Heat Pump Electricity Tariffs

A heat pump runs on electricity, so the tariff you are on shapes what the heating actually costs¹. Because a heat pump draws power steadily through the day and can often be nudged to run more at night, suppliers have built tariffs around it: products with one or more cheap windows, and sometimes an expensive one, that reward a household for shifting when the heating runs. Depending on the supplier, you can get between five and 10 hours of cheaper electricity per day on these products².

The headline example is E.ON Next's Next Pumped, a dedicated heat pump tariff with a super off-peak window from 10pm to 6am, which E.ON Next says saves around £67 a year³. Independent estimates of what a well-chosen tariff can do for a heat pump home run higher: Energy Saving Trust puts the gain at up to £330 a year on heating bills⁴. This page explains how these tariffs are shaped, what a supplier asks for before you can have one, and where the savings claims stop being reliable.

Why the tariff matters as much as the pump

A heat pump is an electric appliance, and electricity is priced very differently from gas. Parliamentary research on domestic heat pumps notes that additional savings are possible with flexible electricity tariffs, and that reducing the price of electricity relative to gas would make heat pumps more competitive⁶. The tariff is where that price relationship gets decided for your household.

The stakes are real in both directions. Energy Saving Trust reports that on standard electricity tariffs, where electricity is nearly four times more expensive than gas, heat pumps can cost slightly more to run than new gas or oil boilers⁷. Its wider review of what actually cuts energy bills is blunter still: most heat pumps on a standard flat-rate tariff cost the same or even more to run than an efficient gas boiler⁴. A poorly insulated home compounds the problem, and Croydon Council's retrofit guidance warns that installing a heat pump in such a home may increase energy bills, because electricity is more expensive than gas⁸.

So the tariff is not a bonus, it is part of the case for the technology. Surveys by Nesta found that the benefit most likely to persuade homeowners to get a heat pump would be lower home energy bills, cited by 16%⁹. Energy Saving Trust's Flexible Futures research analysed over a million heat pump, tariff and technology combinations and found that some tariff types provide the best heat pump savings while others might actually increase energy bills¹⁰. In other words, the wrong tariff can undo the running-cost advantage the right one creates.

E.ON Next's specialist heat pump rate

E.ON Next sells Next Pumped as a tariff built for heat pump homes. Its stated features are a saving of around £67 a year, no exit fees, and 100% renewable electricity³. E.ON Next also offers its customers up to £200 off an air source heat pump, which links the tariff to the installation side of the market³.

The £67 figure deserves a close look, and the section below gives it one. What matters at the outline stage is the structure: Next Pumped is a whole-house time-of-use product, not a separate metered circuit for the heat pump, and its pricing is built around three bands of the day rather than a single night rate. That three-band shape is what separates heat pump tariffs from the older Economy 7 model, which offers one long cheap window and a flat rate for the rest of the day.

For comparison, E.ON Next's fixed products work differently: Which? notes that fixed energy tariffs often charge around £100 per fuel for leaving before the end of the contract¹¹. Next Pumped's absence of exit fees means the product is not locked in that way, which matters if you want to trial it against a tracker tariff or a dynamic tariff.

The pricing day: super off-peak, off-peak and peak

Next Pumped divides the day into three pricing bands, as stated by E.ON Next with pricing correct at 10 September 2026³:

The shape is deliberate. The eight-hour super off-peak window from 10pm to 6am is long enough to pre-heat a home and its hot water before the household wakes, and the off-peak band covers the daytime hours when a heat pump is doing most of its work in winter. The expensive band lands exactly where national demand peaks.

This is not unique to E.ON Next. Which? reports that some heat pump tariffs come with a pricier peak rate between 4pm and 7pm, and that it has seen peak rates up to as much as 50% above standard tariff rates². The peak premium is the tariff's way of saying: do not run the heating hard between four and seven in the evening if you can avoid it. A heat pump, which heats steadily rather than in bursts, is better placed to do that than most heating systems, but only if the household's schedule and the building's ability to hold heat allow it.

Does the cheap rate cover the whole house?

Yes. Heat pump tariffs of this kind are whole-house products: the cheap windows apply to all the electricity the home uses, not only the heat pump. Energy Saving Trust describes heat pump tariffs as offering one or more cheaper periods of electricity during the day or night, and possibly an expensive period too¹². Nothing in that structure singles out the heating circuit.

That has two practical consequences. The first is that the tariff rewards every shiftable load in the home: a washing machine, a dishwasher or an immersion heater run inside the super off-peak window is charged at the cheap rate, which is the same logic behind shifting electricity use to cheap-rate periods on any time-of-use product. The second is that the peak premium also applies to everything, so a household that runs a tumble dryer at 5pm pays the peak rate for it.

The whole-house design is also why these tariffs are mostly only available for homes with a heat pump¹². Suppliers offer the long cheap windows on the expectation that a heat pump will use them, and they ask for evidence of the heat pump before switching you on. A household without one would be getting an unusually generous time-of-use tariff with no obligation to use it.

Who qualifies, and the smart meter requirement

Three things stand between a household and a heat pump tariff: the heat pump itself, a smart meter, and the right kind of smart meter.

The heat pump evidence is straightforward. Because these tariffs are mostly only available for homes with a heat pump¹², a supplier will ask you to confirm what is installed, and some ask for installation details or photographs. E.ON Next ties its own offer to its customer base, with up to £200 off an air source heat pump for E.ON Next customers³.

The smart meter is not optional. Time-of-use tariffs need half-hourly readings so the supplier can bill different rates at different times, and Uswitch's guidance on EV and heat pump tariffs is to ensure your smart meter is SMETS2 compliant, to allow switching between suppliers without affecting functionality and supply¹³. Refusing a smart meter excludes you from cheaper tariffs which are only available if you have one¹⁴, and Ofgem confirms that smart meters give access to more flexible tariffs, including dual-rate products¹⁵.

The SMETS2 point matters more than it sounds. First-generation SMETS1 meters, particularly unenrolled ones, have historically lost their smart functionality when the household switched supplier, which would break a tariff that depends on half-hourly data. Ofgem's consultation on smart meter guaranteed standards covers both SMETS1 and SMETS2 meters, including unenrolled SMETS1 meters, and sets out the performance standards suppliers must meet¹⁶. If your meter is an older one, ask the supplier what happens to the tariff if it drops out of smart mode.

Separately, heat pump installations accredited from 22 May 2018 have their own metering requirement: metering for performance is required for all such heat pump installations¹⁷, and Ofgem notes that applicants who applied on or after 22 May 2018 with a heat pump are required to be metered for performance and can apply for a Metering and Monitoring Service Package to fulfil this criterion¹⁸. That requirement belongs to the renewable heat scheme rather than to electricity tariffs, but it means many heat pump homes already have the metering infrastructure in place.

Aira Intelligence: the heat pump that follows the tariff itself

The newest development in this market is that the heat pump, not the household, does the shifting. Aira, a heat pump manufacturer, says its Aira Intelligence system can optimise against any energy tariff¹⁹. On a smart tariff, such as a day and night or dynamic tariff, the system automatically adjusts when the heat pump runs, using more electricity when prices are lower and easing off when they are higher¹⁹.

This is a maker's claim about its own product, so it carries the weight of any manufacturer statement. But the direction of travel is clear and it changes what a tariff is for. On a manually managed tariff, the household decides when the heating runs and carries the cost of getting it wrong. On an automatically optimised one, the system reads the price signal and the weather, and the household sets the comfort level rather than the schedule.

Aira also states there are no lock-ins and no restrictions: you can switch tariffs whenever you like, and the system adapts automatically¹⁹. For a household weighing a dedicated heat pump tariff against a dynamic half-hourly tariff, that flexibility matters, because it means the tariff choice is not frozen at installation. Whether the optimisation delivers the savings in practice is a question the independent evidence has not yet answered for this specific product.

Standard tariff against time-of-use: what actually changes

The independent evidence on running costs is consistent about the starting point and consistent about the prize. On a standard flat-rate tariff, most heat pumps cost the same or even more to run than an efficient gas boiler⁴. Energy Saving Trust's air source heat pump advice puts it more precisely: on standard electricity tariffs, where electricity is nearly four times more expensive than gas, heat pumps can cost slightly more to run than new gas or oil boilers⁷.

Switch to a heat pump time-of-use tariff and the comparison flips. Energy Saving Trust's latest research shows that by switching to a heat pump time-of-use tariff you can reduce running costs significantly, to the point where a heat pump can cost less to run than a gas boiler⁷. Its press release on clean technology combinations makes the same point: when paired with a suitable time-of-use tariff, a heat pump can offer lower running costs over time compared with a gas boiler, with heat pump users on smart tariffs saving around £330 a year compared with those who are not²⁰. Which? adds that you can save money just by being on a typical time-of-use tariff, according to a study by energy consultancy Cornwall Insight².

The caveat is the mirror image of the promise. Government-commissioned research on the heat pump transition found that where heating patterns are not well aligned to the tariff, time-of-use tariffs can increase fuel bills²¹. A household that needs its heat between 4pm and 7pm, in a home that cannot hold warmth through the evening, is exposed to the peak premium rather than protected by the cheap window. The tariff is a tool, not a guarantee, and it rewards homes and schedules that can flex.

Pairing heat pump rates with solar, storage or electric cars

Heat pump tariffs sit inside a wider set of choices for homes with more than one technology, and the combinations matter.

With a battery. Energy Saving Trust's guidance is direct: if you have a heat pump and a battery, you will probably do best with a heat pump tariff that includes a peak rate, so the battery can power the heat pump during the expensive period¹². The peak premium that looks like a cost on a plain heat pump tariff becomes the signal a battery charges against.

With solar. The same guidance recommends looking for a good Smart Export Guarantee tariff for your exported electricity, and then either a dynamic tariff or a heat pump tariff for import, from the same company¹². The export side and the import side are separate decisions, but tying them to one supplier can simplify the arrangement.

With an EV. This is where the market currently has a gap. Uswitch reports there is currently a lack of combo tariffs designed specifically for both EVs and heat pumps¹³, and Energy Saving Trust notes that if you have a heat pump as well as a car, you will not be able to use much of the EV tariff's cheap rate electricity to run the heat pump, which is why a heat pump tariff is worth looking at instead¹². In practice, many EV tariffs concentrate their cheap hours overnight, which overlaps with a heat pump tariff's super off-peak window, so one product can sometimes serve both loads.

Energy Saving Trust's Flexible Futures research looked at over a million heat pump, tariff and technology combinations¹⁰, which reflects how varied these homes are. For export specifically, Solar Energy UK describes the Smart Export Guarantee market as including 12-month fixed-term products²², so a household assembling an import and export stack should check the term lengths on each side.

Tax and the rest of your energy bill

Two tax positions affect what a heat pump household pays, and both have end dates worth knowing.

The first is VAT on the installation itself. Heat pump installations are exempt from VAT, according to the government's clean energy campaign²³. HMRC's guidance confirms that water source heat pumps qualify for the temporary zero rate until 31 March 2027²⁴, and Ofgem's Boiler Upgrade Scheme guidance states that between 1 April 2022 and 31 March 2027 there is a zero rate of VAT on the installation of energy-saving materials including heat pumps²⁵. The scheme leaflet puts it plainly: "You will also benefit from a 0% rate of VAT on the purchase and installation of these technologies"²⁶. After 31 March 2027, HMRC's guidance indicates water source heat pumps revert to the reduced rate²⁴.

The second is VAT on the electricity a heat pump consumes, which is where the running-cost penalty partly comes from. The European Heat Pump Association's comparison of taxes on heat pumps and boilers notes that a zero VAT rate on heat pumps applies until 2027, with specific conditions available on the official website²⁷. Nesta's tax-free electricity modelling goes further and quantifies what removing electricity taxes would mean: a typical heat pump household would save £387 a year under a tax-free electricity proposal, and £83 a year from VAT removal alone²⁸. Those are modelled figures for policy options, not current bill components, but they show how much of the gas-versus-electricity price gap is tax rather than energy cost.

For the tariff itself, none of this changes the arithmetic of the cheap windows: VAT applies to the unit rates as published. What it changes is the baseline, and any household comparing a heat pump against a gas boiler should know the comparison is being made across a price relationship that policy has deliberately set, and could deliberately reset.

How far a heat pump tariff takes you off grid

A heat pump tariff is a genuine gain for household energy independence, but it is a gain inside a system you still depend on.

What it does: it cuts the running cost of a heating system that needs no fuel deliveries, no gas connection and no boiler, and it does so by changing when you use grid electricity rather than how much. The Warm Homes Plan technical annex models a typical heat pump with a coefficient of performance of 2.8⁵, meaning each unit of electricity moves nearly three units of heat into the home, and a time-of-use tariff makes each of those units of electricity cheaper if the timing works. Uswitch's worked example of a heat pump-focused tariff, such as Octopus Cosy, puts the annual heat pump cost at £850 for a typical household with an EV and heat pump, within a total annual cost of £1,400¹³. The Climate Change Committee estimates a typical household could save around £1,200 a year today by combining an EV, a heat pump, solar panels and a time-of-use tariff²⁹.

What it does not do: it does not remove the grid, the supplier, or the price signal. A time-of-use tariff is a contract in which the supplier pays you to be flexible, and Ofgem's impact assessment notes that households with heat pumps could save more than £250 annually by shifting to a smart tariff and using their heat pump flexibly³⁰, with the same document recording that fewer than 5% of heat pump users are currently on specialised tariffs³⁰. The household is trading autonomy over when it heats for a lower price, and the trade only pays if the home can hold warmth through the peak hours.

The deeper point is the one the Parliamentary research makes: reducing the price of electricity relative to gas would make heat pumps more competitive⁶. Until that happens, the tariff is the household's main lever on the price relationship, and a heat pump home that stays on a flat-rate tariff is leaving the lever unused. Pair the tariff with solar and a battery and the dependence narrows further, to the point where the grid is a backup rather than the whole supply. Without them, a heat pump tariff makes the grid cheaper, not smaller, in your life.