Do heat pumps save money in the UK? (2026)

The short answer

Whether a heat pump saves money in the UK depends on what you are replacing and how the system is set up. Against an oil or LPG boiler, a heat pump usually saves on running costs because those fuels are expensive. Against a mains gas boiler, the running-cost comparison is closer and depends on the pump's SCOP and your tariff — a well-designed system on a heat-pump tariff typically comes out cheaper, while a poorly set-up one on a standard tariff may not. The £7,500 Boiler Upgrade Scheme grant and 0% VAT cut the upfront cost substantially. Over the system's life, the clearest savers are homes coming off oil or LPG, well-insulated homes, and households on favourable electricity tariffs.

Saving money has two parts: the upfront cost (helped heavily by the grant) and the ongoing running cost (which depends on what you replace and how the system runs). Both matter to the overall picture.

Do heat pumps save money?

Replacing oil or LPGUsually saves on running costs
Replacing mains gasCloser — depends on SCOP and tariff
Upfront help£7,500 grant + 0% VAT
Best saversOff-oil/LPG homes, good insulation, heat-pump tariff
Weakest caseLow SCOP + standard tariff vs cheap gas

Running-cost savings depend on the fuel you replace

The size of any running-cost saving depends heavily on the existing heating fuel:

Oil and LPG: these off-grid fuels are typically more expensive per unit of heat than mains gas. A heat pump replacing oil or LPG usually shows a clearer running-cost saving, which is one reason heat pumps are often a strong fit for rural, off-gas homes.
Mains gas: gas is relatively cheap per unit, so the comparison is closer. Here the outcome turns on the heat pump's SCOP and the electricity tariff — a high-SCOP system on a heat-pump tariff tends to be cheaper, while a low-SCOP system on a standard tariff may cost about the same or slightly more.
Old electric heating (storage heaters / direct electric): a heat pump uses far less electricity for the same heat, so it usually saves substantially against direct electric heating.

Off-gas homes have the strongest case: if you currently heat with oil, LPG or direct electric, a heat pump is most likely to cut running costs because those fuels are expensive per unit of heat. Against cheap mains gas, the saving is smaller and depends on doing the installation and tariff well.

The upfront cost and the grant

The other half of the money question is the installation cost. Two measures reduce it:

£7,500 Boiler Upgrade Scheme grant in England and Wales, deducted from the quote by the MCS-certified installer.
0% VAT on installation, currently until March 2027.
Home Energy Scotland grant-and-loan support in Scotland.

After the grant, a typical air source installation can net out at a few thousand pounds. Whether the running-cost savings then repay that net cost over the system's life depends on the same factors — fuel replaced, SCOP and tariff.

Situation	Likely running-cost outcome vs current heating	Notes
Replacing oil boiler	Usually cheaper to run	Oil is expensive per unit
Replacing LPG boiler	Usually cheaper to run	LPG is expensive per unit
Replacing storage/direct electric	Usually much cheaper	Heat pump uses far less electricity
Replacing mains gas, high SCOP + heat-pump tariff	Typically cheaper	Best gas-replacement case
Replacing mains gas, low SCOP + standard tariff	Roughly level or slightly more	Weakest case

Indicative guidance, not a guarantee. Sources: Energy Saving Trust; Nesta. Outcome depends on insulation, SCOP and tariff.

Upfront cost versus lifetime cost

Whether a heat pump saves money depends on which cost you measure. There are two distinct questions:

Upfront cost: a heat pump installation usually costs more upfront than a like-for-like gas boiler swap, even after the £7,500 grant and 0% VAT. So on day one, a heat pump is generally a larger outlay than simply replacing a boiler.
Lifetime cost: over the system's 15-to-20-year life, running-cost differences accumulate. Where a heat pump is cheaper to run — off oil, LPG or direct electric, or off cheap gas with a high SCOP and good tariff — those annual savings work against the higher upfront cost over time.

The honest position is that a heat pump is more likely to save money over its lifetime than on day one, and the size and speed of any saving depend on what it replaced, the SCOP and the tariff. For homes coming off expensive fuels with a well-designed system, the lifetime case is strong; for homes replacing cheap gas with an average system on a standard tariff, the lifetime saving may be small.

Two different questions: 'is it cheaper to install?' and 'is it cheaper to own?' have different answers. A heat pump is usually a bigger upfront cost than a boiler swap, but can be cheaper to run over its life — most clearly when replacing oil, LPG or direct electric heating.

How to make a heat pump save money

The conditions that make a heat pump a money-saver are within your control to a large degree:

Insulate first: reducing heat demand cuts running costs on any system and lets the heat pump run more efficiently.
Insist on good design: correct sizing, low flow temperatures and radiator upgrades where needed raise the SCOP and lower the bill.
Use a heat-pump or off-peak tariff: the right tariff can be the difference between roughly level and clearly cheaper than gas.
Use the grant: the £7,500 BUS grant and 0% VAT materially reduce the upfront figure you need to recover.

Do those things and a heat pump is well placed to save money over its life — particularly off oil, LPG or direct electric. Skip them, and against cheap gas the case is much weaker.

It also helps to be realistic about what 'saving money' means for your situation. If you are replacing a working mains-gas boiler purely to cut bills, the honest answer is that the saving against cheap gas may be modest and the upfront cost takes time to recover — the stronger reasons are then future-proofing and carbon rather than pure economics. If you are coming off oil, LPG or direct electric, or your boiler has failed and needs replacing anyway, the economics shift firmly in the heat pump's favour because you are either replacing an expensive fuel or comparing against the cost of a new boiler rather than a free do-nothing option. Framing the decision around your actual starting point — what you heat with now, and whether you are replacing a system regardless — gives a far clearer answer than a generic 'do heat pumps save money?' ever can.

Frequently asked questions

Do heat pumps definitely cut my bills?

Not automatically. Against oil, LPG or direct electric heating, they usually do. Against cheap mains gas the comparison is close and depends on the system's efficiency (SCOP) and your electricity tariff. A well-designed heat pump on a heat-pump tariff is the scenario most likely to cut bills versus gas.

What is the payback period for a heat pump?

It varies too much to give a single figure honestly. It depends on the net cost after the £7,500 grant, the fuel you replaced, your SCOP and your tariff. Homes coming off expensive oil or LPG with a well-designed system and good tariff see the shortest payback; replacing cheap gas with a low-SCOP system can mean little or no running-cost saving to recover the cost.

Does the grant make it cheaper than a new gas boiler?

The £7,500 grant and 0% VAT bring the net heat pump cost much closer to a boiler replacement, though a heat pump installation is usually still more expensive upfront than a like-for-like gas boiler swap. The grant narrows the gap significantly, and running-cost savings (especially off oil or LPG) work in the heat pump's favour over time.

Sources & further reading

Figures on this page are typical UK ranges drawn from published sources and depend on your specific home. They are guidance, not a quotation or guaranteed saving.