The government has cut £1bn from the Warm Homes Plan, of which the Boiler Upgrade Scheme is a part, in the Budget delivered by Chancellor John Healey on 28 October 20261. Within that, BUS funding will be £400m in 2027-28, down from the £600m previously allocated, and is expected to rise broadly in line with inflation in later years3.
The figures differ between reports. PHAM News puts the reduction in planned BUS funding at £792m over three years, comparing previous allocations of £600m, £683m and £709m for 2027-28 to 2029-30 (£1.992bn in total) with a £400m annual baseline of £1.2bn3. pv magazine describes the total BUS budget as cut by around £700m2. Baxi's Jeff House estimates the overall BUS budget for 2027-30 has fallen by "some £750m plus, or around 100,000 fewer funded heat pump installations at the current £7,500 grant level"3. pv magazine attributes the £1bn Warm Homes Plan cut to a contribution to defence spending, and reports an additional £335m for the Plan in 20272.
Grant amounts themselves are unchanged: £7,500 for most qualifying air-to-water and ground-source heat pumps, and £9,000 for eligible off-grid properties replacing oil or LPG heating until 31 March 20273. The government reported 151,136 BUS voucher applications from May 2022 to August 2026, 98% of them for air-to-water heat pumps2. Ministers have kept the target of 450,000 heat pump installations a year by 20303.
"Reducing planned funding for the Boiler Upgrade Scheme, at a time when applications are growing strongly is incomprehensible and risks creating a hiatus in the market whilst the sector waits for the full implementation of the Warm Homes Plan."
Separately, the temporary zero rate of VAT on qualifying energy-saving materials ends on 31 March 2027, with the reduced rate of 5% applying from 1 April3. pv magazine reports that no VAT is currently paid on home solar and battery, rising to 5% from 1 April 20272. Budget day also brought published guidance for the Warm Homes Loan scheme, with interest-free and low-interest loans for heat pumps, solar panels and batteries1. Which? lists maximum amounts per technology:
| Technology | Maximum loan |
|---|---|
| Solar panels | £15,000 |
| Electrical storage battery | £15,000 |
| Air-to-water heat pump | £20,000 |
| Air-to-air heat pump | £10,000 (where MCS certification available) |
| Ground source heat pump | £35,000 |
| Biomass boiler | £20,000 |
| Heat network connection | £7,500 |
| Micro-renewable system | £20,000 |
Source: Which?1. Repayment terms run up to 30 years, and ten lenders are named as offering loans so far1. Which? reports that a loan can be combined with a BUS grant of up to £9,0001.
Why it matters for households
The grant amounts are not changing, so a household applying now faces the same headline figure as before. What has changed is the size of the pot behind it in future years, which bears on how many installations the scheme can support3. The eligibility rules and the application process are unchanged in the reports. For a home weighing up a heat pump against a gas boiler, the loan scheme adds a finance route that can sit alongside a grant, spreading the amount paid upfront over up to 30 years1. The return of 5% VAT on energy-saving materials from April 2027 raises the installed cost of solar and batteries relative to the zero rate3. On running costs, the Budget also asked Ofgem to remove standing charges from household gas bills, which Nesta's Andrew Sissons said would make switching to electric heating "a better deal for some households that use more gas"2. Which? notes that energy companies are likely to raise unit rates to recover the costs, so households using less gas would save while high gas users may pay more1.
What happens next
Local authorities are to be instructed to make the £100 Council Tax band A-D energy payments from January 20271. The zero VAT rate on qualifying energy-saving materials ends on 31 March 20273. BUS funding of £400m applies in 2027-28, rising broadly in line with inflation thereafter3. The consultation on the proposed Wholesale Contracts for Difference programme closes on 9 December 20262.
Sources3 sources
- £100 energy payments and no gas standing charges: How the Budget will change your energy bills - Which?, which.co.uk
- Heat pump grant survives, new loans for solar and battery storage in UK Budget - pv magazine Global, pv-magazine.com
- Boiler Upgrade Scheme funding cut puts heat pump targets at risk - PHAM News - Plumbing, Heating and Air Movement News Magazine, phamnews.co.uk