The heating industry is changing. Not overnight, and not in a way that should panic anyone, but the direction of travel is clear. Gas boilers are being phased out of new builds, heat pumps are being heavily subsidised, and the government is putting serious money behind the green energy transition.
If you run a plumbing or heating business, this affects you. Not just in terms of the work you do day to day, but in how you plan your finances, invest in your business, and position yourself for the next decade.
Let’s explore what the transition actually looks like, what it costs, and how to make the numbers work in your favour.
The Big Picture: Where UK Heating Policy Is Heading
The Future Homes Standard came into effect for new-build properties from 2025. In simple terms, new homes must produce significantly lower carbon emissions, which effectively rules out gas boilers as the primary heating system in new builds.
For existing homes, the timeline is longer. The government’s target is to phase out the installation of new gas boilers by 2035, though that date has shifted before and may shift again. The direction, however, has not changed. Every policy signal points the same way: away from gas, towards heat pumps and electric heating.
Consider this: there are roughly 24 million gas boilers in UK homes right now. They are not all being ripped out tomorrow. But the new installation market is where the shift begins, and it is already underway.
What This Means for Traditional Gas Heating Businesses
Let’s be direct. This is not the end of gas work. Not even close.
Those 24 million existing gas boilers need servicing, repairing, and eventually replacing. Gas Safe engineers will be in demand for years to come. If your business is built on gas boiler servicing and maintenance, you have a long runway ahead of you.
But new installation work will gradually shift. If you are solely reliant on fitting new gas boilers in new-build properties, that pipeline is already narrowing. And as homeowners start choosing heat pumps for replacements — driven by grants and rising energy awareness — the balance of work will keep tilting.
The smart move is not to abandon gas. It is to add heat pumps alongside it.
The Financial Case for Diversifying Into Heat Pumps Now
There are some genuinely compelling numbers behind this transition if you look at it through a business lens.
Higher-Value Jobs
An average gas boiler installation sits around £2,500 to £4,000. An air source heat pump installation typically comes in at £8,000 to £12,000. That is two to three times the job value. Even with higher material costs, the margins on heat pump work can be very healthy once you are established.
Government Grants Are Doing the Selling for You
The Boiler Upgrade Scheme (BUS) currently offers homeowners a £7,500 grant towards an air source heat pump installation. That takes a £10,000 job down to £2,500 out of the homeowner’s pocket. It is a strong selling point and makes the conversation with customers much easier. For a full breakdown of how the BUS grant affects your accounts, take a look at our guide to the Boiler Upgrade Scheme and tax.
Less Competition, Better Margins
There are roughly 130,000 Gas Safe registered engineers in the UK. The number of MCS-certified heat pump installers? A fraction of that. Fewer qualified installers means less competition in your local area. That puts you in a stronger position to charge what the work is worth, rather than racing to the bottom on price.
First-Mover Advantage
The businesses that get into heat pump installation now — while the market is still growing — will be the ones with the reputation, the reviews, and the referral network when demand really ramps up. Waiting until everyone else has caught up means you have lost that edge. For more on pricing higher-value work confidently, see our guide to quoting heat pump jobs.
The Investment Required: What It Actually Costs
Diversifying into heat pumps is not free. There is a real investment involved, and you need to go in with your eyes open. Here is a realistic breakdown.
MCS Certification
To install heat pumps and access the BUS grant for your customers, you need MCS (Microgeneration Certification Scheme) certification. The process involves an assessment of your business, your competence, and your quality management systems. Budget around £1,500 to £3,000 for the initial certification, plus annual fees of roughly £1,000 to £1,500 to maintain it.
Training Courses
You will need formal training covering heat pump system design, installation, and commissioning. Courses vary, but a comprehensive training programme typically costs £1,000 to £3,000 per person. Some manufacturers offer subsidised or free training if you commit to installing their products.
Tools and Equipment
Heat pump installations require some specialist kit you may not already own — vacuum pumps, refrigerant recovery equipment, manifold gauges, and potentially pipe bending tools for larger diameter pipework. Allow £2,000 to £5,000 for tooling, depending on what you already have.
Vehicle Upgrades
Heat pump units are physically larger than gas boilers. If your current van cannot handle the size and weight of outdoor units, you may need a larger vehicle or a way to transport them separately. This could mean anything from a roof rack upgrade to a new long-wheelbase van.
Marketing
Your existing customers know you as a gas engineer. You need to let them — and new customers — know you now offer heat pump installations. Budget for website updates, local advertising, and potentially new signage on your van. Even £500 to £1,000 spent well on local marketing can generate significant leads in this space.
In total, a realistic first-year investment for a sole trader or small business sits around £7,000 to £15,000. That is a significant outlay, but measured against the value of even two or three heat pump installations, the payback can be fast.
How to Fund the Transition
You do not need to fund everything from savings. There are several ways to make the investment more manageable.
Reinvesting Profits
The most straightforward approach. Set aside a percentage of your current profits specifically for transition costs. Even £500 a month over a year builds a meaningful training and equipment fund.
Capital Allowances on Equipment
The Annual Investment Allowance (AIA) lets you deduct the full cost of qualifying equipment from your taxable profits in the year you buy it. The current AIA limit is £1,000,000, which is more than enough to cover your heat pump tools and equipment. That means the taxman is effectively subsidising your investment.
Training as a Business Expense
Training costs that update or enhance your existing skills are tax-deductible. Heat pump training for an existing heating engineer falls squarely into this category. The cost comes straight off your taxable profit.
R&D Tax Credits
This one is less obvious, but if you are developing innovative installation methods or solving technical challenges in heat pump retrofits, you may qualify for R&D tax relief. It is worth discussing with your accountant whether any of your project work qualifies.
Tax Implications You Need to Understand
The transition to heat pumps brings some specific tax considerations. Get these right from the start and you will save yourself headaches down the line.
0% VAT on Heat Pump Installations
Heat pump installations in residential properties currently benefit from 0% VAT, running through to March 2027. That means you do not charge VAT on the installation. For the homeowner, the price they see is the price they pay. For you, it simplifies the invoice but has implications for your VAT return. Our VAT guide for plumbing businesses covers this in detail.
Capital Allowances on Training and Equipment
As mentioned above, your tools, equipment, and training costs can all be offset against your taxable profit. Make sure you keep clear records of every purchase related to your heat pump setup. Your accountant will need these at year end.
How the BUS Grant Affects Your Accounts
The £7,500 BUS grant flows through your business. You claim it from Ofgem after completing the installation. That means it counts as taxable income and forms part of your turnover. A £10,000 heat pump job where the customer pays £2,500 and Ofgem pays £7,500 shows as £10,000 turnover in your books. This is important to understand because it affects your overall turnover figure.
Watch Your VAT Threshold
Here is something that catches people out. If you are currently below the VAT registration threshold of £90,000 and you start doing higher-value heat pump work, your turnover can jump quickly. Three or four heat pump installations on top of your existing gas work could tip you over the threshold. That is not necessarily a bad thing, but it needs planning. Do not let it surprise you.
Electric Boilers: A Simpler Entry Point
Not ready to dive straight into heat pumps? Electric boilers offer a lower-barrier way to start moving into electric heating.
Electric boiler installations are simpler. The units are smaller, there is no outdoor unit to worry about, and the installation process is closer to what you already know. They are particularly suited to smaller properties, flats, and homes without space for a heat pump.
The job values are lower than heat pumps, typically sitting between £3,000 and £5,000 installed. But they do not require MCS certification, and the training needed is minimal for an experienced heating engineer. It is a way to start building experience with electric heating systems while you work towards full heat pump capability.
In my eyes, electric boilers are a useful stepping stone, not a replacement for heat pump ambitions.
The Hybrid Approach: Running Both Services in Parallel
Let’s be realistic. Most heating businesses will not flip a switch and become heat-pump-only overnight. The practical approach for the next five to ten years is running gas and heat pump services side by side.
This actually works in your favour. Your existing gas customers trust you. When they are ready to consider a heat pump — whether driven by a grant, a broken boiler, or rising gas prices — you are already their first phone call. You do not need to win new customers to sell heat pump work. You need to serve your existing ones better.
The key is making sure your finances can support both sides of the business. Track your gas and heat pump revenue separately so you can see which direction the business is heading. If you are thinking about growing your team to cover both workstreams, our guide to growing your heating business covers the financial side of taking on staff.
Planning Your Transition: A 3-Year Roadmap
A phased approach takes the pressure off and lets you build capability without betting the whole business on day one.
Year 1: Training and First Installations
- Complete heat pump training courses (£1,000–£3,000)
- Begin MCS certification process (£1,500–£3,000)
- Invest in essential tools and equipment (£2,000–£5,000)
- Complete your first 3–5 heat pump installations, possibly at competitive rates to build experience and reviews
- Consider electric boiler installations as an immediate addition
- Update your website and marketing materials
Year 2: Growing Heat Pump Revenue
- Target 10–15 heat pump installations alongside your gas work
- Refine your quoting process to improve margins
- Build a portfolio of completed installations for marketing
- Develop manufacturer relationships for better pricing on units
- Review your finances — is the heat pump side profitable? What is the split between gas and heat pump revenue?
Year 3: Heat Pumps as a Core Offering
- Heat pump installations become a significant portion of your revenue
- Consider taking on staff or subcontractors to handle growing demand
- Explore ground source and hybrid heat pump systems for higher-value projects
- Your early investment in training and certification is now paying back through higher-value jobs and a strong local reputation
- Review your business structure — higher turnover may mean reconsidering whether limited company or sole trader works best for you
Make the Finances Work for Your Transition
The shift to heat pumps is not a threat to your business. It is an opportunity — but only if you plan for it financially. The investment is real, the tax implications need managing, and the transition takes time. But the businesses that start now will be the ones leading their local market in three to five years.
The good news is that between capital allowances, tax-deductible training, the 0% VAT rate, and the BUS grant making your services attractive to homeowners, the government is making it easier than ever to make this shift.
Planning your business transition to heat pumps? Let’s make sure the finances support your growth. Book a free consultation.
If you are serious about building a better plumbing or heating business, the Together We Count books are your next step. The Quote Handbook helps you price your work with confidence — grab your copy on Amazon here. The Systems Handbook gives you the frameworks to run your business properly, available in Kindle, Paperback, and Hardback — get yours on Amazon here, or grab the Hardcover edition here.