The return of the ‘boiler tax'

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19-05-2025

Households are facing the threat of a new £40 'boiler tax' as Labour consults on plans to raise heat pump targets for manufacturers – despite waning demand from consumers.
Targets will be ramped up to as high as 10pc of boiler sales under proposals by Ed Miliband, who resurrected the controversial scheme last month despite fears it would push up the price of gas boilers.
The Clean Heat Market Mechanism (CHMM) threatens fines of up to £500 for each heat pump manufacturers failed to sell below a government-set target, currently at 6pc.
Analysis of installation figures in the past 12 months shows demand is 'flatlining', threatening the Energy Secretary's ambition of seeing 600,000 heat pumps fitted every year from 2028.
Experts said the price of a typical gas boiler would rise by £40 as a result of the penalties.
Monthly installations of air-source heat pumps have fluctuated between 4,000 and 5,800 in the 12 months to April, according to MCS, the installers' accreditation body.
The Energy Department maintains installations have risen by a quarter since last year, but Mike Foster, of the Energy and Utilities Alliance lobby group, said 'the trend line, which averages out the 12 months but also suggests in which direction the level of installs is going, is flatlining'.
He added: 'The Clean Heat Market Mechanism (CHMM), which spawned the 'boiler tax', is a bad policy. Always was and always will be. It does nothing to stimulate demand for heat pumps, which is what is lacking.
'Appliance manufacturers will make products that sell, that's just basic commerce. Fining British businesses because consumers don't want a product they make is simply nonsense, and nothing changes that.
'It's like fining the local butcher because people aren't eating enough greens.'
Before it was shelved by the Conservatives, the CHMM threatened fines of up to £3,000 for each heat pump manufacturers failed to sell. Manufacturers argued the targets were unachievable due to low demand for the green technology, and responded by raising the price of gas boilers by as much as £120 to cover the cost of fines.
However, Gillian Cooper, of Citizens Advice, accused manufacturers of penalising households with higher prices despite having 'no evidence to suggest targets would be missed'.
She said: 'Instead of meeting heat pump targets that aim to reduce people's energy bills, boiler manufacturers may once again choose to penalise consumers with price hikes.
'The Clean Heat Market Mechanism was brought in to ensure companies do what's needed to reduce our exposure to volatile gas prices. Companies are threatening to pass fines they could receive for missing targets onto consumers – despite no evidence to suggest these targets would be missed.
'The last time manufacturers did this, many were left out of pocket. This must not be allowed to happen again.'
The backlash prompted the Tories to abandon the so-called 'boiler tax' ahead of the general election last year, despite calls from MPs to scrap the levies altogether.
In September, industry sources warned that Labour was readying itself to reintroduce the CHMM. And in November, Mr Miliband announced a scaled-back version of the scheme with reduced fines and lowered targets.
Since April, manufacturers have faced fines of £500 for each heat pump they fail to sell to meet the target.
The Government is now proposing increased targets of between eight and 10pc from next year.
Manufacturers are also said to be frustrated that the fines are paid directly to the Treasury, rather than used to encourage flagging uptake.
Martyn Bridges, of Worcester Bosch, said: 'We were informed by officials that year one of the CHMM scheme was a benchmark year, to see if the policy had any impact on the uptake of heat pumps.
'Therefore, it's very disappointing to see year two targets being consulted on just 23 working days after the start of year one of the scheme.
'It would have made more sense to wait until year one of the scheme was at least nine or 10 months old so its impact could be sensibly assessed.'
A government spokesman said: 'To suggest the UK heat pump market is not growing is categorically false. Demand continues to grow, with figures from the MCS showing that installations have increased by 25pc in the first three months of this year, when compared to last year.
'The Clean Heat Market Mechanism, which has only been in place since April 2025, is setting realistic sales targets, as we work hand-in-hand with industry to support the transition to clean heating for years to come.
'We are also making heat pumps more affordable by providing £7,500 towards the cost through the Boiler Upgrade Scheme and have recently announced plans to remove planning constraints to make them even easier to install.'
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