Air-to-Air Heat Pump Grants UK: What Actually Gets Funded

A couple run a small salon off the high street. Two fan heaters in winter, a portable unit with a hose out the window in July, and an electricity bill that stings in both seasons. They read that the government hands out £7,500 for heat pumps, ring up, and ask whether the wall unit that heats as well as cools qualifies for any of it. Until this year the honest answer was no. That has changed, and most of what you will find online has not caught up.

Yes, there is now an air-to-air heat pump grant in the UK. Since April 2026 the Boiler Upgrade Scheme offers £2,500 towards an air-to-air heat pump, but only for residential properties in England and Wales, only when it replaces fossil fuel heating, and only through an MCS certified installer who applies on your behalf. One grant per property. On top of that, a residential installation is zero rated for VAT until 31 March 2027, which on a typical job is worth almost as much as the grant itself. Businesses get nothing for air-to-air. The £7,500 figure you keep seeing is for air-to-water systems, a different machine doing a different job.

What actually changed in 2026

For years the Boiler Upgrade Scheme excluded air-to-air units entirely. The logic was that the scheme existed to decarbonise heating, and a machine that also cools looked, to a policymaker, like air conditioning with ambitions. The government consulted on changing that, and the change is now law. The Boiler Upgrade Scheme (England and Wales) (Amendment) Regulations 2026, SI 2026 No. 390, "introduce air-to-air heat pumps as a new technology that is an eligible plant" under the scheme, while "clarify[ing] the difference between the new air-to-air heat pumps, and air-to-water heat pumps" (Explanatory Note, SI 2026/390, legislation.gov.uk).

The same instrument carries the restriction that matters most to half the people reading this: an air-to-air unit is not eligible "if it is installed in relation to a non-residential building". Homes, yes. Shops, offices, salons, no. That is the settled position as of October 2026, and it sits inside the government's wider Warm Homes Plan, published in January 2026, which is the programme driving money towards lower bills and low carbon heating in homes.

One practical wrinkle. The air-to-air voucher route is new, and the MCS certification chain for installers wanting to redeem these vouchers has been standing up through 2026. Before you commit, ask the installer a blunt question: can you actually process an air-to-air Boiler Upgrade Scheme voucher today, and have you done one? A yes with a completed job behind it is worth more than a yes in principle.

What is funded, and what is not

GOV.UK lists the current grant amounts plainly: "£7,500 towards an air source heat pump (sometimes called an air-to-water heat pump)", "£7,500 towards a ground source heat pump", "£5,000 towards a biomass boiler" and "£2,500 towards an air-to-air heat pump" (Boiler Upgrade Scheme: what you can get, GOV.UK). The same page states "You can get one grant per property", "You cannot get a grant for a hybrid heat pump system" and "You cannot get a grant to replace a low carbon heating system".

Translated into what that means on your job:

• Your existing heating must go. The grant replaces fossil fuel heating, so gas, oil, LPG or direct electric. You cannot keep the boiler as backup and pocket the voucher. That is a real decision, because air-to-air does not heat your water.
• Homes that already had heat pump funding are out. One grant per property. Most new builds and social housing are excluded too.
• The clock starts at application. Your installer must commission the system within 120 days of applying or the grant lapses.
• The £9,000 you may have read about is not for you. Until March 2027 there is an extra £1,500 for air-to-water or ground source in off-gas homes heated by oil or LPG. Air-to-air is specifically outside that uplift.
• The installer handles the money. An MCS certified installer applies to Ofgem for you and deducts the grant from your quote. If a quote does not show the £2,500 coming off, ask why before you sign.

The VAT saving nobody mentions

The grant gets the headlines. The VAT relief is quieter and, on many jobs, worth nearly as much. HMRC's Notice 708/6 zero rates the installation of energy-saving materials in residential accommodation from 1 May 2023 to 31 March 2027, after which it "will revert to the reduced rate of VAT of 5%". The qualifying list includes air source heat pumps, and the notice is unusually helpful on what that covers: these systems "absorb heat from the outside or surrounding air and transfer that into useable heat in the home", they "can be reversed so that they can draw heat from inside a building, thus providing cooling during the summer", and "most air conditioning units are air source heat pumps". The unit must be "permanently fixed and are not portable or moveable" (VAT Notice 708/6, HMRC).

Read that middle part again. A fixed, reversible unit that heats in winter and cools in summer is exactly what the notice describes. On a £4,000 residential installation, zero rating saves £800 against the standard rate, and it applies whether or not you qualify for the grant. Stack the two and a homeowner replacing electric heating can be looking at £3,300 of combined support before the first unit goes on the wall.

Two cautions. The relief is for residential accommodation, so a unit serving the shop does not qualify even though the flat above it might. And it ends on 31 March 2027. After that the rate is 5%, not 20%, but 5% of a real invoice is still real money.

What an air-to-air heat pump actually is

Strip the marketing off and an air-to-air heat pump is the same refrigeration circuit as the air conditioning we have fitted for twenty years. An outdoor unit moves heat through refrigerant pipework to one or more indoor units, and a reversing valve decides which direction the heat travels. Warm in winter, cool in summer, one machine. Energy Saving Trust describes the type as systems that warm room air directly rather than heating water for radiators, notes that they "don't usually provide hot water", and puts typical installed cost at "£1,900 to heat a single room" and "£3,700 to heat a three-bedroom semi-detached house" (Air-to-air heat pumps, Energy Saving Trust).

That last point about hot water is where air source heat pump vs air conditioning stops being a semantic argument and becomes a floor plan. An air-to-water heat pump feeds radiators or underfloor heating and a hot water cylinder, replaces the boiler outright, and earns the £7,500 grant because it takes the whole heating load. An air-to-air unit heats the rooms it serves and leaves your hot water to an immersion heater, an electric shower or a cylinder you already have. For a well-insulated smaller home, a flat, or somewhere off the gas grid heating with panels and plug-in heaters, that trade is often fine. For a big draughty house with four bedrooms and a bath-run household, air-to-water is usually the honest recommendation, and our heat pump versus air conditioning comparison goes through that decision in more detail.

Running costs: the honest maths

Here is where I am going to be blunt, because the internet is not. Heat pumps are very efficient. Electricity is very expensive. Both things are true at once, and whether you save money depends on what you are replacing.

Energy Saving Trust's figures for heat pumps generally say the technology is "more than three times more efficient than a gas or oil boiler", three or more units of heat per unit of electricity, while "electricity is nearly four times more expensive than gas" per unit on a standard tariff (Air source heat pumps, Energy Saving Trust). Set those two numbers against each other and the conclusion writes itself. Against a modern gas boiler, the running cost saving is modest and can vanish entirely unless you move to a time-of-use tariff, which the Trust says "can reduce running costs significantly". Against direct electric heating, fan heaters, panel heaters, old storage heaters, the same machine delivers roughly three times the heat per unit of electricity, and the saving is large and immediate.

The Trust is unusually honest about air-to-air specifically: "There's currently not much data on how air-to-air systems perform in the UK." So treat any website quoting you precise savings to the pound as guesswork in a suit. What we can say from the plant side is that modern inverter-driven units modulate rather than cycling on and off, which is where the real efficiency comes from, and our page on inverter air conditioning explains why that matters for your bill. For a worked breakdown by the hour, see our post on air conditioning running costs.

Then value the cooling. If you were going to buy cooling anyway, and after the last few Julys most people we talk to were, the heating is effectively half-price plant. No grant formula counts that, but your bank account will.

Planning permission and the outdoor unit

For a house, an air source heat pump is usually permitted development, meaning no planning application, provided the conditions are met. The Planning Portal lists the main ones: the installation must comply with the MCS planning standard, MCS 020a, which from 28 May 2026 is the only permitted scheme for the noise assessment; the outdoor unit "must not exceed 1.5 cubic metres on a house or 0.6 cubic metres for a block of flats"; only the first installation is permitted development on most properties, with the first two allowed on a detached house; and the rights "do not apply for installations within the curtilage of a Listed Building or within a site designated as a Scheduled Monument". In a conservation area the unit cannot go on a wall or roof fronting a highway (Planning permission: air source heat pump, Planning Portal).

The condition that surprises people is this one: permitted development covers a unit "not used solely for cooling purposes". A heat pump that heats and cools is fine. A cooling-only air conditioner is not. Flats, shops and anything commercial are a different planning conversation, and we have a separate guide on whether you need planning permission for air conditioning covering those cases.

No grant for your premises? Run the numbers anyway

If you own or run a small business, the position as of October 2026 is simple and slightly annoying: no capital grant for air-to-air, no VAT relief on the commercial premises, and no sign of either changing soon. The Boiler Upgrade Scheme does cover non-domestic buildings, but for air-to-water and ground source systems, not air-to-air. I am not going to pretend that is good news. What I will say is that the grant was never the biggest number in the decision for most commercial sites.

The framework I walk people through is four questions:

• What are you heating with now? Direct electric panel heaters or fan heaters are the expensive baseline. Cutting their consumption by two thirds dwarfs any £2,500 voucher over a few winters.
• How many hours a week does the heating actually run? A salon open six days has a very different payback from a storeroom heated twice a week.
• Would you otherwise buy cooling? If yes, half the cost of the system was already spoken for. You are comparing the grant you did not get against two machines you did not have to buy.
• What does breakdown cost you? A cold shop in January loses trading days. Reliability and servicing belong in the maths, not just the tariff.

Answer those honestly and the grant question shrinks to its proper size. Pleasant if you qualify. Absent if you do not. Rarely the deciding factor either way.

Frequently asked questions

Is there a grant for air-to-air heat pumps in the UK?

Yes. As of October 2026 the Boiler Upgrade Scheme offers £2,500 towards an air-to-air heat pump for residential properties in England and Wales. It must replace fossil fuel heating, one grant per property, and an MCS certified installer applies to Ofgem for you and deducts it from your quote. Scotland and Northern Ireland run different schemes.

Can my business get the air-to-air heat pump grant?

No. The 2026 amendment regulations make air-to-air units eligible only where the installation is not in relation to a non-residential building. The wider scheme does cover non-domestic buildings, but for air-to-water and ground source heat pumps at £7,500, not air-to-air.

Does an air-to-air heat pump provide hot water?

No, and this catches people out. Air-to-air units heat room air directly and do not feed a cylinder or taps, so you keep an immersion heater, electric shower or your existing arrangement. If replacing the boiler outright including hot water is the goal, that is the air-to-water conversation and the £7,500 grant.

Do I pay VAT on an air-to-air heat pump?

On a residential installation, no, at least until 31 March 2027. HMRC Notice 708/6 zero rates the installation of air source heat pumps in residential accommodation and observes that "most air conditioning units are air source heat pumps", provided the unit is permanently fixed. From 1 April 2027 the rate reverts to 5%. Commercial installations do not get the relief.

Do I need planning permission for an air-to-air heat pump?

Usually not on a house, as long as the installation meets the MCS 020a noise standard, the outdoor unit stays under 1.5 cubic metres, it is the first unit on the property, and the building is not listed. The unit must not be used solely for cooling, which a heat pump never is. Flats, conservation areas and commercial premises have tighter rules, so check before the brackets go on the wall.

Is an air-to-air heat pump worth it without a grant?

It depends what you are replacing. Against direct electric heating, at around three units of heat per unit of electricity, the savings are substantial with or without support. Against a modern gas boiler on a standard tariff, the case is thinner and rests on a time-of-use tariff and the value of the cooling you get free. Work out which of those two you are before falling in love with either answer.

Getting the right system, grant or no grant

The grant is real, the VAT relief is real, and neither changes the underlying job: the right size unit, in the right place, refrigerant pipework run properly, by people who will still answer the phone in three winters. We have been installing heat pump air conditioning across London and the South East since long before there was a voucher for it, and we will tell you straight whether your property suits air-to-air, air-to-water, or the heating you already have.

If you want to talk it through, start with our page on air conditioning heat pumps, or for premises, our commercial air conditioning installation in London service. Bring your last winter's electricity bill. That number tells us more in a minute than an hour of guessing.

About the author: Ali Elm runs Be Cool Refrigeration & Air Conditioning, a family-run London firm that has been installing, servicing and repairing commercial refrigeration and air conditioning since 2004. His F-Gas certified team has delivered more than 2,000 projects across London and the South East.

Last updated: 8 October 2026