Heat pump rollout could mean households slapped with £120 ‘boiler tax’ next year | Personal Finance | Finance

Households face being slapped with a pricey “boiler tax” as companies attempt to mitigate the financial cost of the heat pump rollout.

Manufacturers are speaking out about the cost of these devices which are being hailed as environmentally friendly and are set to bring energy bills down in the long-term.

Worcester Bosch confirmed the cost of its gas boilers will go up by £120 in the New Year, while fellow boiler supplier Valiant announced it would raise its prices by £95.

From 2028, the UK Government plans to install 600,000 heat pumps a year but Worcester Bosch has asserted it “does not have the scale” to meet this target and is raising prices.

This move was made following the introduction of new rules which have been put in place to prioritise heat pump installations which means companies who fall short of these targets will be fined.

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According to Worcester Bosch, the company told The Telegraph it has “no option but to raise the prices of the boilers we sell to meet what is in effect a boiler tax”.

In January 2024, the Government will introduce its “Clean Heat Market Mechanism” as part of its net zero agenda.

Price increases to boilers will be implemented to offset plans to fine boiler manufacturers to meet heat pump quotas.

Through the Government scheme, manufacturers are incentivised to sell more heat pumps by making sure that four percent of gas boiler sales are matched in volume with heat pump sales.

All new builds, which are required under the law to have a heat pump from 2025, are exempt from this scheme.

Current industry estimates predict that only around 50 percent of heat pumps to be installed in 2024 will be in new builds and will not count towards the sales quota.

Some 80,000 heat pumps are forecast to be installed next year, however, just 40,000 of these devices will be retrofit installations.

As such, manufacturers would be legally required to install 60,000 heat pumps in the first year which is 50 percent higher than the predicted market size.

A spokesman said: “Worcester Bosch will not benefit in any way and interestingly, neither will market growth for heat pumps as the revenue raised from the fines will go to the Treasury and not be used to grow demand for heat pumps.

Speaking to The Telegraph, a Department for Energy Security and Net Zero spokesman said: “We have not required any increase to the price of gas boilers.

“Targets are realistic and fully achievable, providing industry with flexible options to support our ambition to make heat pumps easy and affordable to install.

“This is alongside making it easier to get a heat pump by increasing the Boiler Upgrade Scheme by 50pc to £7,500 – tripling applications in the week after it was rolled out.”