November 2025 Budget: What Changed for Home Heating

The Chancellor's November 2025 Budget on 26 November 2025 did not announce a new heat pump scheme. It did, however, change three things that quietly shift the maths on home heating: it stripped policy levies worth around £150 a year off household electricity bills, it reconfirmed Boiler Upgrade Scheme funding into the late 2020s, and — by signalling a cap on Cash ISAs from April 2027 — it nudged the relative attractiveness of putting capital into the home rather than into tax-sheltered savings. None of these are headline heat pump policies. All of them affect the heat pump decision.

The headline energy measure was the removal of certain policy costs from electricity bills, with HM Treasury indicating a saving of around £150 per year for an average dual-fuel household. The mechanism is the migration of legacy renewable-obligation and social-tariff costs away from the unit price of electricity and onto general taxation, where they now sit in the broader fiscal accounts rather than on the bill.

For a household running a gas boiler, that's a one-line saving on the electric meter. For a household running a heat pump — where a much larger share of energy use is electrical — it's structurally more meaningful. A typical UK heat pump consumes 3,000-5,000 kWh of electricity a year for space heating and hot water. Shaving roughly 1p-1.5p off the average unit cost of electricity (the rough Ofgem-cap implication of the levy move) reduces running costs by £30-£75 a year on top of the £150 standing-charge-equivalent saving.

The wider point matters more than the immediate cash. The UK has long had one of the most distorted electricity-to-gas price ratios in Europe — typically 4x or higher at the meter — because policy costs sit disproportionately on electricity. Heat pump economics in the UK have been a story of waiting for that ratio to narrow. The November 2025 Budget is the first time the Government has narrowed it materially rather than expanding it.

The Budget reaffirmed funding for the Boiler Upgrade Scheme through to the end of the current published horizon. Grant levels are unchanged — £7,500 for air-source heat pumps and ground-source heat pumps, £5,000 for biomass boilers in eligible properties. The £9,000 uplift route for households replacing oil or LPG heating systems remains in place. Ofgem continues to administer the scheme on behalf of DESNZ.

What's actually new is what the Budget did not do. It did not extend BUS into the 2030s with a long-term ramp; it did not introduce a means-tested top-up; it did not consolidate BUS with other home-energy grants. The signal is steady-state continuity rather than expansion — the scheme keeps doing what it's been doing, with the same per-property maxima, at the same eligibility bar.

The cross-party tone in the surrounding commentary is worth noting separately from the Budget text. Both major Westminster parties have, in their published positions through 2025, treated electrification of heat as a settled direction even where the funding instruments and timelines differ. That matters for anyone making an investment that depreciates over 15-20 years. The grant route is the most volatile element of the heat pump decision; a Budget that confirms rather than changes it is the more useful kind of Budget for buyers.

One detail worth pulling out for the 1.5 million UK homes off the gas grid: the £9,000 BUS uplift for oil and LPG replacements introduced earlier in 2025 was not touched by the Budget. This is the most generous heat-of-electrification route currently funded by HM Government, and it specifically targets the segment of the housing stock where the economics are best — homes that are already paying high per-kWh prices for oil or bottled LPG, and where the relative running-cost saving from a heat pump is largest.

If you're in this bracket and you have not yet looked at BUS, the November 2025 Budget did not change your situation in a negative way. It also did not extend the window. The grant remains a fixed-budget pot administered on a first-claim basis through MCS-certified installers, and demand has consistently exceeded the rate at which it's drawn down in any given quarter. The realistic interpretation is that the route stays open at the current rate for now; the long-term life of the £9,000 uplift specifically is contingent on subsequent fiscal events.

For a deeper look at the eligibility rules, see our BUS £9,000 oil and LPG grant guide.

The most-debated savings measure in the Budget was the proposed reduction of the annual Cash ISA allowance to £12,000 from April 2027, with the wider £20,000 ISA wrapper retained for stocks-and-shares contributions. This is not a heat pump policy by any stretch — but it does affect the implicit returns calculation on home-energy capex.

The Budget framing is around redirecting capital toward productive investment in UK equities. The household-level effect is that anyone who currently maxes their Cash ISA at £20,000 a year will have £8,000 of "surplus" allocation to deploy somewhere from April 2027 onwards. That capital could go into the stocks-and-shares wrapper; it could go into pension contributions where the marginal allowance allows; or it could go into a one-time capex decision like a heat pump install, an EV, an insulation upgrade, or solar PV.

None of this is financial advice — and the right destination for surplus savings is genuinely different for different households. What the Budget changes is the marginal comparison between sheltered cash savings and home-energy capex. A heat pump installation in 2026 or 2027 that delivers an internal return of 5-10% in avoided running costs is now competing against a smaller pot of risk-free, tax-sheltered cash savings. That tilts the comparison slightly in favour of the capex decision.

For completeness, here are the heat-pump-relevant items that were widely expected to appear in the November 2025 Budget and didn't:

• A VAT cut on heat pump installations. Currently 0% on the installation and on most parts of a domestic install when supplied and fitted together; this measure was extended in 2022 and continues, but no widening to fringe categories (replacement parts, standalone cylinders) was announced.
• An MCS-certification reform. Installer-side commentary through 2025 had asked for changes to the MCS umbrella that administers eligible installers for BUS. The Budget did not make those changes.
• A direct subsidy for low-carbon hot water cylinders. Some industry submissions had requested a standalone grant for replacing a gas-fired hot water cylinder with a heat-pump-compatible vented or unvented cylinder. Not in this Budget.
• A means-tested top-up for lower-income households. The current BUS is flat-rate. Means-testing was raised in pre-Budget commentary as a way to direct funding to where running-cost savings are most material; it was not introduced.
• Clarity on the long-term direction beyond 2028. BUS continues in its current form; what replaces or supersedes it in the late 2020s is not in this Budget.

The absence of these measures is, on balance, neutral for current heat pump buyers. The scheme works as it stands; the per-property cap is what it is; the running-cost gap is structurally narrower than it was 12 months ago.

Putting the four threads together — a £150 levy cut on electricity, a reaffirmed BUS at £7,500-£9,000, no change to oil/LPG eligibility, and a marginal tilt against tax-sheltered cash from April 2027 — the November 2025 Budget improves the heat pump case by a small but cumulative amount. None of the changes individually move the needle from "don't install" to "install". They do, however, move the needle from "install if economics are clearly favourable" to "install if economics are even neutrally favourable".

For households in the strongest brackets (off-gas-grid, eligible for £9,000 BUS, moving from oil to a heat pump in a well-insulated property), the Budget makes already-favourable economics slightly better. For households in marginal brackets (gas-grid, mid-1980s housing stock, partial insulation upgrade required), the Budget narrows the gap but does not close it on its own.

The single biggest variable for any individual decision continues to be the property's heat-loss profile and the quality of the install. Our guide to commissioning a heat-loss survey explains how to get a defensible figure for your own property before you commit to a system size.

• Boiler Upgrade Scheme 2026: Complete UK Grant Guide — full eligibility and application detail.
• BUS £9,000 Grant for Oil and LPG Homes — the off-gas-grid route in detail.
• BUS Guidance v5: What Changed on 28 April 2026 — Ofgem's most recent procedural update.
• Heat Pump Running Costs vs Gas Boiler: UK 2026 Maths — the underlying running-cost calculation the Budget feeds into.

Primary sources: HM Treasury, Autumn Budget 2025 (26 November 2025); Department for Energy Security and Net Zero (DESNZ), Boiler Upgrade Scheme guidance; Ofgem, BUS administrative guidance v5 (28 April 2026).