Replacing oil or LPG heating in a rental: new boiler or heat pump?

The short answer

For a rental heated by oil or LPG, a heat pump is usually the stronger long-term choice and a like-for-like boiler is usually the faster and cheaper one today. The grant gap is wide: a heat pump can get £9,000 where the home has no mains gas, and a new oil or LPG boiler gets nothing from the Boiler Upgrade Scheme. Against that, a heat pump needs a survey, an outdoor unit, often a hot water cylinder and sometimes larger radiators, which takes time you may not have if the boiler has failed mid-winter.

The decision turns on four things: whether the boiler is failing now, how well the house holds heat, how long you will hold it, and how the tenant’s bill compares on your actual fuel price.

The £9,000 test

The Boiler Upgrade Scheme gives £7,500 towards an air source or ground source heat pump. GOV.UK says an additional £1,500 is available, making £9,000, where both of these are true:

• the property is heated by oil or LPG
• there is no mains gas connection at the property

The higher amount runs from 21 July 2026 to 31 March 2027. Landlords qualify because you must own the property you apply for, including one you rent out. The installer must be MCS certified and applies on your behalf, the heat pump must be installed within 120 days of applying, and there is one grant per property. Hybrid systems, such as a heat pump paired with an oil boiler, are not funded. A property that has already had government funding for a heat pump or biomass boiler is excluded, as is social housing.

GOV.UK does not define “mains gas connection” on the pages this guide read. If there is a gas main in the lane but the house has never been connected, ask the installer to confirm in writing how the scheme treats it.

A new oil boiler against a heat pump

The table sets the two routes side by side. Where a figure is missing, it is because this guide found no official source for it; get quotes.

	Like-for-like oil or LPG boiler	Air source heat pump
Boiler Upgrade Scheme grant	None	£9,000 if oil or LPG and no mains gas
Typical installed cost	Get quotes	Around £12,000 before grant (Energy Saving Trust)
VAT on installation	Not on the zero-rate list	0% until 31 March 2027, then 5%
Fuel storage	Oil tank or LPG supply stays	Tank removed; electricity only
Annual statutory check	Yes for LPG (gas safety); not for oil under the gas rules	None comparable
Carbon monoxide alarm	Needed if the boiler is in a room used as living accommodation	Not needed unless another combustion appliance remains
Planned EPC heating metric (proposal)	Cannot reach C	Always C and above
Time to install	Shorter	Longer: survey, design, possibly a cylinder and radiators

On the Energy Saving Trust typical price of around £12,000, a £9,000 grant leaves about £3,000 to pay before any extras. Installers’ prices vary widely, so treat that as a guide and compare written quotes. HMRC’s VAT Notice 708/6 lists oil-fired boilers only under the reduced rate for grant-funded heating for qualifying people, and says installations paid for by landlord contributions do not qualify, so ask the installer which rate applies to a boiler.

Running cost: use your own fuel price

Ofgem does not cap heating oil or LPG prices, and they move with the season and the supplier, so this guide does not quote one. The comparison you need is a single formula:

Break-even SCOP = electricity price × boiler efficiency ÷ fuel price per kWh

At the Ofgem cap for 1 October to 31 December 2026, electricity is 26.32p per kWh. If your boiler is 90% efficient and your delivered fuel works out at an illustrative 8p per kWh, the break-even SCOP is 26.32 × 0.9 ÷ 8 = 2.96. A heat pump with a seasonal efficiency above that costs less to run. The 8p is a placeholder for the arithmetic, not a market price: convert your last invoice into pence per kWh using the energy content your supplier states, and repeat the sum.

The direction is simple. The dearer your fuel per kWh, the lower the efficiency a heat pump needs to beat it, so do the sum separately for oil and LPG rather than assuming they behave alike. A well designed heat pump running at a low flow temperature does better than a poorly set up one, and the tenant usually pays the difference.

The oil tank and what happens to it

Oil storage rules depend on where the tank is and how big it is. GOV.UK says that at a home in England a new or replacement oil storage container must meet building regulations, and that a container holding 3,501 litres or more falls under the rules for businesses instead. Wales has its own building regulations. GOV.UK advises using someone registered with a competent person scheme, who can self-certify the work; otherwise you need a building control notice from the council. A tank holding more than 2,500 litres, or one near drains, watercourses or a drinking water source, needs secondary containment holding 110% of its capacity.

That matters both ways. If you stay on oil and the tank is old, a replacement tank brings its own cost and building regulations sign-off. If you switch to a heat pump, the tank has to be drained and taken away. The Environment Agency’s low risk waste position LRWP 47 sets conditions for contractors who drain and store domestic oil tanks, such as draining only at a site the contractor controls, on impermeable paving with sealed drainage. In practice, ask:

1. Is tank draining, removal and disposal in the quote, or a separate job?
2. What happens to any oil left in the tank?
3. Who makes good the base and any pipe runs?

For LPG, if the tank or cylinders come under a supply agreement, check it for notice periods and removal terms before you commit to a date.

Safety duties change with the fuel

An oil or LPG boiler is a fixed combustion appliance. Under the smoke and carbon monoxide alarm rules for private rented homes in England, a carbon monoxide alarm is required in any room used as living accommodation that has one, gas cookers aside. A heat pump burns nothing, so that requirement falls away unless another combustion appliance, such as a solid fuel stove, remains.

LPG appliances also carry the annual gas safety check. The Health and Safety Executive says landlord duties for LPG appliances are the same as for natural gas. Remove the last LPG appliance and that annual check has nothing to cover. Electrical safety duties continue whatever the heating: an inspection at least every 5 years in England, with penalties of up to £40,000.

Whatever you fit, most tenancies in England carry the landlord’s statutory duty to keep the installations for space heating and heating water in repair and proper working order, under section 11 of the Landlord and Tenant Act 1985. A failed boiler is a repair you have to deal with, not an upgrade you can defer.

The EPC: today and under the planned rules

Today’s minimum for a rental is EPC E. The government’s January 2026 response plans EPC C by 1 October 2030, with a £10,000 cost cap per property; the regulations are not yet made and are expected in 2027. Boiler Upgrade Scheme funding will not count towards that cap, according to the response, while other government funding can.

The planned standard puts fabric first, then gives the landlord a choice of a heating system standard or a smart readiness standard. The Home Energy Model consultation proposed that no home relying on a fossil fuel boiler could reach C on the heating system metric, that an oil boiler would score lower than a gas boiler, and that electric heat pumps would always score C and above. It also noted that landlords could meet the smart readiness standard instead of replacing a fossil fuel system. So a new oil boiler does not block compliance on paper, but it closes one of the two routes. See do heat pumps improve an EPC rating.

Tax: a point to raise with your accountant

Annex A of the government’s January 2026 response says that where a heat pump replaces an existing heating system, installing it can be an allowable expense for a landlord, including the pipes and making good, and that the landlord’s own spend alongside a Boiler Upgrade Scheme grant can be treated the same way. Tax depends on your circumstances, so confirm the treatment with an accountant before you rely on it.

Rural rentals: the practical checks

Many off-gas rentals have outdoor space, which helps, but the planning limits still apply. Class G permitted development in England allows two units on a detached house and one on other houses, a 37.0 dB(A) noise limit, and nothing on a pitched roof; listed buildings and some conservation area positions are excluded, and an Article 4 direction can remove the rights. If the property is listed, in a conservation area or covered by an Article 4 direction, check with the council before you pay for a design.

Ask the installer for a room-by-room heat loss calculation, the design flow temperature, the radiator changes needed, where the cylinder will go, and whether the electricity supply needs an upgrade. A heat pump that is undersized in a cold, exposed house will leave the tenant cold and the bill high.

When a heat pump is the wrong call

Choose a repair or a like-for-like boiler, at least for now, when:

• the boiler has failed in winter and the tenant needs heat within days
• the house is very leaky and the fabric work has not been done
• there is no legal position for the outdoor unit, or the building is listed and consent is unlikely
• you plan to sell soon, and the buyer, not you, would gain from the grant
• your own fuel price sum shows a heat pump would cost the tenant more and there is no other reason to proceed
• what you want is a hybrid, which the scheme does not fund

Fitting a boiler today does not stop you revisiting a heat pump later, but the £9,000 uplift is dated and the next boiler may last many years.

Next step

Run the property through the landlord heat pump calculator with your own fuel price. When you want prices for both routes, send an enquiry and relevant independent firms contact you, with no charge to you and no obligation.