Heat Pump Payback UK 2026: Marginal Cost Over a New Boiler

Published 13 May 2026 · 12 min read

Some links in this guide are Amazon affiliate links — we earn a small commission if you buy, at no cost to you. We only recommend kit we'd put in our own homes.

Your gas combi is 12 years old. It's had two engineer visits this winter, the second one cost £340, and the next failure will be the one that ends it. You've got two quotes on the kitchen table. One is £3,000 for a like-for-like new boiler. The other is £12,000 for an air source heat pump, with a £7,500 government grant knocking £4,500 off it.

The salesperson for the heat pump talked about saving thousands. The boiler engineer rolled his eyes and said heat pumps don't work in British weather. Neither of them showed you the maths.

This guide does. Three worked household scenarios, real installed prices from May 2026, the current Boiler Upgrade Scheme grant, real Octopus tariffs. By the end you'll know whether the heat pump is a £1,500 upgrade or a £15,000 mistake — because it can genuinely be either, depending on the house.

TL;DR — three marginal-payback numbers

The headline trick: payback should be calculated against the cost of a new gas boiler you'd otherwise have to buy, not against zero. Your old boiler is dying. Doing nothing is not an option. So the real question is what the heat pump costs over and above the boiler you were going to fit anyway.

  • Scenario A — 3-bed semi, post-2000 build, gas combi about to fail: £4,500 ASHP net of grant minus £3,000 boiler = £1,500 marginal cost, paying back in 1–3 years on Octopus Cosy.
  • Scenario B — 4-bed 1970s detached, mediocre insulation, oversized rads: £6,500 ASHP net minus £3,500 system boiler = £3,000 marginal cost, paying back in 4–6 years.
  • Scenario C — 5-bed period home, off-grid on oil: £11,500 GSHP net of £9,000 grant minus £5,000 oil boiler = £6,500 marginal cost, paying back in 3–5 years because oil is brutal.

The point isn't that heat pumps are cheap. The point is that the marginal cost over the boiler you were already going to buy is often a few thousand pounds, not twelve.

The framing — marginal cost, not gross cost

Most "is a heat pump worth it" articles online compare a £12,000 heat pump install to £0 — as if not replacing your heating system were a real option. It isn't. A gas boiler lasts 12–15 years. If yours is on its last legs, you are going to spend money on heating capex this year. The only question is what kind.

So the honest comparison is:

Heat pump cost  =  gross install  −  BUS grant
Boiler cost     =  new gas combi or system boiler install
Marginal cost   =  heat pump cost  −  boiler cost

It's the marginal cost that needs to pay back from running-cost savings, not the gross. That single reframing turns a "15-year payback" headline into something closer to 2–5 years for most houses where the boiler was already due.

It also flips the decision on its head. A heat pump fitted when your boiler still has eight years left in it is a much harder sell, because you're now financing a £3,000 boiler you didn't need to buy. The natural replacement moment matters enormously.

The Boiler Upgrade Scheme — what you actually get

The Boiler Upgrade Scheme (BUS) is the headline UK government grant for heat pumps. It runs in England and Wales until 2030 (Scotland has Home Energy Scotland equivalents). The current rates, as of April 2026:

  • Air source heat pump replacing gas or electric heating: £7,500
  • Ground source heat pump replacing gas or electric heating: £7,500
  • Air or ground source heat pump replacing oil or LPG: £9,000 (this higher rate was introduced in April 2026)
  • Biomass boiler, rural / off-gas only: £5,000
  • Hybrid heat pump systems: not covered

The grant is paid to your installer, not to you. You see the price on the quote already net of grant. You must use an MCS-certified installer, the property must have an EPC rating with no outstanding loft or cavity wall insulation recommendations (or you have to address those first), and you must own the property or have written landlord permission.

The application is handled by the installer. You don't fill in forms.

Scenario A — 3-bed semi, gas combi dying

Modern post-2000 semi, double-glazed, decent loft insulation, current heating bill around £1,100/yr on gas. Annual heating + hot water demand: roughly 10,000 kWh thermal. The existing gas combi is on its last service interval.

The install — Vaillant aroTHERM plus 7 kW ASHP:

  • Gross installed cost: £12,000
  • BUS grant: −£7,500
  • Net cost: £4,500

The boiler alternative:

  • New gas combi installed: £3,000

Marginal cost of choosing the heat pump: £1,500

Running cost on Octopus Cosy with smart scheduling:

At a realistic SCOP of 3.5 (well-sized rads, modern unit, weather compensation enabled), 10,000 kWh thermal = 2,860 kWh electric. Blended Cosy rate for a heat-pump-aware household (60% cheap, 30% standard, 10% peak): roughly 22p/kWh.

  • Annual electricity cost: 2,860 × 22p = £630/yr
  • Current gas cost: 10,000 ÷ 0.9 (boiler efficiency) × 5.7p = £633/yr

These are within £5 of each other. The bills don't change much in year one.

But the boiler costs £200/yr to amortise (£3,000 ÷ 15 years), and the heat pump's £1,500 marginal capex amortises at roughly £75–£100/yr over its 20-year lifespan. So on a like-for-like capex basis the heat pump is cheaper by £100–£125/yr from day one, before any running-cost gains.

Payback against marginal capex: 1–3 years. And every year gas prices rise relative to electricity, the case improves.

Scenario B — 4-bed 1970s detached, mediocre insulation

Cavity-walled, not externally insulated, decent loft, original radiators sized for 70 °C gas flow temperatures. Annual heating + hot water demand: around 14,000 kWh thermal. Current gas bill: ~£1,400/yr.

The install — Mitsubishi Ecodan 11 kW ASHP, with three radiators upsized:

  • Gross installed cost: £14,000 (£1,500 of which is rad upgrades and a hot water cylinder)
  • BUS grant: −£7,500
  • Net cost: £6,500

The boiler alternative:

  • New gas system boiler + cylinder installed: £3,500

Marginal cost: £3,000

Running cost on Octopus Cosy:

At a realistic SCOP of 3.2 (slightly lower because the building fabric is mediocre and flow temperatures need to be a little higher), 14,000 kWh thermal = 4,375 kWh electric. Blended Cosy: 22p/kWh.

  • Heat pump cost: 4,375 × 22p = £965/yr
  • Existing gas: 14,000 ÷ 0.9 × 5.7p = £886/yr

Heat pump runs about £80/yr more on current prices. Not nothing, but not a disaster either. The capex difference of £3,000 is what's really paying back.

Payback against marginal capex: 4–6 years, depending on what happens to gas prices over that window. A 10% rise in gas relative to electricity flips this comfortably into heat-pump territory; the trajectory of UK energy pricing favours that direction.

The cautionary note: if you can't or won't upsize the radiators that need it, the SCOP drops to 2.5 or worse and the running cost jumps to £1,230/yr. That's the bad-install version of this house and it's a £15,000 mistake. Insist on a Heat Geek-trained or equivalent quality-focused installer, not the cheapest MCS quote.

Scenario C — 5-bed period home on oil

No mains gas. Currently on a 2,500 litre oil tank, refilled twice a year at roughly 70p/litre. Annual heating + hot water demand: around 18,000 kWh thermal. Current oil bill: ~£1,750/yr at recent prices, and oil is volatile — recent winters have spiked it well past £2,000.

The install — 14 kW ground source heat pump with horizontal slinky loop:

  • Gross installed cost: £20,500
  • BUS grant: −£9,000 (higher oil/LPG rate)
  • Net cost: £11,500

The oil boiler alternative:

  • New oil boiler + tank servicing: £5,000

Marginal cost: £6,500

Running cost on Octopus Cosy:

GSHPs do better SCOPs than ASHPs because the ground stays at 8–12 °C year round. Realistic SCOP for a well-installed system: 4.0. 18,000 kWh ÷ 4.0 = 4,500 kWh electric. Blended Cosy: 22p/kWh.

  • Heat pump cost: 4,500 × 22p = £990/yr
  • Existing oil: ~£1,750/yr (and rising)

That's a £760/yr running cost saving in year one, and oil prices generally trend up relative to electricity over time. Paying back the £6,500 marginal capex takes 3–5 years, and the household is shielded from oil price spikes forever after.

The off-grid case (oil, LPG, electric storage heating) is the clearest financial case for a UK heat pump in 2026. Pretty much always pays back inside the warranty period.

Running costs — heat pump vs gas at current prices

The brutal honest summary, which most heat pump marketing won't tell you: at current UK prices, a well-installed heat pump on a smart tariff runs the house for roughly the same as gas. Not dramatically less, not more — about the same.

The numbers, for a typical 12,000 kWh/yr thermal demand:

Heating systemEffective unit costAnnual cost
Gas combi, 90% efficient5.7p/kWh thermal£760
ASHP SCOP 3.5 on Cosy (blended 22p)6.3p/kWh thermal£755
ASHP SCOP 3.5 on standard variable (24.7p flat)7.1p/kWh thermal£850
ASHP SCOP 2.5 (poor install) on Cosy8.8p/kWh thermal£1,055
Oil boiler8.8p/kWh thermal£1,170

Two things jump off this table. First, the heat pump only beats gas if you're on a heat-pump-friendly tariff like Cosy or Agile and the install achieves a real SCOP above 3.0. Both conditions matter. Second, a poorly-designed heat pump install on standard variable electricity is genuinely more expensive than gas. This is the bad-outcome scenario the eye-rolling boiler engineer was talking about — and he's not wrong, just incomplete.

The financial case isn't running costs. It's marginal capex plus the trajectory of fuel pricing.

Tariff really matters

A heat pump household pays roughly 40% more per year sitting on standard variable electricity vs Octopus Cosy. That gap is bigger than the year-one saving over gas. If you don't switch tariff after installing a heat pump, you've left the strongest argument for the kit on the table.

Cosy is now a 6-month fixed tariff with a £25 exit fee (changed in March 2026), but it's still open to new customers, and the three-band structure (cheap windows 04:00–07:00, 13:00–16:00, 22:00–00:00; peak 16:00–19:00) is unchanged. The play is to shift as much heating and hot water load into those cheap windows as you reasonably can.

Octopus Agile is the variable alternative — works similarly well if your heat pump's controls can follow half-hourly prices. Both pair beautifully with Home Assistant scheduling.

Where a heat pump pays back fast

In rough order of how clearly the maths works:

  1. Off-grid homes on oil or LPG. Always. The £9,000 BUS rate makes this nearly automatic.
  2. A dying gas boiler at the natural replacement moment. Marginal cost is small, payback under 3 years.
  3. A well-insulated post-2000 home with rads already sized generously.
  4. New builds that can specify the heat pump from day one.
  5. Households willing to engage with smart scheduling — Cosy or Agile, not standard variable.

Where it doesn't pay back

Equally important:

  1. Leaky uninsulated solid-wall Victorian terrace running on cheap gas. Without serious fabric work first, the heat pump SCOP will be poor and the install will be miserable.
  2. A household with a healthy boiler. Replacing a 5-year-old combi just to fit a heat pump is throwing away £3,000 of unused boiler life.
  3. Owners who won't switch tariff. Standard variable kills the case.
  4. Installs by the cheapest MCS-certified bidder who won't upsize rads and won't commission flow temperatures properly. A bad install is £15,000 down the drain.

If two or more of those apply to you, the honest answer is "wait" or "no". Fabric first, boiler-life next, heat pump when the boiler dies.

What Home Assistant adds

Once the heat pump is in, the next layer of value is automating it. Home Assistant can run heating schedules that follow Cosy's cheap bands, pre-heating the building fabric and hot water cylinder in the 04:00–07:00 window so the heat pump barely needs to fire during peak. It can override the manufacturer's weather compensation curve when forecast data says the next 12 hours are unusually mild or cold. It can prioritise hot water cycles to coincide with solar generation if you have a PV array. And it can alert you the moment SCOP starts drifting downward — usually the earliest sign of a refrigerant or commissioning problem, months before the unit fails outright.

None of this is essential. All of it shifts the year-one running cost down by 10–20% and protects the install from quietly degrading. See our smart heating guide for the controls layer.

A quick note on carbon

Heat pumps drop a home's direct heating emissions by roughly 60–70% at the current UK grid mix. By 2030, as the grid continues to decarbonise toward 90%+ low-carbon generation, that figure climbs toward 80–90%. A heat pump fitted in 2026 only gets cleaner over its lifetime; a gas boiler fitted in 2026 stays exactly as carbon-intensive as it is today, for 12–15 years.

That's not the financial case, but it's worth knowing the financial case and the carbon case point the same way for most UK households.

Verdict

For the right house at the right moment — dying boiler, decent fabric, owner on Cosy, MCS installer who knows what they're doing — a heat pump in 2026 UK is a no-brainer at the margin. The grant carries the gross cost down to within touching distance of a new boiler, and the running costs are at parity with gas already. Off-grid oil customers should be ordering quotes this week.

For the wrong house at the wrong moment — healthy boiler, leaky fabric, cheapest-quote install, owner who won't switch tariff — it's a £15,000 mistake. Don't do it because you feel you ought to. The numbers won't bail you out.

The trick is being honest about which house you've got. The arithmetic above is the same arithmetic any decent installer will do for you on the second visit — if they won't, find one who will.

If you'd rather not run the controls layer yourself once the heat pump is in, that's where habbb fits. We set up the Home Assistant instance, keep it updated, and make sure the heating schedules keep following your tariff windows after every software update. See how the service works.