Heat Pumps and Extensions London 2026: Should You Upgrade When You Extend?
An extension is the single best moment to switch to a heat pump. You are already disrupting the house, the new space needs heating, and the £7,500 government grant makes the economics hard to ignore. Here is how to decide whether it makes sense for your project.
Quick Answer
Installing a heat pump during an extension costs £8,000–£15,000 before the £7,500 BUS grant, bringing the net cost to £500–£7,500. Heat pumps are 0% VAT until March 2027. Pair with underfloor heating in the new extension (£3,000–£6,000) for the best efficiency. Running costs are comparable to gas when well installed.
£500–£7,500
Heat pump (after grant)
£3,000–£6,000
UFH in extension
£7,500
BUS grant
Check your specific property constraints
Free Property CheckWhy an Extension Is the Ideal Time to Install a Heat Pump
Most homeowners only think about heating when their boiler breaks down. But an extension project creates a window where switching to a heat pump is significantly easier and cheaper than doing it as a standalone job.
You are already disrupting the house
Builders are on site, floors are up, walls are open. Running new pipework through the existing house is far less disruptive now than as a separate project later. The marginal cost of integrating a heat pump during construction is lower than retrofitting afterwards.
The new extension needs heating anyway
Your builder has to install a heating system in the extension regardless. Laying underfloor heating in the new slab costs very little extra and is the ideal emitter for a heat pump. If you are going to lay UFH in the extension, you are already halfway to a heat pump system.
The heating system needs reassessing
Adding a 15–30m² extension to a house changes the heating load. Your existing boiler may not have the capacity. Rather than upgrading to a larger gas boiler, this is the moment to consider switching fuel source entirely. The additional floor area also improves the payback calculation for a heat pump.
Insulation work is already happening
A well-insulated home is essential for heat pump efficiency. Building regulations mean your new extension will be insulated to current Part L standards. While the builders are on site, improving insulation in the existing house (loft top-up, draught-proofing, cavity wall) is simpler and cheaper than doing it separately.
Air Source Heat Pump Basics
An air source heat pump extracts heat from outdoor air and concentrates it to heat your home and hot water. Even when the air temperature is below zero, there is extractable heat energy. The system works like a fridge in reverse.
The key metric is the Coefficient of Performance (COP). A modern air source heat pump delivers 3 to 4 units of heat for every 1 unit of electricity it consumes. That means it is 300–400% efficient compared to a gas boiler at 90–95% efficiency. This is how heat pumps can match or beat gas on running costs despite electricity costing more per unit than gas.
Suitability for London homes
Air source heat pumps suit most London properties. The outdoor unit is roughly the size of a large suitcase and sits on the ground outside, typically in a side return, rear garden, or against a back wall. London's relatively mild climate (rarely below -5°C) means heat pumps operate near peak efficiency for most of the year.
The main consideration for London terraces and semis is the outdoor unit placement and noise. Since May 2025, the noise limit for permitted development is 37 dB(A) at the nearest neighbour's window, and the 1m boundary setback rule has been removed. Modern units from brands like Vaillant, Daikin, and Mitsubishi comfortably meet these limits.
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2026 Costs: Heat Pump and Underfloor Heating
All figures below include VAT. Heat pumps currently attract 0% VAT until March 2027, making 2026 the best year to install.
Heat pump supply and installation
A typical 3-bed London terraced house needs a 6–10kW unit costing £9,000–£12,000 installed. After the £7,500 grant that is £1,500–£4,500 out of pocket, comparable to a premium gas boiler installation.
Underfloor heating in the extension
If your existing house has a combi boiler and no hot water cylinder, you will need to add one (heat pumps work best with a cylinder). Budget for finding space for a 170–250L cylinder, often in a utility cupboard or loft.
VAT and grant summary
Air source and ground source heat pumps are zero-rated for VAT until 31 March 2027. This saves roughly £1,600–£3,000 compared to the standard 20% rate. After April 2027 the rate reverts to 5%.
The Boiler Upgrade Scheme provides £7,500 towards an air-to-water or ground source heat pump. Your MCS-certified installer applies on your behalf and deducts it from your bill. You never pay the full amount upfront.
Between the grant and zero VAT, you save £9,000–£10,500 compared to paying full price at standard VAT. This is the most favourable the economics have ever been for heat pump installation in the UK.
The Boiler Upgrade Scheme (BUS) Grant
The BUS grant is the main financial incentive for switching to a heat pump. Here is how it works and who qualifies.
How much
£7,500 for an air-to-water or ground source heat pump. A new £2,500 grant for air-to-air heat pumps was introduced in 2026. The grant is deducted directly from your installer's quote.
Eligibility
- Your property must be in England or Wales
- You must be replacing a fossil fuel heating system (gas, oil, LPG, or electric storage heaters)
- Your property needs a valid EPC (any rating, the previous insulation requirement has been scrapped)
- The heat pump must be installed by an MCS-certified installer
How to apply
The scheme is installer-led. Your chosen MCS-certified heating engineer handles the application through Ofgem, claims the voucher, and deducts £7,500 from your final bill. You do not need to apply directly or pay the full amount upfront. The process typically adds 2–4 weeks to the timeline while the voucher is processed.
Budget for 2025/26
The government allocated £295 million for the 2025/26 BUS budget. Over 100,000 applications have been made since the scheme launched. Funding is available on a first-come-first-served basis.
Want to know if your property qualifies for the £7,500 BUS grant and what a heat pump would cost alongside your extension?
Check now — it's free →Planning Permission for Heat Pumps
Most air source heat pump installations fall under permitted development and do not need planning permission. The rules were relaxed in May 2025 to make installation easier.
Permitted development conditions (updated May 2025)
- Maximum 1 unit on semi-detached, terraced, or flats (2 units allowed on detached houses)
- Maximum volume 1.5 cubic metres (for houses)
- Noise limit: 37 dB(A) at the nearest neighbour's habitable room window
- The 1m boundary setback rule has been removed (as of May 2025)
- Must comply with MCS 020 certification standards
- Not on a pitched roof, and not on a wall or roof fronting a highway
When you need planning permission
- Listed buildings (listed building consent required)
- Conservation areas: permitted if not on an elevation fronting a highway, but may need permission if on a prominent elevation
- Scheduled monuments
- If the unit exceeds the noise or size limits
Practical note: If you are already applying for planning permission for your extension (conservation area or beyond PD limits), adding a heat pump to the same application is straightforward. Your architect includes it on the drawings and the council assesses it as part of the same scheme.
When a Heat Pump Makes Sense (and When It Does Not)
Good candidate
- Your boiler is 10+ years old or approaching end of life
- You are installing underfloor heating in the extension
- Your home is reasonably well insulated (or you are willing to improve it during the project)
- You have outdoor space for the unit (side return, back garden, rear wall)
- You want to reduce carbon emissions and future-proof your home
Think twice
- Your gas boiler is less than 5 years old and working well
- Your existing radiators are undersized and you do not want to replace them
- Very small extension (under 10m²) where the project budget is tight
- No space for a hot water cylinder (heat pumps need one)
- Your home has very poor insulation and you cannot address it during the project
If your boiler is more than 10 years old, the calculation is simple: you will need a new heating system within the next few years regardless. Doing it now during your extension means lower installation costs, the £7,500 grant, and 0% VAT. Waiting means paying full price later with more disruption.
Radiators vs Underfloor Heating with a Heat Pump
Heat pumps work most efficiently at low flow temperatures (35–45°C) compared to gas boilers (60–75°C). This matters because different emitters need different temperatures.
| Emitter type | Flow temperature | Heat pump compatibility |
|---|---|---|
| Underfloor heating | 30–40°C | Ideal |
| Oversized radiators | 40–50°C | Good |
| Standard radiators | 55–65°C | Works but less efficient |
| Small/old radiators | 65–75°C | Poor — upgrade needed |
The ideal setup is underfloor heating in the new extension and oversized radiators (or retained existing radiators) in the original house. Your MCS installer will do a room-by-room heat loss calculation to determine whether your existing radiators can deliver enough heat at lower temperatures. In many cases, Victorian terraced houses with double-panel radiators already have enough surface area. Where they do not, replacing specific radiators with larger models costs £200–£400 each.
Key point: You do not need to rip out every radiator. A good installer assesses each room individually. Often only 2–3 radiators need upgrading, and the rest work fine at heat pump temperatures.
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Running Costs: Gas Boiler vs Heat Pump
Running cost comparisons depend on energy tariffs, home insulation, and system efficiency. Here is a realistic comparison for a typical 3-bed London terraced house using 2026 energy prices.
| Gas boiler | Air source heat pump | |
|---|---|---|
| Efficiency | 90–95% | 300–400% (COP 3–4) |
| Annual heating cost | £750–£950 | £700–£1,000 |
| Annual service | £80–£120 | £100–£200 |
| Expected lifespan | 12–15 years | 20–25 years |
| With heat pump tariff | N/A | £550–£800/year |
On a standard electricity tariff, heat pump running costs are roughly comparable to gas. The savings come from three factors: specialist heat pump electricity tariffs (offered by Octopus, OVO, and others at 14–17p/kWh vs the standard 24p/kWh), the longer lifespan of the equipment, and the trajectory of energy prices where gas is expected to rise faster than electricity as carbon levies increase.
If you have or plan to install solar panels, the economics improve further. A heat pump running during daylight hours on free solar electricity is significantly cheaper than any gas system.
The Future Homes Standard: Why This Matters
The Future Homes Standard will require all new-build homes in England to use low-carbon heating from late 2026 onwards, effectively mandating heat pumps for new construction. Gas boilers in new builds are being phased out.
While existing homeowners are not required to switch, the direction of travel is clear. Installing a heat pump during your extension is smart future-proofing for several reasons:
- Gas boiler replacements may face restrictions or higher costs in future as the grid decarbonises
- EPC ratings increasingly affect property value and mortgage terms — a heat pump improves your EPC
- The £7,500 BUS grant may not continue indefinitely — the current scheme has a fixed budget
- Buyers increasingly expect low-carbon heating, especially in London where EPC awareness is high
Common Mistakes
Undersizing the heat pump
The heat pump must be sized for the whole house including the new extension, not just the extension alone. An MCS installer calculates heat loss room by room and sizes the unit accordingly. An undersized unit will run constantly and struggle in cold weather. Oversizing wastes money and short-cycles. Get the calculation right.
Not insulating the existing house
A heat pump heating a well-insulated extension attached to a poorly insulated Victorian terrace is working harder than it needs to. While builders are on site, address loft insulation (top up to 300mm), draught-proof windows and doors, and consider cavity wall insulation if you have unfilled cavities. These measures cost relatively little during an extension project and make a big difference to heat pump performance.
Ignoring outdoor unit placement
The outdoor unit needs adequate airflow and access for maintenance. Do not box it in tightly or place it where airflow is restricted. Plan the location during the extension design stage, not as an afterthought. In a side return, ensure there is enough clearance (300mm minimum around the unit). Noise travels, so avoid placing it directly below bedroom windows.
Forgetting the hot water cylinder
If you currently have a combi boiler (no cylinder), switching to a heat pump means finding space for a 170–250 litre hot water cylinder. This is a significant space requirement that needs to be designed into the project from the start. Common locations are a utility cupboard in the extension, under the stairs, or in the loft (if structurally suitable).
Leaving the heat pump installer out of the design process
Your MCS heating engineer needs to be involved during the design stage, not after construction. Pipework routes, cylinder location, outdoor unit position, and electrical supply all need coordinating with the architect and builder. Retrofitting these into a finished extension is expensive and disruptive.
Frequently Asked Questions
How much does a heat pump cost when extending in London in 2026?
An air source heat pump costs £8,000–£15,000 supply and install (0% VAT until March 2027). The £7,500 BUS grant reduces this to £500–£7,500 net. A typical 3-bed terraced house needs a 6–10kW unit costing £9,000–£12,000, so £1,500–£4,500 after the grant. Add £3,000–£6,000 for underfloor heating in the extension.
Can I get a grant for a heat pump if I am extending my house?
Yes. The Boiler Upgrade Scheme (BUS) provides £7,500 towards an air-to-water heat pump regardless of whether you are extending. Your MCS-certified installer applies on your behalf and deducts it from your bill. You need a valid EPC and must be replacing a fossil fuel system. The previous insulation requirement has been scrapped.
Do I need planning permission for a heat pump in London?
Usually no. Air source heat pumps are permitted development in most cases. Since May 2025, the 1m boundary setback rule has been removed. You can have 1 unit on a terrace or semi (2 on detached). The noise limit is 37 dB(A) at the nearest neighbour's window. Planning permission is needed for listed buildings and may be needed in conservation areas if on a highway-facing elevation.
Is it cheaper to run a heat pump or a gas boiler?
On a standard electricity tariff, running costs are roughly comparable for a well-insulated home: £700–£1,000/year for a heat pump vs £750–£950/year for gas (3-bed terraced house). On a specialist heat pump tariff (14–17p/kWh), the heat pump is cheaper at £550–£800/year. Heat pumps also last 20–25 years vs 12–15 years for a gas boiler.
Do I need to replace all my radiators for a heat pump?
No. A heat pump installer assesses each room individually. Many existing radiators, particularly double-panel models, have enough surface area to work at the lower flow temperatures a heat pump uses (40–50°C). Typically only 2–3 radiators need upgrading at £200–£400 each. Underfloor heating in the new extension is ideal as it works at 30–40°C.
Can I keep my gas boiler and just heat the extension with a heat pump?
Technically possible with a hybrid system but rarely recommended. You would not qualify for the £7,500 BUS grant (which requires replacing the fossil fuel system), and running two separate heating systems adds complexity and maintenance cost. The most cost-effective approach is usually a single heat pump for the whole house.
What is the best heating for a new extension?
Underfloor heating is the best choice for a new extension, whether powered by a heat pump or gas boiler. It is installed in the slab before the floor is laid, provides even heat with no radiators taking up wall space, and works at low temperatures which suits heat pumps perfectly. Cost is £3,000–£6,000 for a typical London extension.
Will heat pumps be mandatory in the UK?
Heat pumps will be mandatory for new-build homes under the Future Homes Standard from late 2026 onwards. Existing homeowners are not currently required to switch, but the direction of government policy is clear. The £7,500 BUS grant and 0% VAT are designed to incentivise voluntary adoption. Installing during an extension is the most cost-effective time to make the switch.
Summary
If you are extending your London home in 2026, seriously consider adding a heat pump to the project. The combination of the £7,500 BUS grant, 0% VAT (until March 2027), and the fact that your house is already under construction makes this the most cost-effective time to switch.
The net cost after the grant (£1,500–£4,500 for a typical installation) is comparable to a premium gas boiler replacement. Running costs are similar on standard tariffs and lower on specialist heat pump tariffs. The equipment lasts almost twice as long as a gas boiler.
The key is to involve your MCS heating engineer early in the design process, size the system correctly for the whole house, and pair it with underfloor heating in the new extension. Get those three things right and the switch to a heat pump is straightforward.
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