Energy savings made by heat pumps will not outweigh their upfront costs even after the Chancellor’s VAT cut, analysis has found.
For the next five years, energy-efficient equipment such as solar panels, insulation and heat pumps will attract zero VAT instead of 5pc, Rishi Sunak announced in his Spring Statement last week.
Despite this, heat pumps will remain prohibitively expensive for all but the best insulated homes with the best systems, according to the Energy & Utilities Alliance, a trade body.
This remains the case for the limited number of homes that will benefit from the Government’s £5,000 Boiler Upgrade Scheme grants, which will be introduced next month.
Air source heat pumps cost on average £10,855 including installation, the EUA said. A replacement gas boiler costs £1,400 on average. The VAT cut would take the total cost of replacing a system with a heat pump rather than a gas boiler to £8,955.
A heat pump’s efficiency is graded by what is known as a Seasonal Coefficient of Performance, also known as a Scop rating, with higher ratings saving more money.
