Workers could pay for heat pumps using salary sacrifice
Homeowners who ditch their gas boilers for a heat pump could pay back the cost of installation through salary sacrifice schemes under plans being considered by Ed Miliband.
The proposal would allow salaried employees to repay their loan in monthly instalments that come out of their pre-tax income, saving money overall as they pay less towards national insurance and income tax.
It would be similar to salary sacrifice schemes already in place for electric vehicles, which have been credited with boosting uptake among drivers.
Mr Miliband, the Energy Secretary, is looking to expand the schemes on offer as a way of helping consumers with the similarly high costs of switching to a heat pump, according to energy companies.
According to data provider MCS, the typical cost of installing an air source heat pump – the most common kind – is still about £5,500 after government grants are applied.
On Monday, the Government did not rule out making salary sacrifice options available for heat pump purchases but it is understood there are no immediate plans being drawn up.
The proposal would likely be more complicated to introduce than the equivalent EV scheme, however, given that heating systems are not typically leased.
However, The Electric Car Scheme, which runs salary sacrifice schemes for client companies, said payments on a heat pump costing £14,760, spread over three years, could effectively be reduced from £410 to just £295 using the tax perk.
Thom Groot, the chief executive of the company, said: 'We know that the government is seriously considering adding heat pumps to the hugely successful legislation covering salary sacrifice EVs and would welcome their introduction.
'Including these sustainable technologies would provide a meaningful boost to both our net zero goals and the economic growth that Rachel Reeves has made a central pillar of her policy.'
Trevor Hutchings, the chief executive of the Renewable Energy Association, added: 'The growing uptake of EVs has been driven in many cases by the hugely successful salary sacrifice provision that makes them cheaper for consumers.
'Extending this to include renewable technologies like heat pumps and solar could provide the industry with a much-needed boost, one that industry estimates could translate into roughly 600,000 Heat Pump and renewable heating installations by 2030.'
A government spokesman said: 'We are helping more people install heat pumps, including with our £7,500 grant – and supporting industry to develop financing models that can remove the upfront cost entirely.
'We are consulting on expanding the Boiler Upgrade Scheme to support new approaches, such as heat pump subscriptions, to help more households make the switch to cleaner heating in a way that works for them.'
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