Today's announcement is good news for heat pump economics on two timescales. Right now: oil and LPG homeowners will now get a £9,000 BUS grant, up from £7,500, expected July 2026. Longer term: electricity pricing reform will gradually reduce the cost of running a heat pump. Neither is a magic fix, but both move in the right direction.
Heat pump costs have two components: upfront installation and ongoing running costs. Today's government announcement affects both. The upfront change is immediate and specific. The running cost change is real but will take years to feed through.
The Upfront Cost Change: £9,000 for Oil and LPG Homes
The Boiler Upgrade Scheme (BUS) grant for properties on oil or LPG is increasing from £7,500 to £9,000. This applies to England and Wales only. Properties on mains gas are not affected. Their grant stays at £7,500.
The increase is expected to take effect in July 2026. The precise date will be confirmed in a Grant Change Notice on GOV.UK. Until that notice is published, the current £7,500 rate applies.
What That Means in Practice
A typical air source heat pump installation costs between £10,000 and £15,000 before grant. At £9,000, the grant covers a substantial portion of that. That is the highest BUS payment ever made available for oil and LPG properties.
The 120-day rule
There is an important timing detail worth knowing. BUS voucher applications can be submitted up to 120 days after an installation is commissioned. That means if you have a heat pump installed in May or June, you may still be able to apply for the voucher under the new £9,000 rate in July, as long as the commission date falls within the 120-day window.
If you already have a BUS voucher in place and the installation hasn't happened yet, you also have the option to withdraw the application and reapply at the higher rate once it goes live. The same 120-day rule applies. Always check with your installer before doing anything and make sure that specific dates for the change have been announced, which it hasn't yet.
Check out Adam's reaction to the announcements on the day.
Why Oil and LPG Homes Are Being Prioritised
Oil and LPG prices have no equivalent of the electricity price cap. When global gas and oil markets spike, as they have following the current conflict in the Middle East, households on these fuels take the full hit.
Energy Secretary Ed Miliband was explicit on this point. The Department for Energy Security and Net Zero described oil and LPG homeowners as those most impacted by rising energy prices, particularly those in rural areas, and the grant increase is a direct response to that.
A heat pump removes this exposure entirely. Once installed, your heating cost is tied to your electricity tariff, which has price cap protection and is subject to the structural reforms announced today.
The Running Cost Change: Electricity Pricing Reform
This is the bigger long-term story for heat pump economics and it is worth understanding clearly.
The Problem Today
Electricity in the UK is still priced heavily by gas. Gas sets the wholesale electricity price around 60% of the time. When gas prices spike, electricity bills follow, even though heat pumps, EVs and other electric appliances run on wind and solar power that costs nothing to fuel.
This is why some homeowners have found heat pump running costs higher than expected over the couple of years. It is not a problem with heat pumps. It is a problem with electricity pricing.
What the Government Is Doing
The government is moving around 30% of UK generation onto new fixed-price wholesale contracts. These are legacy renewables currently on the old Renewables Obligation scheme. Fixed price means their revenue no longer tracks gas. Over time, this reduces how often gas sets the electricity price, pulling wholesale costs down.
Chancellor Rachel Reeves said: families and businesses should not "bear the brunt of global gas price shocks" while generators profit. The EGL increase from 45% to 55% recaptures some of that windfall immediately, while the Wholesale CFD fixes the structural problem over time.
Gas currently sets the electricity price around 60% of the time. The government expects this to fall to around 50% by 2030 on the current trajectory, and faster with today's intervention.
What This Means for Heat Pump Running Costs
It is structural improvement, not immediate relief. The wholesale CFD allocation process runs in 2027. Bill savings from those contracts feed through over subsequent years.
The honest answer is that electricity prices will not fall overnight. But the direction is clear: less gas influence on electricity pricing, more fixed-price clean generation and a gradually improving running cost picture for heat pumps through the late 2020s.
For the running cost case to work today, the key variables are your current fuel price, your heat pump's efficiency (measured as COP, or coefficient of performance) and your electricity tariff. For oil and LPG homes in particular, the comparison is already favourable at current fuel prices for a well-designed system.
What "Well-Designed" Actually Means
This is where Heat Geek's position matters. A heat pump running at a COP of 2.5 is not the same as one running at a COP of 4. The difference comes from system design: correct sizing, flow temperature optimisation, emitter set up and controls setup.
Most of the heat pump horror stories (high bills, cold rooms, inefficient systems), trace back to poor design rather than the technology itself. A heat pump is not a direct swap for a boiler. It requires a proper heat loss calculation, matched radiators or underfloor heating and a system designed to run at low flow temperatures.
Done correctly, heat pumps are efficient, comfortable and cheaper to run than oil or LPG at today's prices. Done incorrectly, they are none of those things.
The Overall Picture
For oil and LPG homeowners, today's announcement shifts the economics meaningfully. A £9,000 BUS grant, current high oil and LPG prices and a policy environment moving towards lower electricity costs make the case for acting stronger than it has been at any point in the last three years.
For gas homeowners, the near-term picture is less dramatic. The running cost case improves gradually as electricity pricing reform takes effect. The grant remains at £7,500. The case depends more heavily on individual circumstances.
Either way, the question of whether a heat pump is right for your home starts with getting the design right. That is true regardless of what grants are available or where gas prices are trading.
The £9,000 BUS grant for oil and LPG properties is expected July 2026. Current standard BUS grant is £7,500 for all eligible properties. All figures correct as of April 2026.
