Boiler Tax - What Is It & How Does It Work?

The UK is slowly, but surely, moving away from fossil fuel-powered boilers, and towards renewable heating systems, such as heat pumps.

A key component of this initiative is the Clean Heat Market Mechanism, commonly referred to as the “boxer tax,” a government policy aimed at accelerating the transition to low-carbon heating solutions across the country.

We’re diving into exactly what this policy is, the environmental benefits, what it means for your wallet, and whether it’ll lead to gas boilers being banned.

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Key Points:

• The Clean Heat Market Mechanism (CHMM) is a UK government policy that aims drive down prices for clean heat technologies.

• It’ll do this by promoting competition between business manufacturing and selling clean heat technologies, such as heat pumps and solar thermal systems.

• Heat pumps in particular are key to the CHMM.

• The Government’s Boiler Upgrade Scheme covers £7,500 worth of funding, making heat pumps more appealing and potentially affordable than ever.

• By 2028, the Government wants to install 600,000 heat pumps per year.

• The CHMM does not seek to ban gas boilers.

The Clean Heat Market Mechanism Explained

The Clean Heat Market Mechanism (CHMM) is an initiative launched by the UK government to help drive down the cost of clean heat technologies, such as heat pumps, and encourage homeowners to move away from gas and oil heating systems.

It aims to do this by incentivising investment in heat pump supply chains — a fancy way of saying the scheme plans to give customers more choice when it comes to picking greener ways to heat their home.

A crucial part too, is that the CHMM wants to make heat pumps more affordable for both business and customers. It’ll do this by lowering the price of both a heat pump and its installation by growing the scale of the heat pump market.

In theory, as the market for heat pumps gets bigger, the price of buying and installing one goes down, making it easier for customers to choose a heat pump over a traditional boiler powered by fossil fuels.

Getting this market to grow however, means an initial push from the Government to boiler manufacturer. The scheme requires that heating appliance manufacturers meet a target for selling heat pumps each year.

If they don’t meet that target, a £3,000 payment is required for any missed heat pump installations.

Seems a little harsh on the manufacturer (and by extension the customer — see the section below), but it is a clear incentive to invest and promote low-carbon heating in the UK.

When Does the Clean Heat Market Mechanism launch?

The CHMM was initially set to launch in April 2024, but after backlash (mostly from boiler manufacturers) it was pushed back to April 2025.

Manufacturers wanted more time to prepare, as the rush to get them to substitute (or match) 4% of any boiler sales above 20,000 with heat pumps was considered a big ask. And this was just for the first year of the scheme — by year two, manufacturers would need to match 6% of boiler sales with heat pumps.

According to some, the CHMM had also led to price gouging by boiler manufacturers, who had reportedly hiked up the cost of new gas boilers to compensate for the CHMM’s heat pump sales requirement — the price increase reached up to £120 on top of a new boiler.

This so-called “boiler tax” was being passed directly onto the customer, who would effectively be covering the cost for manufacturers missing heat pump sales.

How Did the Clean Heat Industry React To the Delay?

The clean heat industry wasn’t best pleased with the delay of the CHMM launch, on the other hand. Delaying the scheme was seen as an example of the UK lagging behind the rest of Europe in terms of adopting clean heating technologies.

He added that the “Clean Heat Market Mechanism is crucial to the rollout of heat pumps, which are the only viable option to decarbonising at scale the 17% of UK emissions that are created by heating our homes.”

What Is the Environmental Impact of the Clean Heat Market Mechanism?

The obvious impact on the environment is the shift away from gas and oil-powered boilers. These types of boilers use fossil fuels, and fossil fuels are both finite resources (they won’t last forever) and leading causes behind climate change.

As we burn fossil fuels, we release carbon emissions into the atmosphere, causing global temperatures to rise. In fact, domestic heating currently accounts for roughly 17% of all UK emissions.

This is why we need to switch to greener options such as heat pumps to heat our homes, so we don’t continue to rely on technologies that harm the planet.

Sure, many modern condensing boilers are incredibly efficient these days (a lot more so than older boilers), but we’ll still need to eventually make the switch.

And if the UK wants to meet the government’s target of net-zero emissions by 2050, gas and oil boilers will have to be a thing of the past by then.

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What Role Do Heat Pumps Play in the CHMM?

The CHMM wants to make it easier to switch to heat pumps, which will be key to the UK government’s target of 600,000 heat pump installations per year by 2028. We’re still quite a way off hitting that target, despite a record number of MCS-registered ASHP installations in 2023 — 36,799 exactly.

In other words, the Government needs to ramp up heat pump installations by 1,530% to meet its ambitious target.

As to why heat pumps are key for the CHMM, they run entirely on electricity, which if you can guarantee comes from a renewable source, means you’ll be keeping warm with functionally zero carbon emissions.

This is true for all types of heat pumps:

• Air source heat pumps keep you warm by using the ambient heat in the air. They can operate efficiently at temperatures as low as -20°C!

• Ground source heat pumps, as the name implies, keep properties warm using the warmth from the ground. This can be from installing pipework a metre or so underneath the soil of your garden (horizontal installation), or by digging a deep, narrow borehole to tap into heat further below the ground (vertical installation).

• Water source heat pumps use the warmth in a body of water, like a lake or large pond, to heat a building.

If you can power your heat pump using your own source of renewable energy such as from solar panels, then even better! Be aware that powering heat pumps with solar panels requires a larger-than-average system, which can potentially add thousands onto the already high cost of going solar!

Many of the top boiler manufacturers make heat pumps, so you can trust brands like Worcester Bosch, Vaillant, and Viessman are using their heating experience to keep you warm without burning fossil fuels.

Interested to learn how heat pumps compare to gas boilers? Check out our complete heat pump vs gas boiler guide.

Will the Clean Heat Market Mechanism Ban Gas Boilers?

The short answer is no, banning gas boilers is not part of the CHMM — the CHMM is designed purely to promote and increase the number of heat pump installations in the UK.

There is no legislation that’ll require you to replace your boiler before or after 2025, though if you’ve got an old, inefficient boiler it might be time to consider a new boiler. After all, a new boiler can save you around 30% on your annual energy bill (roughly £355 for the average three-bedroom household according to the Energy Saving Trust).

Can the Clean Heat Market Mechanism Save Money?

In theory, the CHMM can save you money by making it easier to afford the cost of a heat pump. Heat pumps cost between £7,000–£13,000, which is a lot more than the cost of a new boiler, but combined with the Boiler Upgrade Scheme (BUS), it can be more manageable.

With the BUS, you can get up to £7,500 towards the cost of a heat pump, so you could use the scheme to potentially cover the entire cost of a new heat pump.

As good as heat pumps can be for the environment though, they’re not (yet) as attractive financially when it comes to running costs. Electricity is normally more expensive than gas, and as heat pumps require electricity to run, they’ll cost more to keep your home warm.

Electricity costs 24.5p per kilowatt hour (kWh) and gas costs 6.24p per kWh (correct as of October 2024) — electricity is 3.9 times more expensive than gas, basically. For a heat pump to be cost effective, electricity must be less than roughly 3.2 times more expensive than gas.

Where the CHMM won’t save is when boiler manufacturers increase the cost of their products to offset the potential loss of money from missing heat pump installation targets.

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