Private landlords can now claim a £2,500 government grant to install an air-to-air heat pump, a system that heats your property in winter and cools it in summer, without the cost or complexity of a full heat pump retrofit. The Boiler Upgrade Scheme (BUS) formally expanded to include this technology from April 2026, alongside a matching £2,500 grant for heat batteries.
This is different from the £7,500 ASHP grant many landlords already know about. Air-to-air systems are cheaper, simpler to install, and particularly well-suited to flats and leasehold properties where a full air source heat pump is difficult or impossible to fit.
There is, however, a critical catch that no other guide is explaining clearly: air-to-air heat pumps do not automatically improve your EPC rating under current rules. Read on before you commit to an installation.
What Is the £2,500 Air-to-Air Heat Pump Grant?
The Boiler Upgrade Scheme expanded in November 2025 and formally launched the new category in April 2026, adding two new eligible technologies at a £2,500 grant level each:
- Air-to-air heat pumps, heating and cooling via wall-mounted fan units
- Heat batteries, thermal storage units that heat water overnight for daytime use
The existing £7,500 grant for air-to-water (air source) heat pumps and ground source heat pumps remains unchanged.
Here's how the three BUS technologies now compare:
| Technology | BUS Grant | Hot water? | Radiators needed? |
|---|---|---|---|
| Air-to-water heat pump (ASHP) | £7,500 | ✓ | ✓ |
| Ground source heat pump (GSHP) | £7,500 | ✓ | ✓ |
| Air-to-air heat pump | £2,500 | ✗ | ✗ |
| Heat battery | £2,500 | ✓ (stored) | ✗ |
What is an air-to-air heat pump? It looks and works like a modern air conditioning unit, an outdoor unit extracts heat from outside air and delivers warm or cool air through wall-mounted indoor units. In winter it heats; in summer it cools. It does not connect to your radiator circuit and does not produce hot water.
Installers typically quote around £4,500 for a flat or small house, which puts the net cost after the £2,500 grant at roughly £2,000. Get your own quotes: the figure moves with the number of indoor units and the difficulty of the outdoor siting.
Are Private Landlords Eligible?
Yes. The Boiler Upgrade Scheme is available to all property owners in England and Wales, and private landlords qualify in the same way as owner-occupiers. Portfolio landlords can claim one grant per property, there is no cap on the total number of properties.
Key eligibility rules for the £2,500 air-to-air grant:
- England and Wales only, Scotland and Northern Ireland have separate energy efficiency schemes
- Must replace an existing fossil fuel system, the grant is for replacing gas, oil, or LPG heating; it does not apply to new builds or properties that already use low-carbon heating
- Boiler must be fully removed, you cannot retain a gas boiler as a backup or hybrid system. The air-to-air unit must become the primary heating source
- MCS-certified installer required, the installer applies for the grant on your behalf and deducts it from the invoice; you do not claim it directly
- One grant per property, if you use the £2,500 air-to-air grant for a property, you cannot also claim the £7,500 ASHP grant for the same property later
- Prior insulation funding does not disqualify you, if you've already received ECO4 or Warm Homes Local funding for insulation at the property, you can still apply for BUS
To find an MCS-certified installer, use the MCS installer finder.
Costs and What the Grant Covers
The grant is applied by your installer as a direct deduction from your invoice, you never see or handle the money. Your installer claims it from Ofgem once the installation is complete.
| Cost element | Air-to-air | ASHP (for comparison) |
|---|---|---|
| Typical gross install cost | ~£4,500 | ~£12,000 to £15,000 |
| BUS grant | £2,500 | £7,500 |
| Typical net cost | ~£2,000 | ~£5,000 to £7,000 |
| VAT rate | Check with installer | 0% |
Note on VAT: air source and ground source heat pumps qualify for 0% VAT under the Energy Saving Materials relief. Air-to-air systems are not currently included in that relief, check with your MCS-certified installer for the applicable VAT rate before budgeting.
The Boiler Upgrade Scheme (England and Wales) (Amendment) Regulations 2026 extended the scheme end date from 2028 to 2030. That extension is in force, so the funding window is real rather than promised.
Will It Improve Your EPC Rating?
This is the question every landlord needs answered before committing, and it is the one area where most guides fall short. The honest answer is: it depends on your current heating system, and the impact under current rules is limited for most landlords.
Under Current RdSAP (the EPC methodology in use now)
Air-to-air heat pumps are not counted as the primary heating system in standard EPC assessments. Because they produce warm air through fan units rather than heating water through a radiator circuit, and because they do not supply hot water, RdSAP assessors record them differently to an air source heat pump.
If your property currently has a gas boiler, that boiler remains the recorded primary heating system even after an air-to-air installation. Your EPC band is unlikely to change.
There is one scenario where air-to-air can improve an EPC rating under current rules:
If your property uses direct electric heating or storage heaters as its primary system, replacing them with an air-to-air heat pump is likely to improve your rating. Air-to-air units are significantly more efficient than direct electric resistance heating, and this efficiency difference is captured in RdSAP.
If you are working towards band C: remember that band C is a proposal, not a legal duty. Government said in January 2026 that it intends to require EPC C in the private rented sector from 1 October 2030, but that needs an Act of Parliament and then a statutory instrument amending the 2015 Regulations. The legal minimum today is band E, so bands D and above are lawful to let. If you do want to reach C, an air-to-air heat pump on its own is unlikely to move the band where gas is the primary system. Pair it with loft insulation, heating controls or internal wall insulation, and use our D-to-C upgrade guide to work out the combination.
Under the Home Energy Model (HEM), timing not yet fixed
The Home Energy Model is intended to replace RdSAP and to introduce a dual-metric system, an Energy Efficiency rating and an Environmental Impact rating. No start date is confirmed, so treat any timetable you see, including on this site, as provisional. Heat pump technology is expected to score more favourably than gas heating under the Environmental Impact metric, and air-to-air units would likely benefit from that.
However, the exact weighting of air-to-air heat pumps under HEM is not yet confirmed. Until HEM assessment software is published, treat any EPC improvement claims for air-to-air under HEM as directional, not guaranteed. See our HEM timing guide for more on the upgrade-now-or-wait decision.
Why It Matters Most for Flat and Leasehold Landlords
The £2,500 grant is best understood as a solution to a very specific problem: flat and leasehold landlords who cannot access the £7,500 ASHP grant.
Full air source heat pumps require a larger outdoor unit, connection to the property's central heating system, and, in leasehold buildings, freeholder consent. In practice, most freeholders refuse or impose conditions that make ASHP installation unworkable.
Air-to-air systems are different:
- Smaller outdoor unit, often eligible for permitted development in England and Wales (your installer can confirm whether planning permission is needed for your specific property)
- No pipework modifications, units are fully self-contained; no connections through floors or ceilings between flats
- Freeholder consent still usually needed, but easier to obtain for a reversible air conditioning unit than for structural heating modifications
- Cooling benefit, for flat landlords worried about overheating (a growing HEM metric), the cooling function adds a separate compliance and tenant comfort benefit
If your flat property currently relies on night storage heaters or direct electric heaters, this grant may be the most accessible and cost-effective EPC improvement available to you. Read our leasehold flat EPC guide for the full picture on flat-specific compliance options.
What the Grant Won't Do
In the spirit of balanced advice:
- Won't provide hot water, you still need a separate boiler, immersion heater, or heat battery for hot water supply
- Won't automatically improve your EPC under current RdSAP if gas remains your primary heating source
- Won't fund a hybrid system, you must remove the gas boiler entirely to qualify
- Won't give you the £7,500 ASHP grant later, one grant per property means choosing between the two
- Won't cover new builds, BUS is for replacing fossil fuel systems in existing properties only
- Won't apply in Scotland or Northern Ireland, England and Wales only
Frequently Asked Questions
Can I claim the air-to-air grant if I already claimed ECO4 for insulation? Yes. Receiving ECO4 funding for insulation does not affect your BUS eligibility. The schemes operate independently. This applies to Warm Homes Local grants for insulation too.
Do I need planning permission to install an air-to-air heat pump? In many cases, no, air-to-air units are smaller and less intrusive than full heat pump systems, and your MCS-certified installer will confirm whether your installation requires planning permission. If your property is in a conservation area, listed building, or a leasehold block with specific restrictions, always check with your local authority and freeholder before proceeding.
Does the air-to-air grant apply to properties in Wales? Yes. The Boiler Upgrade Scheme covers England and Wales. Scotland has the Home Energy Scotland grant and loan scheme; Northern Ireland has the Home Energy Scheme.
Does the installation cost count toward the MEES cost cap? The cap in force is £3,500 including VAT. The £10,000 cap, and the idea that spend from 1 October 2025 would count towards it, are both part of the January 2026 proposal and are not law. Separately, under the rules in force grant money does not count against the £3,500 cap at all: GOV.UK says that where third-party funding covers the full cost of the improvements, "the cost cap does not apply", and where it covers part, a landlord "may need to top up with your own funds to the value of the cost cap". So the £2,500 grant is not your spend against that cap. The roughly £2,000 you pay yourself is. Under the proposed £10,000 cap, Boiler Upgrade Scheme money would not count, but other third-party funding, such as ECO4 or local grants, could. Keep the invoices either way, and see our guide to which improvements count toward the cost cap.
For the full picture on heat pump grants available to landlords, including the £7,500 air source heat pump route, see our heat pump grant guide for landlords. To understand how grant funding is changing after ECO4 closes, see the Warm Homes Plan transition guide.