The Boiler Upgrade Scheme is putting money on the table for homeowners switching to heat pumps. As a heating installer, that means more work, more opportunity, and a genuine reason to diversify beyond gas boilers.
But here’s what most installers don’t think about until it’s too late: the BUS grant changes how your accounts look. It affects your turnover figure, your VAT position, and your cash flow. Get it wrong and you could end up with a surprise tax bill or an unexpected VAT registration.
This guide breaks down exactly what the Boiler Upgrade Scheme means for your business finances. No jargon. Just the practical stuff you need to know.
What Is the Boiler Upgrade Scheme?
The Boiler Upgrade Scheme (BUS) is a government-funded grant designed to help homeowners in England and Wales replace fossil fuel heating systems with low-carbon alternatives. The headline figure is a £7,500 grant towards the cost of installing an air source heat pump.
Ground source heat pumps also qualify for £7,500. Biomass boilers in rural properties off the gas grid attract a lower grant of £5,000.
The scheme launched in 2022 and has been extended to run until 2028. To qualify, the property must have an existing fossil fuel heating system (gas, oil, or LPG), and the homeowner needs a valid Energy Performance Certificate (EPC) with no outstanding recommendations for loft or cavity wall insulation.
Consider this: the average air source heat pump installation costs somewhere between £10,000 and £15,000. A £7,500 grant takes a significant chunk off that price for the homeowner. That’s a strong selling point for your business.
How the Grant Works for You as an Installer
This is where it gets interesting from an accounting perspective. The homeowner doesn’t receive the grant money directly. Instead, the process works like this:
- You quote the homeowner for the full installation cost.
- The homeowner applies for a BUS voucher through Ofgem’s portal (or you help them with the application).
- Once the voucher is issued, you carry out the installation.
- The homeowner pays you the balance after the grant — so if the job is £12,000, they pay you £4,500.
- You then claim the £7,500 grant directly from Ofgem after the installation is complete and the system is commissioned.
So the money flows through you. You deliver the full installation, the customer pays their share, and Ofgem pays the rest. That’s important, because it means the grant income appears in your business accounts.
How the BUS Grant Affects Your Accounts
The Grant Is Income to Your Business
Let’s be clear about this. The £7,500 you receive from Ofgem is taxable income. It’s not a gift, it’s not a rebate on your costs — it’s payment for work you’ve done. It forms part of your total turnover.
In my eyes, the easiest way to think about it is this: you’ve done a £12,000 installation. You receive £4,500 from the customer and £7,500 from Ofgem. Your total income from that job is £12,000. The grant simply replaces part of what the customer would otherwise have paid you.
The Net Effect on Profit
Here’s the bit that confuses people. The BUS grant doesn’t make you more profitable on a per-job basis. You quoted £12,000 for the work, and you received £12,000. The grant just changes who pays you, not how much you get paid.
Your costs are the same. Your profit margin is the same. But your turnover figure is based on the full job value, including the grant portion. That matters, and we’ll get to why in a moment.
How to Record It in Your Books
You should record BUS installations as two separate income lines:
- Customer payment: £4,500 (or whatever the balance is after the grant)
- BUS grant income: £7,500 from Ofgem
Together, these make up your total income for the job. Keeping them separate gives you a clear audit trail and makes it straightforward if HMRC ever asks questions. Your accountant will thank you for it.
VAT on Heat Pump Installations
The 0% VAT Rate
Since April 2022, the installation of energy-saving materials — including heat pumps — in residential properties has qualified for 0% VAT. This zero rate was originally introduced for five years, running through to March 2027.
This is a significant benefit. On a £12,000 heat pump installation, the difference between 0% and 20% VAT is £2,400. For your domestic customers, that’s a major saving on top of the BUS grant. For your business, it changes the VAT arithmetic.
What 0% VAT Means vs VAT-Exempt
Don’t confuse zero-rated with VAT-exempt. They’re very different. Zero-rated supplies are still taxable supplies — they just happen to be taxed at 0%. This means:
- Zero-rated turnover counts towards the £90,000 VAT registration threshold.
- If you’re VAT-registered, you can still reclaim VAT on your business purchases related to zero-rated work.
That second point is important. You’re not charging your customer any VAT, but you can still reclaim the 20% VAT you paid on the heat pump unit, copper pipe, electrical components, and everything else that went into the installation. On a job where your materials cost £5,000 plus VAT, that’s £1,000 back in your pocket.
For a full breakdown of how VAT works for plumbing and heating businesses, take a look at our complete VAT guide.
If You’re on the Flat Rate Scheme
Here’s where you need to pay close attention. If you’re on the VAT Flat Rate Scheme, the zero-rated nature of heat pump installations can work against you.
Under the Flat Rate Scheme, you pay HMRC a fixed percentage of your gross turnover. Normally, you collect 20% VAT from customers and pay, say, 9.5% to HMRC — keeping the difference. But with zero-rated heat pump work, you’re collecting 0% VAT from the customer while still paying your flat rate percentage on the turnover to HMRC.
In other words, you’d be paying HMRC a percentage of income on which you collected no VAT at all. That’s money coming straight out of your profit.
If heat pump installations are becoming a significant part of your work, it may be time to review whether the Flat Rate Scheme still makes sense. Talk to your accountant before the next quarter.
Watch Your VAT Threshold
This is the one that catches growing heating businesses off guard. Remember, the VAT registration threshold is £90,000 of taxable turnover over any rolling 12-month period.
The BUS grant income counts as part of your turnover. Every £7,500 grant you claim from Ofgem pushes you closer to that threshold.
Let’s explore a quick example. Say you’re currently turning over £70,000 a year from gas boiler work and general plumbing. You decide to take on heat pump installations and complete five BUS jobs in a year, each worth £12,000.
Your turnover is now:
- Existing work: £70,000
- Heat pump installations: 5 × £12,000 = £60,000
- Total turnover: £130,000
You’ve gone well past the £90,000 threshold. You need to register for VAT. And you might hit that threshold sooner than you think — possibly after just three or four BUS installations on top of your existing workload.
This isn’t necessarily a bad thing. But you need to plan for it, not discover it after the fact. Late VAT registration means HMRC backdates it, and you’ll owe VAT on sales where you never charged it.
Cash Flow: The Timing Problem
Let’s talk about the reality of getting paid under the BUS. This is where the scheme can put pressure on your business if you’re not prepared.
How the Payment Timeline Works
You complete the installation and commission the system. Then you submit your claim to Ofgem with the required evidence. Ofgem processes the claim and pays the grant into your bank account.
The published target is payment within 30 working days of a valid claim, though in practice many installers report receiving payment within two to three weeks. That said, if there are queries on your application or missing paperwork, it can take longer.
The Gap You Need to Fund
Here’s the issue. You’ve already bought the heat pump, the materials, and paid your labour costs. The customer has paid their £4,500 share. But you’re waiting for £7,500 from Ofgem.
On a single installation, that’s manageable. But if you’re running two or three BUS jobs at the same time, you could have £15,000 to £22,500 outstanding with Ofgem at any given point. That’s a significant cash flow gap.
Plan for this. Make sure you have enough working capital or a business overdraft facility to cover the gap. Don’t take on more BUS installations than your cash flow can support, no matter how tempting the work is.
If cash flow management is something you want to get better at, our guide on managing cash flow in your heating business is worth a read.
Record-Keeping for BUS Installations
HMRC expects you to keep proper records of every BUS installation. Ofgem also has its own requirements. Here’s what you need to keep on file for each job:
- The BUS voucher number and confirmation from Ofgem
- Your customer invoice showing the full installation cost, the BUS grant amount, and the balance payable by the customer
- Proof of the Ofgem payment — bank statement showing the grant received
- Material and equipment receipts — showing what you purchased for the job
- MCS certificate for the installation (you must be MCS-certified to do BUS work)
- Commissioning records for the heat pump system
Keep everything digital, clearly labelled, and linked to the specific job. If you’re using cloud accounting software, create a separate category or tag for BUS grant income so you can pull reports easily.
If you’re doing subcontract work alongside your BUS installations, make sure your CIS records are kept separately and up to date.
The Business Opportunity: Why This Matters Beyond Tax
Let’s step back from the numbers for a moment. The Boiler Upgrade Scheme isn’t just an accounting exercise. It’s a signal about where the heating industry is heading.
Gas Boilers Have a Shelf Life
The government has committed to phasing out new gas boiler installations in new-build homes. The Future Homes Standard, expected from 2025, sets the direction. Heat pumps, heat networks, and other low-carbon heating systems are the future.
If your entire business is built around gas boiler installations and servicing, now is the time to think about diversification. Not panic — but plan.
Fewer Qualified Installers Means Premium Pricing
Here’s the opportunity. There aren’t enough MCS-certified heat pump installers to meet demand. The government wants 600,000 heat pump installations per year by 2028. The current rate is a fraction of that.
Fewer qualified installers plus growing demand equals the ability to charge premium rates. Heat pump installations are higher-value jobs than most gas boiler replacements. A typical BUS installation at £10,000 to £15,000 is significantly more than the average boiler swap.
Building a Long-Term Revenue Stream
Heat pumps also need annual servicing, just like gas boilers. Every installation you do today is a recurring service customer for years to come. If you’re already offering service plans on your gas work, the same model applies here.
In my eyes, the installers who invest in heat pump training and MCS certification now will be the ones running the strongest businesses in five years’ time.
Getting Your Accounting Right from the Start
The Boiler Upgrade Scheme is straightforward once you understand how the money flows through your accounts. The grant is income. Zero-rated VAT changes the arithmetic. Cash flow needs managing. Records need keeping.
None of this is complicated, but it all needs to be set up correctly from day one. The last thing you want is to be three months into BUS work and realise you should have registered for VAT, or that your Flat Rate Scheme is costing you money on every heat pump job.
Installing heat pumps under the BUS? Make sure your accounting setup handles it properly. Get in touch.
If you’re 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.