Heating Incentives and Grants

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Heating Incentives and Grants

Heating is a crucial aspect of a home, and the type of heating system chosen determines how much goes into the project.

Different options are available when deciding on which heating system is best for a home or business. 

The old systems involve burning gas and oil to generate heat for water and space heating.

However, today, renewable heating systems are gradually becoming a thread, especially with the introduction of the government’s incentives to support low-carbon emissions in the UK.

With the high cost of renewable heating systems, homeowners and businesses always ask if there are any heating incentives and grants available for their heating systems. 

Depending on the heating system’s technology, a few heating incentives, and grants are available to relieve homes and businesses of the high cost of installing a low-carbon heating system.

In this article, we look at the available heating incentives and grants and let you know all that revolves around these incentives and grants.

Green Homes Grant Scheme

The Green Homes Grant is one of the most popular heating incentives and grants in the UK, which is aimed at encouraging homeowners and landlords to venture into the installation of more energy-efficient systems. 

This grant offers qualified landlords and homeowners up to £10,000 on every installation.

What is the Green Home Grants Scheme?

The Green Homes Grant is a scheme established by the UK government to promote the installation of heating systems with energy-saving features. 

This helps improve a property’s energy efficiency and reduce energy usage. 

What Benefits Does The Scheme Offer?

Depending on the category a system falls into, the benefits to expect from Green Homes Grant differ. 

However, the scheme offers up to £10,000 to an eligible system. 

While a typical UK homeowner with regular income can expect up to £5,000, homeowners on a low income are eligible to up to £10,000. 

However, these offers are in the form of a voucher.

Which Heating Systems Are Eligible Under This Heating Grant?

Different heating systems are eligible under the Green Homes Grant and are categorized into 2: primary and secondary measures. Here’re a few of what is covered under the Green Homes Grant:

  1. Solar thermal
  2. Ground or air source heat pumps
  3. Secondary measures
  4. Hot water tank
  5. Appliance tank thermostats
  6. Smart heating controls
  7. Heating controls
  8. Zone controls
  9. Thermostatic radiator valves

You can claim the voucher if you have both primary and secondary measures. 

However, before you’re eligible to claim a voucher for a secondary measure, the scheme requires you to have at least a primary measure installed before a secondary measure. 

Also, the cost of the secondary measure mustn’t exceed that of the primary.

Am I eligible for the Green Homes Grant Scheme?

All measures listed in this guild are qualified for the Green Homes Grant, and the list of qualified improvements for the grant is provided when applying for the voucher. 

Before a homeowner is qualified to apply for a Green Home Grant voucher, he/she must obtain at least a quote from a qualified installer. 

It’s ideal to have more than one quote from qualified installers for comparison. 

Submitting more than one quote also gives the scheme the opportunity of choosing a good one. 

Once he/she provides the scheme with the quote(s) and the type of work, he can expect to receive a voucher for the grant.

The amount to expect depends on whether the homeowner or landlord is on a low income or not and on the cost of installing the heating system. 

For a homeowner on a regular income, the grant offers two-third of the total cost of installation and doesn’t exceed £5,000. 

For low-income earners, the grant covers 100% of the total installation costs not exceeding £10,000. 

How to Apply For a Green Homes Grant

Application for the Green Homes Grant scheme started from September 2020 and is accessible through the Simple Energy Advice’s website. 

However, a homeowner or landlord must obtain a quote from a qualified installer before forging on for application. 

The scheme only accepts quotes from MCS certified or TrustMark registered local companies.

Locating a qualified installer around you is made easy through the SEA’s website that shows you local companies in your area.

When Does The Scheme End?

The Green Homes Grant scheme started in September 2020 and is expected to run until March 2022, having been extended from March 2021.

Is Green Homes Grant Worth It?

The only thing that should stop you from applying for a voucher from the Green Homes Grant scheme is to meet the requirements. 

While you can generate heat with your low-carbon heating system, receiving heating incentives and grants from the government helps save money with the system.

Renewable Heating Incentive

Another heating incentive from the UK government is the Renewable Heating incentive scheme also aimed at promoting low-carbon emissions in the UK. The scheme pays quarterly for 7 years.

What Is The Renewable Heating Incentive?

The UK is making every effort to ensure the rate of carbon emission reduces in the UK drastically and focusing on heating systems is a part of this effort. 

The UK government has the ambition of generating 12% of heating from renewable sources. 

To trigger more households and businesses to support this ambition, the government introduced the Renewable Heating Incentive.

The scheme is under the Department for Business, Energy, and Industrial Strategy (BEIS) for key policy decisions while Ofgem administers it.

The Renewable Heating incentive comes in two versions: Domestic and Non-Domestic Renewable Incentives. 

While Domestic RHI deals with heating systems in residential homes, the Non-Domestic RHI covers installations in businesses and public sectors.

Am I Eligible?

Eligibility for this heating incentive depends on the type of the system. 

Virtually, every renewable heating system is qualified for the grant. 

However, there’re other requirements to be met before applying, and going through the instructions and rules is key to qualify for the incentive.

Does RHI Cover My Heating System?

An array of heating system is covered under the Renewable Heating Incentive, and knowing which system is eligible is ideal for those who haven’t installed a heating system yet and want to know which system to install to qualify for the RHI. 

Here’re eligible heating systems for the Renewable Heating incentive:

  • Integrated boilers for space heating
  • Biomass Boilers
  • Air-to-water heat pumps
  • Ground-to-water heat pumps
  • Water-source heat pumps 
  • Solar thermal panels for hot water

The application for the incentive is to take place within the first year of installing the system.

How Much Does RHI Pay?

It isn’t easy to pinpoint the exact amount to expect from RHI, as payments under the incentive depend on certain factors. 

How much a homeowner or business owner can expect from this incentive is influenced by the installed system’s technology, the current tariffs, and metering – though not common.

The Department for Business, Energy, and Industrial Strategy provides an RHI payment calculator, with which RHI applicants can calculate how much the RHI scheme will pay them.

How Do I Apply For RHI?

The application for the RHI was to end in March 2021 but has been extended to March 2022.

Eligible applicants are to apply for the incentive on Ofgem’s website, and qualification status is made known shortly, provided that the relevant information is not to pass through manual review.

Documents need to apply for the RHI include:

  • Energy Performance Certificate (EPC) number
  • MCS installation certificate number for the system
  • Bank details

This is enough information for applying for RHI. 

However, if the system has been used to collect any public fund in the past, it’s demanded to provide the details of the fund received, including the amount and the date received.

Elements Affecting RHI Payments

The scheme calculates payments for a system using a ‘degression’ system. This system is designed to help manage the budget for the incentive. 

With this, new installations have their payments reduced from time to time until a certain percentage of the amount claimed for the installation is reached.

One common factor that affects payments under the RHI is if the system has been used to claim a government or public fund before. 

The fund received with the system under another heating incentive or grant plays a significant role in calculating RHI payments, resulting in reduced payments.

Reduced VAT

Other than the Green Homes Grant and the Renewable Heating incentive, owners of certain energy-saving heating systems are qualified for a reduced VAT rate of 5%. 

Qualified heating systems for reduced VAT include wood-fueled boilers and air source heat pumps. 

However, it’s worth mentioning that not all of these systems are qualified for the incentive, and qualification depends on the types of residential building the system is installed. 

Most systems installed in new dwelling constructions are not qualified for this incentive.

Checking with the government helps know if a particular system is qualified for reduced VAT and what rate is applied to the particular installation.

For an installation to qualify for the reduced rate tax, it must be one of the listed types of equipment under the VAT Act 1994, which enlists the eligible energy-saving materials for this incentive. 

Funding an installation with a government or public fund doesn’t affect the eligibility of a heating system, and the reduced tax only deals with the exact price of the heating materials.

Installation

Other than the materials qualifying for the reduced rated tax, the installation can also be reduced rated. 

However, this requires that the installation meets one of the social policy conditions under the VAT Act 1994. 

One of these conditions is that the installation is supplied to a qualified homeowner’s residence.

For a homeowner to be tagged ‘qualified’, he/she must be above 60 years old or a beneficiary of any of these benefits:

  • Disability Living Allowance
  • Child Tax Credit 
  • Disablement Pension
  • Council Tax Benefit
  • Income Support
  • War Disablement Pension
  • Housing Benefit
  • Income-based Jobseeker’s Allowance
  • Working Tax Credit

Another condition is that the installation must be to a relevant housing association, such as a registered social landlord.

When Did Rules Start?

The rules started on 1 October 2019 and applied to only energy-saving materials made before this date. 

Contracts that have taken place before this date are not eligible for reduced VAT. 

As such, if you have entered into any agreement with a contractor earlier than 1 October 2019 for the supply or installation of an energy-saving material, you’re not eligible to claim a reduced VAT.

Installation of Energy-Saving Materials Only

In most cases of installing an energy-saving material, installation occurs with other projects, influencing the reduced VAT rate. 

However, certain rules also guide the installation of energy-saving materials only. 

These include that the installation meets at least one of the social policy conditions, or it doesn’t exceed the 60% threshold. 

Installation with Auxiliary Supplies

Installing an energy-saving material with auxiliary supplies is still reduced rated. 

The only clause being that the supplies must meet one of the social policy conditions or the 60% threshold is not exceeded.

An auxiliary supply, in this context, is any supply of energy-saving material that enhances the benefits of a principal supply. 

For example, installing a heat pump but having to install wall insulation. 

While installing the heat pump is a principal supply, installing wall insulation is an auxiliary supply that lets you have the best of the heat pump.

Another example here is the replacement of a roof with an insulated one. Installing an insulated roof means enjoying the roof to the maximum, and is reduced rated. 

Installation of Energy-Saving Materials with Other Goods and Services

When a group of materials is supplied as a single supply, their eligibility for reduced VAT depends on if the single supply is listed under qualified supplies under the VAT Act 1994. 

This might be confusing when there is no dominant supply to represent a group of supplies.

An example is when a heat pump is installed but involves the supply of radiators, conventional boiler, radiator valves, copper pipe, and heating controls. 

While supplying these items individually attracts reduced VAT, heat pump installation is not included in the reduced-VAT-eligible items under the VAT Act 1994. 

As such, the supply of a central heating system in this scenario is not reduced rated but standard rated.