The Clean Heat Market Mechanism (CHMM), colloquially dubbed the “boiler tax,” is a UK government policy (currently delayed) designed to accelerate the transition to low-carbon heating solutions.
It aims to drive investment, innovation, and competitiveness within the heating industry, focusing on technologies such as ground-source and air-source heat pumps.
The CHMM is intended to reduce the UK’s reliance on traditional oil and gas heating systems. By fostering a more competitive market, the policy seeks to lower the costs associated with adopting clean heating technologies.
At the core of this policy is the ambition to provide clear incentives for the supply chain, from manufacturers to installers, to make the installation of heat pumps more appealing and cost-effective for homeowners and businesses alike.
Due to concerns boiler manufacturers may increase prices to cover these new levies, the term “boiler tax” highlights concerns over the potential financial burden on homeowners, particularly those needing to replace their traditional boilers with low-carbon alternatives.
Despite this, the policy’s primary focus remains on making clean heating technologies more affordable and accessible, ultimately reshaping the UK’s approach to heating in line with long-term sustainability goals.
Important update: The CHMM scheme was set to launch in April 2024 but has now been delayed until April 2025.
What is The Clean Heat Market Mechanism?
The CHMM, or boiler tax, is a government plan designed to encourage companies to invest in heat pump manufacturing.
With fines for missing certain heat pump targets, the initiative could, in theory, push boiler manufacturers to install more heat pumps.
As we’ll explore in more detail soon, GOV.UK explains how manufacturers would be fined £3,000 for each heat pump sale dropped versus the targets the government sets.
The GOV.UK document also adds that for 2025/26, the plan is to set a 6% sales target for manufacturers. In practice, this would mean companies would be made to pay at least £3,000 if they sold fewer than six heat pumps for every 100 relevant boilers sold.
The figure would rise to £6,000 if they sold just four for every 100 relevant boilers (since they’d be two off their target and so on)
Despite the boiler tax meaning well on paper, it could spell bad news for billpayers. This is because manufacturers might increase the cost of having new boilers installed to cover these financial penalties.
This could mean you’d end up paying an extra £100 or more to have a new boiler installed if the boiler tax is introduced.
We’ve made this estimate based on past examples, like Worcester Bosch’s temporary boiler price hike in early 2024 (when it seemed like the CHMM scheme was going to be introduced soon).
Also, with this in mind, it’s possible that manufacturers will re-introduce boiler price hikes early next year, though this time, the price hikes may not occur until closer to the boiler tax being officially introduced.
We can speculate that boiler companies may wait until closer to the planned launch date (or even the launch date itself) before making a decision since the scheme was previously re-scheduled, and with a new government, there could be changes.
What is the Boiler Tax?
By encouraging the growth of heat pump manufacturing and installation, the boiler tax could lower the costs of low-carbon heating technologies, allowing more customers to choose alternatives like heat pumps.
The scheme is not only designed to increase heat pump sales but also to push forward the heat pump industry’s development in general.
Heat pumps have huge potential to help the UK reach its energy and climate goals, like achieving carbon net zero by 2050.
As a GOV.UK publication highlights, that heat pumps could potentially lead to 70% fewer carbon emissions than you’d get with a gas boiler.
Of course, though, if boiler manufacturers pass on the boiler tax to consumers, the initiative is likely to fail while creating added stress for households on a budget.
Also, as a Public Accounts Committee or PAC report pointed out earlier this year, it’s important that heat pump installation and running costs are brought down for the benefit of consumers.
While heat pumps are much more efficient than gas boilers, the latest Ofgem energy prices show that electricity prices are about four times higher than gas prices.
As a result, heat pumps are still more expensive to run than gas boilers. Therefore, for consumers to benefit sooner from any government heat pump incentives, lowering the running costs will be a key step forward.
How the CHMM Boiler Tax Will Work
If introduced, the boiler tax would work as follows:
- Manufacturers will be given heat pump targets for a given period
- According to GOV.UK, manufacturers would face a fine of £3,000 for every heat pump sale dropped when contrasted with their boiler sales (i.e. if they miss their yearly heat pump targets)
- The government would measure these targets based on a company’s heat pump sales when compared with their boiler sales
- As highlighted on GOV.UK, the previous government set an initial 2024/25 target of requiring heat pump sales to be 4% of each manufacturer’s relevant boiler sales
- With current plans, this percentage figure would be 6% for 2025/26, as also highlighted from the source above
- Despite previous delays, GOV.UK suggests the boiler tax will return in spring 2025.
- The fines only apply to boiler manufacturers that already produce heat pumps
*Again, with a 6% sales target (for 2025/26), boiler manufacturers would need to ensure they sell six heat pumps for every relevant 100 boilers sold in this scenario, or else face fines.
The previous Conservative government planned to launch the scheme in April 2024. However, as mentioned by GOV.UK back in March, Sunak’s government delayed the boiler tax until April 2025, with Labour likely to launch the scheme on schedule.
After the delays were announced, a GOV.UK post from March explained that the CHMM boiler tax details would not see any changes,
That said, the new Labour government could change these details if they go ahead with the scheme in 2025. Recently, a range of news outlets have reported that industry sources say the government will indeed launch the CHMM boiler tax in April.
Unsurprisingly, this boiler tax has many concerns, but what exactly might this mean for your pocket, and how have industry players responded so far?
Concerns and Opposition to the CHMM
While the boiler tax aims to lower bills and reduce the UK’s carbon footprint, the plan lacks industry support and may simply increase costs to the consumer instead.
Future Boiler Price Hikes
Since manufacturers like Baxi believe financial penalties are an inevitable result of the boiler tax, there are strong reasons to believe this will cause a knock-on effect, resulting in a boiler price hike.
As mentioned, this could mean customers will need to pay an extra £100 or so when having a new boiler installed, with boiler installations going up in response to expected fines resulting from the CHMM scheme.
The National Energy Action or NEA says that about six million UK households remain in fuel poverty. With this in mind and the ongoing cost of living crisis, many households on tight finances could easily feel the impact of price increases like the boiler tax.
Price hikes already took place for a few months in early 2024. This happened when a range of boiler manufacturers announced price hikes when the CHMM boiler tax was first expected to launch in April 2024, as mentioned on GOV.UK.
Boiler Price Hikes In Early 2024
According to the ECIU, boiler manufacturers added price hikes of £110 per boiler on average earlier in 2024.
Broken down and based on information from several news outlets as well as the Baxi and Worcester Bosch official websites, the price hikes were introduced on January 1st, 2024, and lasted for a few months:
| Manufacturer | Price Hike | Combi Boiler Cost Before Price Hike* | Combi Boiler Cost After Price Hike* |
| Baxi | £120 per boiler | £900 to £1,180 | £1,020 to £1,300 |
| Worcester Bosch | £120 per boiler | £900 to £2,500 | £1,020 to £2,620 |
| Vaillant | £95 per boiler | £800 to £2,600 | £895 to £2,695 |
| Ideal Heating | £110 per boiler | From £2,295 | From £2,405 |
The industry’s boiler price hikes proved a big factor in the Sunak government’s decision to postpone the boiler tax by a year.
However, with the delayed launch now less than six months away, it’s important to consider how likely new price hikes are and whether they might be delayed or if the amounts might change.
Are New Price Hikes Likely?
Unfortunately, the boiler tax being fully introduced next year will likely mean fresh and maybe even higher boiler taxes if the industry’s reaction to the boiler tax from late 2023 to early 2024 is anything to go by.
Renewed price hikes, which again may land around £100 or so on average, if not more, could easily cancel out any benefits of the CHMM initiative, at least in the short term, while frustrating customers with added costs during already challenging times.
The fines are almost certain, partly because manufacturers need to increase their heat pump sales by a factor of about x30 in order to reach the CHMM boiler tax target of 6%! With fines very likely, so too would boiler price hikes.
We’ve based this ‘x30’ increase estimate on two pieces of data. Firstly, we considered GOV.UK’s claims that around 1.7 million domestic-scale natural gas boilers are installed in the UK every year.
Secondly, though Carbon Brief reports that there was an impressive 20% increase in heat pump installations last year, this figure of 36,799 is still only equivalent to 0.2% of average natural gas boiler installations, which is thirty times less than the 6% target for 2025/26.
So it’s no surprise that manufacturers believe fines resulting from the CHMM boiler tax are unavoidable.
For instance, before the scheme was set to launch in 2024, Baxi expressed how they expected to face huge financial penalties because of the CHMM boiler tax. We discuss this more in our ‘industry opposition’ subsection below.
Refunds For Previous Boiler Tax
Boiler manufacturers and installers like Wolseley announced refunds for these previous price hikes in spring 2024 after the government postponed the boiler tax.
Boiler Tax Refunds Eligibility And Real Examples
As news and cost-saving sources have reported, you may be eligible for a refund if you had a boiler fitted in the January-March period of 2024.
This covers the time window that many boiler manufacturers raised prices in response to the CHMM boiler tax and before they got rid of their price hikes when the scheme was postponed.
If you had a boiler installed from January to March 2024, you could receive a refund of between £95 and £120, depending on your manufacturer, as cited earlier.
Worcester Bosch and Baxi are some big examples. For instance, if Worcester Bosch fitted your boiler during this three-month period, you could receive a £120 refund since this is how much the company temporarily added to their boiler installations.
However, not all installers will have passed on the boiler tax. For example, if BOXT installed your boiler between January and March, you will not be eligible for a refund.
As many news sources reported earlier this year, this is because BOXT kept installation prices the same during this time, unlike many top industry brands.
How to Potentially Receive Your Refund
If you think you’re entitled to a refund, contact the service that installed your boiler to find out if this is the case.
You should also take the chance to ask any additional questions you might have, like how soon you’ll receive your refund (if you are eligible) and the amount.
It’s important to note that one or more refunds may have expired by the time you’re reading this.
Beyond that, there are many reasons why manufacturers oppose the boiler tax, to begin with, as brands like Baxi and Worcester Bosch emphasised through online posts last year.
Industry Opposition
In December 2023, UK manufacturer Baxi argued that the boiler tax would cause substantial financial penalties for the sector.
This came at a time when the popular boiler brand announced a £120 boiler price hike in anticipation of facing fines from the CHMM boiler tax. Baxi also said that the scheme, as planned, did not reflect the UK domestic market. The manufacturer also, unsurprisingly, considers the scheme’s targets to be unachievable.
Worcester Bosch also considered the targets involved (with the timescale given) to be unrealistic. In a December ‘23 news post, the boiler giant made the case that the industry would inevitably face heavy fines.
Under the same logic as Baxi, Worcester Bosch announced a £120 boiler price hike too. Worcester Bosch also argued that the scheme would not benefit them nor help grow the heat pump industry itself.
The company added that the fines would go to the Treasury and not heat pump manufacturing or development.
Some framed the industry’s boiler levies as price gouging. For instance, it was reported that Greenpeace referenced price gouging when criticising the government for delaying the CHMM scheme.
On the other hand, brands like Worcester Bosch previously made the case that these changes were a direct response to the government’s boiler tax, with the manufacturer seeing financial penalties as an inevitable outcome.
Ultimately, the boiler tax, while promoted as a way to lower the upfront and running costs of heat pumps, lacks industry support, and for this reason and more, is unlikely to succeed, at least without significant changes.
Therefore, the boiler tax will probably not act as a helpful way for the government to reach its energy and climate targets, but it would also increase how much you’d need to pay for a new boiler.
That said, with industry opposition, it’s not hard to imagine the government may introduce changes before launching the boiler tax.
This all comes at a time of growing concern among consumers over fuel prices and the cost of living more generally.
Growing Pressure On Consumers
On the one hand, the government has and is developing many plans and projects (e.g. GB Energy) that could keep energy prices more stable, make the UK more self-sufficient when it comes to energy and lower the nation’s carbon footprint.
As highlighted in a GOV.UK article on the National Energy System Operator and a GB Energy policy paper, these efforts could lower heating and electricity costs on the whole while possibly reducing fuel poverty over time.
However, the boiler tax will likely add to consumer stresses alongside other pressures. This is with Statista reporting that gas prices will still be higher in 2024 than at any time from July 2016 to April 2021, while the cost of living crisis continues to affect millions of UK households.
Households Remain Under Pressure Nationwide
The Ofgem price cap, which remains fairly high as winter 2024/25 years, is a good measure of where energy prices are at.
It serves the purpose of capping how much utility companies can charge while also increasing or decreasing based on energy market prices. As a result, it can theoretically offer some protection to consumers from excess energy costs.
Though not as bad as some of the figures seen for 2022 to 2023, the price cap for gas and electricity costs combined increased to £1,717 from October 1st, 2024.
The above figure is based on average energy costs per household and remains higher than it was at any point from January 2019 to January 2022.
Therefore, factors outside of the UK, including global stability or instability, can indirectly increase household gas and electricity bills at home.
With our electricity imports from Europe hitting a record high recently, this also really highlights the need for the government to push ahead with increasing the UK’s energy self-reliance.
While government action is needed, projects like GB Energy have better potential to achieve this and stabilise energy prices than the boiler tax.
Fuel poverty remains widespread, too, as reported by NEA; it still affects millions of UK households to this day.
Due to the cost of living crisis and the 2020s energy crisis, fuel poverty has worsened in some ways over the past several years.
For example, the UK Parliament’s official website says that the aggregate fuel poverty gap for England rose by 67% from 2020 to 2023.
This figure is a measure of how much energy costs must be reduced to create a situation where no households are experiencing fuel poverty anymore. In other words, it is a measure of the depth or severity of the fuel poverty these households face.
These conditions continue to leave households across the UK in a difficult financial situation. While measures like GB Energy and the Warm Homes Fund will likely help, many are concerned over the boiler tax as well as changes to the winter fuel allowance.
Pensioners Losing Winter Fuel Allowance
In July, the government announced plans to remove the winter fuel allowance from pensioners. According to Age UK, this could affect 2.5 million pensioners nationally.
The government defended the move, however, with Keir Starmer making the case in an interview last month that it was necessary due to the nation’s finances. Starmer also emphasised that difficult choices were required but that people in need would continue to receive support.
That said, many pensioners will be concerned and feel the squeeze further as we enter winter 2024-25. As GOV.UK reports, that the winter fuel allowance can reduce a person’s heating bills by £200 to £300 during the winter months, showing just how much of a loss this will be for those losing access.
If sticking with these plans, the government must, on the one hand, ensure that projects such as GB Energy can deliver, leading to lower energy bills and reduced fuel poverty in the years ahead, to at least ensure the strategy is not beneficial for all households, including pensioners.
However, a more urgent concern is how households, including pensioners, will manage this coming winter with the latest price cap 10% higher than the cap for July to September.
For instance, as highlighted by Disability Rights UK, the government chose to keep the Household Support Fund or HSF going until the Spring.
All the same, more could be done to support pensioners ahead of the winter, whether or not it means reversing the winter fuel allowance changes.
Age UK’s Charity Director, Caroline Abrahams, expressed serious concern over the winter fuel allowance changes, highlighting how the scale of the problem was underestimated while describing the changes as unfair and unsustainable.
Summary
The CHMM or boiler tax, while proposed in good faith, risks increasing boiler prices while failing to achieve much of its goal of increasing heat pump sales.
Policies like the boiler tax could simply increase financial pressure for consumers while possibly pushing some boiler models out of a household’s price range when dealing with the fine lines associated with being on a tight budget.
Staying informed about upcoming policy changes is a helpful way to plan ahead, though seeking support and taking steps to lower your energy costs where possible can also help in the short term, especially with the winter approaching.
Taking what measures you can put your household in a stronger position, while more medium-term government energy plans will hopefully bear fruit in the years ahead in the push toward 100% clean and affordable electricity by the decade’s end.
Sources:
- https://www.energy-uk.org.uk/publications/energy-uk-explains-the-clean-heat-market-mechanism/
- https://www.gov.uk/government/consultations/clean-heat-market-mechanism-adjustment-to-scheme-introduction-date/clean-heat-market-mechanism-proposal-to-change-the-scheme-start-date-to-1-april-2025