Commercial Heat Pump Grants in 2026: Full Guide

Commercial heat pump grants are the single most misunderstood part of decarbonising a non-domestic building, and that confusion costs organisations real money every year. The headline scheme almost everyone has heard of is the Boiler Upgrade Scheme, and it is not limited to homes: small non-domestic buildings can qualify. Larger projects have different routes with different rules, and several have closed. The work is to match your building, your sector and your tax position to a route that is actually open before you commit capital.

This guide lays out the commercial heat pump grants that actually apply in 2026, who qualifies for each, and how the application works in practice. It deliberately leads with the funding question, because the funding case and the engineering case are the same piece of work, and the right scheme often shapes the system you build.

Why there is no single commercial heat pump grant

It helps to clear the most common misconception first. The Boiler Upgrade Scheme (BUS) covers England and Wales and is not limited to homes: small non-domestic buildings can qualify, so confirm eligibility with the installer and Ofgem. It pays £7,500 for an air-to-water, ground-source or water-source heat pump, or £9,000 for air-to-water or ground-source in an eligible off-gas-grid property (applications from 21 July 2026, available to 31 March 2027). The grant is flat per installation, up to 45 kWth (up to 300 kWth for a shared ground loop), and the installer must be MCS certified and applies for the voucher. It suits small systems, not building-scale plant.

Beyond BUS, larger projects have looked to sector-specific routes plus capital tax relief any business can use. The trick is knowing which are open, and planning the project so the funder’s criteria are met from day one.

The Public Sector Decarbonisation Scheme (PSDS)

PSDS is for public bodies such as NHS trusts, schools, colleges, universities and local authorities. It funded low-carbon heating and paid the premium a heat pump carries over a like-for-like fossil-fuel replacement. It is no longer open: Phase 4 closed to new applications in November 2024.

There is no open application window and no confirmed successor, and funded projects continue to 2027/28, so do not plan a new bid around it; check gov.uk for any announcement. PSDS was public sector only and never funded private commercial buildings. If you run a school, a council leisure centre or an NHS site with an ageing gas boiler, watch gov.uk and plan the supply and plant-space groundwork now.

The Industrial Energy Transformation Fund (IETF)

IETF supported fuel-switching to industrial heat pumps and waste-heat recovery at eligible industrial sites. It is now closed: gov.uk guidance lists it closed from July 2025, with no further extension and no successor planned. Projects already funded continue.

It is not an available route for a new project, so do not build a business case on it. IETF was aimed at large-scale industrial and process heat, not ordinary office heating. Our industrial and process heat pump guide covers the technology for this kind of fuel-switching case.

The Green Heat Network Fund (GHNF)

Where the project serves more than one building, the Green Heat Network Fund is the route to look at. It covers England and Wales and is open to public, private and third-sector organisations (not individuals, households or sole traders) for new low-carbon heat networks, or retrofitting and expanding existing ones, using heat pumps, geothermal, water-source or waste heat. Funding can be drawn down until 2029-30.

Round 12 closed on 25 September 2026, so no round should be treated as open; check gov.uk for the next round. It suits universities, hospitals, councils and large mixed-use developments rather than single buildings. If your site is a campus or a cluster of buildings that could share a central low-carbon energy centre, this is where the larger funding for shared systems sits.

Capital allowances: the AIA and others

The route that applies to almost every business, and the one most often overlooked, is capital tax relief. Heat pumps for space or water heating are special-rate integral features: the Annual Investment Allowance gives 100% relief on up to £1m a year, then companies get the 50% special-rate first-year allowance and a 6% writing-down allowance. It is uncapped. At the 25% corporation-tax rate that is worth up to 25p of tax saved for every pound spent. For a private commercial building with no route into a competitive grant, this is frequently the most useful lever available.

The Annual Investment Allowance relieves up to £1m of qualifying spend a year at 100%; other capital allowances and the rate that applies depend on the asset and your tax position. Relief applies to the cost the business itself funds, so a grant reduces the qualifying spend. Always confirm the exact treatment with your accountant, but plan the project knowing these reliefs exist.

How to apply, and how to make the bid stand up

Funding follows credible numbers, so the grant application and the system design should be developed in parallel, not in sequence. A sound process looks like this.

Start with real consumption data

Begin with your half-hourly meter data and at least 12 months of gas or oil consumption, never floor area. Ask the installer to model it. A competitive grant application and an honest business case both live or die on real demand data, and a funder will scrutinise the assumptions behind your savings claim.

Map the schemes you qualify for

Next, work out which routes apply, public or private, single building or campus, and how a capital grant interacts with capital allowances, which relieve only the cost you fund yourself. This is where most of the value sits, because the answer is rarely just one scheme.

Design to the standards a funder expects

The system is then specified to recognised standards, BS EN 14825 for SCOP and BS EN 14511 for rated COP, so the performance figures in the bid are directly comparable to any compliant supplier. For systems up to 45 kW thermal, BUS requires an MCS-certified installer; check the installer’s certification on the MCS register. Larger systems are typically designed to CIBSE and BSRIA standards. Ask the installer to start the DNO supply enquiry early so the longest-lead item does not derail a fixed grant deadline.

Submit around the scheme, not the other way round

Finally, the application should be built around the funder’s rules and deadlines, with the engineering case attached as evidence. Ask the installer for a written quote with running cost and carbon modelled from your own data, and a clear statement of which grant or tax route it is designed to qualify for.

What the numbers can look like (illustrative)

As a purely hypothetical example, not a real project: a council-owned leisure centre with a year-round heating load on an end-of-life gas boiler. Where a grant meets most of the capital above what a like-for-like boiler swap would cost, conventional payback is not the relevant measure for the council. That is how PSDS worked while it was open; no such window is open now. The outcome depends on your building, your eligibility and the scheme rules in force at the time.

Your next step

The right first move is to find out which funding is open to you, then plan around it. Work through the grants and funding routes in detail, review the full cost guide to see how grants net off against installed cost, model your own figures with the savings calculator, and when you are ready, send an enquiry and we reply by email about the grant routes your building may qualify for.