Commercial Heat Pump Grants & Funding 2026

Every commercial heat pump funding conversation starts with the Boiler Upgrade Scheme, so here is the position. It can be used for a building used for a business, but only for a single system within the 45 kWth cap, replacing a fossil-fuel system. The good news is that commercial and public-sector buildings have their own routes, several of them far larger than £7,500, and the job of a specialist installer is to map which ones you genuinely qualify for and build the application around the design rather than bolting a grant on as an afterthought.

What the Boiler Upgrade Scheme covers for a business

The Boiler Upgrade Scheme funds air-source and ground-source heat pumps in England and Wales; gov.uk says it can be used for your home or a building used for your business, within DESNZ capacity caps (45 kWth for a single system, 70 kWth for multiple systems, 300 kWth for shared ground loops), and hybrid systems are excluded. The headline grant is £7,500 for an air-source or ground-source heat pump, rising to £9,000 for an off-gas-grid property replacing an oil or LPG system from 21 July 2026 to 31 March 2027. Terms and rates change over time, so check gov.uk before relying on any figure. The practical point is that a small business premises replacing a fossil-fuel system within the cap may qualify, while a larger commercial plant room will not and needs a different playbook, which is where capital allowances come in.

Public Sector Decarbonisation Scheme (PSDS)

If you are a public-sector body, this is usually the headline route. The Public Sector Decarbonisation Scheme, administered by Salix Finance for DESNZ, funds low-carbon heating such as heat pumps and heat-network connections, taking a whole-building approach that also covers demand-reduction measures. PSDS has had no open application window since Phase 4 closed in November 2024, and gov.uk lists no further phase.

• Who qualifies: public-sector bodies in England, including NHS trusts, schools, colleges, universities, local authorities and the emergency services.
• What it covers: capital grants from tens of thousands to multi-million pounds, covering the additional cost beyond what a comparable fossil-fuel replacement would have cost.
• The catch: it runs in competitive application windows and is time-limited, so confirm the current deadlines on gov.uk. It is for the public sector only, not private commercial buildings.

You can read the official scheme detail on the Public Sector Decarbonisation Scheme pages. PSDS has had no open application window since Phase 4 closed in November 2024, and gov.uk lists no further phase.

Industrial Energy Transformation Fund (IETF)

For industrial sites and data centres, the IETF supports fuel-switching to industrial heat pumps and waste-heat recovery. The IETF closed in July 2025 and gov.uk states that no successor fund is planned.

• Who qualifies: industrial sites and data centres in England, Wales and Northern Ireland in eligible SIC codes. That means manufacturing and recovery or recycling, plus newer sectors including controlled-environment horticulture, industrial laundries and textile renting.
• What it covers: capital grants towards fuel-switching and waste-heat recovery. Terms (grant rates, minimum grant sizes, technology-readiness requirements and eligibility windows) vary by funding round, so check the current scheme guidance on gov.uk.
• The catch: it runs in periodic competition windows operated by DESNZ and is time-limited, so confirm current deadlines on gov.uk. It is for large-scale industrial and process heat, not ordinary office heating.

The official collection sits on the government’s Industrial Energy Transformation Fund page. The IETF closed in July 2025 and gov.uk states that no successor fund is planned.

Green Heat Network Fund (GHNF)

Where the project serves more than one building, the GHNF is the route to look at. The Green Heat Network Fund runs in application rounds: Round 12 closed on 25 September 2026, and gov.uk says funding can be drawn down until 2029 to 2030, so check for the next round.

• Who qualifies: public, private and third-sector bodies in England developing new low-carbon heat networks, or retrofitting and expanding existing ones, using heat pumps, geothermal, water-source or waste heat.
• What it covers: capital grants towards eligible commercialisation and construction costs of low-carbon heat networks, with awards regularly running to several million pounds per scheme. Grant rates and eligibility vary by funding round, so check the current scheme guidance on gov.uk.
• The catch: it suits campuses, councils, hospitals and large mixed-use developments rather than a single building. The fund is time-limited, so confirm current deadlines on gov.uk, and heat networks are moving under Ofgem regulation as the new market regulator.

The government’s Green Heat Network Fund publication sets out eligibility. Heat network schemes are designed and operated to the CIBSE and ADE Heat Networks Code of Practice CP1, and the Heat Network (Metering and Billing) Regulations apply. The Green Heat Network Fund runs in application rounds: Round 12 closed on 25 September 2026, and gov.uk says funding can be drawn down until 2029 to 2030, so check for the next round.

Capital allowances: the route open to any business

Grants are competitive and sector-specific, but capital tax relief is available to any taxpaying business and is often the largest single saving on the table. Because heat pumps count as plant and machinery, the relief is generous.

• Tax relief works differently from what many guides say: a heat pump is part of a space or water heating system, which HMRC lists as an integral feature (special-rate plant), and full expensing covers main-rate plant only. The Annual Investment Allowance gives 100% relief up to its limit (£1 million), and companies can then claim a 50% first-year allowance on special-rate plant, with a 6% writing-down allowance on the rest. Confirm the treatment with an accountant.

Tax relief works differently from what many guides say: a heat pump is part of a space or water heating system, which HMRC lists as an integral feature (special-rate plant), and full expensing covers main-rate plant only. The Annual Investment Allowance gives 100% relief up to its limit (£1 million), and companies can then claim a 50% first-year allowance on special-rate plant, with a 6% writing-down allowance on the rest. Confirm the treatment with an accountant. As always, confirm the precise treatment with your accountant. The bigger point is that capital allowances can stack on top of a grant: tax relief can stack on top of any grant that is open: a public body might combine a successor to PSDS with relief on the non-grant-funded element, while an industrial site now relies on capital allowances and finance because the IETF has closed. PSDS has had no open application window since Phase 4 closed in November 2024, and gov.uk lists no further phase. The IETF closed in July 2025 and gov.uk states that no successor fund is planned.

How the routes map to your organisation

A quick way to orient yourself before a feasibility study:

• A public body such as a council, NHS trust, school or university should check Salix and gov.uk for any successor to PSDS, which has had no open window since Phase 4 closed in November 2024, and should not plan a project around a grant that is not open.
• An eligible industrial site, manufacturer, laundry, food producer or data centre cannot use the IETF, which closed in July 2025 with no successor planned; it relies on capital allowances and finance.
• A multi-building campus or development may fit the GHNF, which runs in application rounds: Round 12 closed on 25 September 2026, so check gov.uk for the next round.
• A private commercial building outside those categories relies on capital allowances, and the business case rests on running-cost savings and carbon reduction rather than a headline grant.

Turning eligibility into a funded project

Funding windows are competitive and the paperwork rewards a properly modelled design.