Budget 2026: what 5% VAT on heat pumps from April 2027 means for installers

The 28 October 2026 Budget set VAT on heat pumps to rise to 5% from April 2027 and froze Boiler Upgrade Scheme spending. Installs completed before April 2027 should avoid the higher rate, so UK installers should expect demand to be pulled forward and make sure their R290 and R32 tools and BUS paperwork are ready.

The Autumn Budget on 28 October brought mixed news for anyone fitting heat pumps. The headline for installers is a planned change to VAT: heat pumps are set to carry 5% VAT from April 2027, rather than the 0% rate that has applied to energy-saving materials in recent years. Alongside that, spending on the Boiler Upgrade Scheme (BUS) is being held flat rather than increased. The Heat Pump Association (HPA UK) reacted the following day, and Cooling Post reported its response on 29 October.

What was announced

Based on the HPA UK response, the key points are:

• VAT on heat pumps rising to 5% from April 2027. HPA UK chief executive Charlotte Lee described the move as reckless given the current pressure on fossil fuel prices.
• Boiler Upgrade Scheme spending frozen. The grant continues, but the budget is not growing even though applications have been rising strongly. HPA UK warns this risks a "boom and bust cycle" for the sector.
• A new Warm Homes Loan Scheme, which the HPA welcomed, while calling for more action on electricity prices.

The HPA also pointed to its target of 450,000 heat pump installations a year by 2030, and the economic activity that level of work would bring to the UK supply chain.

Why it matters on the ground

For customers, the practical effect is simple: a job quoted and installed before April 2027 should avoid the higher VAT rate, while the same job done after that date will cost more. That is likely to pull some demand forward into the next five months. Combined with a capped BUS budget, there is a real chance of a busy run-up followed by a slower period once the VAT change lands and grant funds are stretched.

For installation businesses, that means planning now. Busy periods expose gaps in kit, stock and training, and the jobs that go wrong are usually the rushed ones.

How installers can get ready

• Check your tools are up to the refrigerants you are fitting. Many domestic heat pumps now use R290 (propane) or R32. Both are flammable to some degree and need suitable tools: spark-free vacuum pumps, compatible recovery machines and leak detectors. See our R290 tools and R32 refrigerant tools and equipment.
• Don't cut corners on evacuation. Moisture and non-condensables shorten compressor life, and callbacks eat margin fast in a busy season. Our vacuum and evacuation range and gauges and manifolds cover the essentials.
• Talk to customers about timing. Anyone sitting on the fence should know that waiting past April 2027 is likely to cost them more, and that grant funding is limited.
• Keep paperwork tidy. BUS jobs depend on MCS certification and correct records. A backlog of half-finished paperwork is a risk when the scheme budget is capped.

Our view

Policy changes like this are frustrating, but they also create a clear window. Installers who are equipped, trained and organised will be best placed to handle a rush of work without the quality problems that damage reputations. Check the details of any scheme with the official guidance before quoting, as rules and dates can change.

Need help choosing the right tools for R290 or R32 work? Call our team on 0161 775 1190, Monday to Friday, 9am–4pm.