat pumps, geothermal, water-source or waste heat, with grants of up to 50% of eligible costs. 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). Because heating plant is special-rate, the route is AIA rather than full expensing. See our 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	Domestic only	£7,500 (not for business)
PSDS	Public sector	Tens of thousands to millions
IETF	Eligible industry	30-50%, min £75k
Green Heat Network Fund	Multi-building schemes	Up to 50%
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. We map which schemes apply and align the 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 free feasibility.