Grants and funding for commercial heat pump installation
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 and emergency services. Grants for 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.
Administered by Salix Finance for DESNZ. Competitive application windows, and projects must complete within the phase deadline, so delivery programme and funder timeline have to be planned together. Public sector only.
Industrial Energy Transformation Fund (IETF) Phase 3
Industrial sites and data centres in England, Wales and Northern Ireland in eligible SIC codes (manufacturing, recovery/recycling, data centres, plus controlled-environment horticulture, industrial laundries and textile renting). Supports fuel-switching to industrial heat pumps and waste-heat recovery.
- Value
- Up to £185m total across the fund (2024-2028); SME minimum grant £75,000, typically 30-50% intervention. Technology must be TRL 7 or above.
Operated by DESNZ. Periodic competition windows; projects must complete by 31 March 2028. Large-scale industrial and process heat only.
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 of up to 50% of eligible commercialisation and construction costs; awards regularly run to several million pounds per scheme.
Funding rounds run to 2029/30. 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 rather than full expensing; the split between qualifying plant and building works matters. Always confirm the exact treatment with your accountant.
Boiler Upgrade Scheme (BUS), DOMESTIC ONLY (noted for clarity)
Grants for air-source and ground-source heat pumps in DOMESTIC properties in England and Wales (up to 45 kWth). NOT available for commercial or non-domestic buildings.
- Value
- £7,500 for air-source or ground-source; £2,500 for air-to-air (from 28 April 2026, domestic only).
Included only to set expectations: businesses frequently ask about the £7,500 grant, and it does not apply to commercial premises. Commercial buyers should look to PSDS, IETF, GHNF or capital allowances.