Paying for a commercial heat pump: finance, tax relief and business rates
UK grants, tax reliefs, and finance routes for commercial heat pump installation. Updated for 2026.
Funding routes for this sector
Public Sector Decarbonisation Scheme (PSDS), Salix
Public-sector bodies in England (NHS trusts, schools, colleges, universities, local authorities, emergency services) were the eligible group. The scheme funded low-carbon heating (heat pumps, heat-network connections) and demand-reduction, on a whole-building approach.
- Value
- Capital grants from tens of thousands to multi-million; funds the cost over and above like-for-like fossil-fuel replacement.
STATUS: no open application window. Phase 4 closed in November 2024 and gov.uk lists Phases 1-4 only with no future phase announced, so check Salix and gov.uk for any successor before planning around it. Historically administered by Salix Finance for DESNZ, with completion deadlines set by the phase. Public sector only.
Industrial Energy Transformation Fund (IETF), CLOSED
Was open to industrial sites and data centres in eligible SIC codes for fuel-switching to industrial heat pumps and waste-heat recovery.
- Value
- Historic: typically 30-50% intervention. No open window.
STATUS: closed. gov.uk: the planned second Phase 3 window will not take place (3 July 2025), there will be no further extension and no successor fund is planned. Operated by DESNZ. Listed so buyers know it is no longer a route.
Green Heat Network Fund (GHNF)
Public, private and third-sector bodies in England developing new low-carbon heat networks, or retrofitting and expanding existing ones, using heat pumps, geothermal, water-source or waste heat.
- Value
- Capital grant towards eligible heat-network costs; the share and award size are set per round, so read the current round guidance on gov.uk.
STATUS: Round 12 closed on 25 September 2026 per the gov.uk page (updated June 2026); funding can be drawn down until the 2029 to 2030 financial year. Check gov.uk for any later round. Suits campuses, councils, hospitals and large mixed-use developments. Heat networks are moving under Ofgem regulation.
Annual Investment Allowance & Capital Allowances
Businesses paying UK tax that buy qualifying plant and machinery. The Annual Investment Allowance gives 100% relief on up to £1m of qualifying spend a year; heat-pump plant that forms an integral feature of a building falls in the special-rate pool.
- Value
- Worth up to 25p of tax saved per £1 of qualifying spend for a company at the 25% corporation-tax rate.
Heat-pump and heating plant are commonly integral features (special-rate), so AIA is the primary route (full expensing is for main-rate plant and does not apply to special-rate heating plant); the split between qualifying plant and building works matters. Always confirm the exact treatment with your accountant.
Boiler Upgrade Scheme (BUS), England and Wales, small systems
Grants for air-to-water, ground-source and water-source heat pumps in homes and in small or medium non-domestic buildings in England and Wales, up to 45 kWth for a single system (shared ground loops up to 300 kWth). Not open in Scotland or Northern Ireland.
- Value
- £7,500 for air-to-water, ground-source or water-source heat pumps; £9,000 for eligible off-gas-grid properties (that tier is listed to 31 March 2027); £2,500 for air-to-air, residential properties only. Flat rate per installation, up to 45 kWth (shared ground loops up to 300 kWth).
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, so it helps small systems rather than building-scale plant. Confirm eligibility, the current grant amounts and the end date on Ofgem and GOV.UK before relying on it (checked 30 October 2026).