Grants and funding for commercial heat pump grants

Let us clear up the question we get asked more than any other. There is no commercial version of the £7,500 Boiler Upgrade Scheme. The Boiler Upgrade Scheme is domestic-only. It does not cover offices, care homes, schools, hotels, factories, or any other non-domestic building. Businesses constantly ask about the £7,500 grant because it dominates every heat pump conversation, and the honest answer is that it does not apply to you.

That is not the end of the story though, it is the start of a different and often more generous one. Commercial and public-sector buildings have their own funding routes, several of them far larger than the domestic grant. The catch is that there is no single headline scheme, so the right answer depends entirely on what kind of organisation you are and what kind of building you run. Here is how the main routes work and who they suit.

Public Sector Decarbonisation Scheme (PSDS)

If you are a public-sector body, an NHS trust, a school, a college, a university, a local authority, or an emergency service, the Public Sector Decarbonisation Scheme is usually the first place to look. Administered by Salix Finance on behalf of DESNZ, it provides capital grants for low-carbon heating, including heat pumps and heat-network connections, taking a whole-building approach that often bundles in demand-reduction measures. Grants run from tens of thousands of pounds to multiple millions and typically fund the cost over and above a like-for-like fossil-fuel replacement. Applications run in competitive windows, and projects must complete within the phase deadline, so timing matters. This route is for the public sector only, it is not open to private commercial buildings.

Industrial Energy Transformation Fund (IETF)

For industrial sites and data centres in eligible SIC codes, the Industrial Energy Transformation Fund supports fuel-switching to industrial heat pumps and waste-heat recovery. Eligible sectors include manufacturing, recovery and recycling, data centres, and newer additions such as controlled-environment horticulture and industrial laundries. The fund runs to £185 million across 2024 to 2028, with a minimum SME grant of £75,000 and intervention typically in the 30 to 50 percent range. The technology has to be at TRL 7 or above, so this is for proven equipment at scale, not pilot projects. Like PSDS it runs in periodic competition windows, and projects must complete by 31 March 2028. This is the route for energy-intensive process heat, not for ordinary office heating.

Green Heat Network Fund (GHNF)

If your project serves more than one building, a campus, a hospital estate, a council development, or a large mixed-use scheme, the Green Heat Network Fund is the one to investigate. It supports new low-carbon heat networks and the retrofit or expansion of existing ones using heat pumps, geothermal, water-source, or waste heat. The grant can cover up to 50 percent of eligible commercialisation and construction costs, and awards regularly run to several million pounds per scheme. Funding rounds continue through to 2029/30. Heat networks are moving under Ofgem regulation as the new market regulator, and schemes are expected to follow the CIBSE and ADE Heat Networks Code of Practice (CP1), which shapes design and operation.

Capital allowances: full expensing and the AIA

Every business paying UK tax can use the tax system, regardless of sector. Full expensing lets companies deduct 100 percent of the cost of new, unused qualifying plant and machinery, heat pumps included, against profits in the first year, with no upper cap. At the 25 percent corporation tax rate that is worth up to 25p of tax relief per £1 spent, and it is being made permanent from April 2026. Sole traders and partnerships use the Annual Investment Allowance instead, which gives 100 percent relief on up to £1 million of qualifying spend. Some ancillary wiring works may fall outside full expensing but still qualify for the AIA. The official detail is in the government's capital allowances guidance, and you should always confirm the treatment with your accountant.

How the routes stack

The grants above are largely mutually exclusive by organisation type, a school uses PSDS, a manufacturer uses IETF, a campus heat scheme uses GHNF, but capital allowances sit alongside almost any project. A private commercial building that does not qualify for a capital grant still benefits from full expensing or the AIA, which is why the tax route is the backbone of most private-sector business cases. Where a grant does apply, the tax relief generally applies to the portion of the cost you fund yourself, so the two combine rather than cancel out. We model the full stack for your specific situation so you can see the real net cost.

What you will need, and the common pitfalls

Whichever route fits, a credible application rests on the same foundation: at least twelve months of consumption data, a proper heat-loss survey, a modelled SCOP and running cost to BS EN 14825, and a clear carbon saving. The most common pitfall is leaving the application too late for the competition window, these schemes do not run continuously, and a strong application needs design work behind it. The second is underestimating the DNO supply timeline, which can outlast the grant deadline if it is not started early. The third is assuming the domestic Boiler Upgrade Scheme applies, building a budget around £7,500, and being caught short. We have prepared applications across these schemes and build the design and the funding case together, so the numbers in the application are the numbers we can deliver. Start with a free feasibility review and we will tell you which routes you qualify for, and roughly what each is worth, before you commit to anything. The expected costs sit on our cost page.