The running cost sum
The cost of a kWh of heat is the price of the fuel divided by how efficiently the system turns it into heat. For oil that means three numbers. BoilerJuice’s UK average for 1,000 litres was 109.3p a litre before VAT on 28 September 2026, or 114.8p once the 5% VAT on heating oil is added, which puts it on the same basis as the Ofgem cap prices. A litre of kerosene holds about 10.35 kWh of energy, and we assume an oil boiler turns 85% of it into heat. That gives about 13.0p per kWh of heat.
For a heat pump, the fuel is electricity at the cap rate of 26.32p per kWh for 1 October to 31 December 2026 (no VAT on household electricity in Great Britain from 1 October 2026 to 31 March 2027). A heat pump with a seasonal efficiency (SCOP) of 3 makes three units of heat from each unit of electricity, so heat costs about 8.8p per kWh, or 7.5p at a SCOP of 3.5. The break-even point, where a heat pump costs the same to run as oil at these prices, is a seasonal efficiency of about 2.0.
| System | Fuel price | Efficiency assumed | Cost per kWh of heat |
|---|---|---|---|
| Oil boiler | 114.8p per litre | 85% | 13.0p |
| Heat pump, SCOP 3 | 26.32p per kWh | 300% | 8.8p |
| Heat pump, SCOP 3.5 | 26.32p per kWh | 350% | 7.5p |
Those efficiencies are design figures. Real systems vary: in the government-funded Electrification of Heat trial the median air source system measured 2.78 over a year on the whole-system measure (December 2024). Even at that figure the heat pump comes in under oil at today’s prices, but the margin is smaller, which is why the design and the flow temperature matter more than the brand on the box.
A year of heating: an illustrative example
Take a home that needs 12,000 kWh of heat a year, our illustrative three-bed. On oil it burns about 1,364 litres, which is about £1,566 at the price above. A heat pump at SCOP 3 would cost about £1,053 in electricity, about £902 at SCOP 3.5, and about £1,136 at the trial’s median of 2.78. On these numbers the heat pump is roughly £513 a year cheaper to run at SCOP 3.
Two details change the comparison for your house. First, oil has no standing charge, while you already pay the electricity standing charge whatever heats the home, so switching from oil adds no new standing charge. Second, oil is bought in deliveries at whatever the price is that week, while electricity is billed monthly. A home that bought its last fill when prices were low will see a different number from one that bought at a peak. Use twelve months of your own deliveries rather than one invoice. For the same sum against mains gas, see the heat pump vs gas boiler running costs page.
The £9,000 grant for oil homes
Under the Boiler Upgrade Scheme, GOV.UK lists £7,500 towards an air source or ground source heat pump, and until March 2027 an additional £1,500 where both of these are true: the property is heated by oil or LPG, and it has no mains gas connection. That is the £9,000 off-gas heat pump grant, available for applications up to 31 March 2027. A capped gas meter counts as a connection, so a home with one gets the standard £7,500.
The usual eligibility rules apply on top: you must own the property, it must be in England or Wales, and the heat pump must replace the oil system. GOV.UK says you cannot get a grant for a hybrid system, so keeping the oil boiler as a back-up rules the grant out. The installer applies, not you; the full checklist is on Boiler Upgrade Scheme eligibility.
Oil homes are a large part of the scheme already. In the DESNZ statistics to end of September 2026, 18% of grants paid replaced an oil system, second only to gas at 55%. From July to September 2026, the first three months of the higher band, 8,107 applications (32% of the total) were at the £9,000 level.
Upfront cost after the grant
The best public benchmark for the installed price is the DESNZ median for grant-funded jobs: £12,826 for an air source heat pump in 2026 Q3, including the grant value. Take off the £9,000 and the middle of the market leaves about £3,826 for an off-gas oil home, against £5,326 on the standard band. Ground source has a median of £34,630, or about £25,630 after the higher grant. Installing a heat pump in a home carries 0% VAT until 31 March 2027, then 5%.
A replacement oil boiler is the honest comparison, and there is no official median for one, so get a price for it alongside the heat pump quotes. What the medians cannot tell you is what your house needs: radiators, a cylinder, the length of pipe run. The heat pump installation cost guide lists what should be on each quote.
Oil homes are most common among grant-funded installs in the South West; the South West heat pump grants page has the regional figures.
What changes in the house
- The boiler goes, and the tank usually follows. Ask each quote to say whether it includes decommissioning or removing the oil tank and who deals with any oil left in it.
- An outdoor unit goes in. In England an air source unit is permitted development within limits, including a sound check under the MCS planning standard; heat pump planning permission has the detail.
- Hot water comes from a cylinder. If you already have one, ask whether it suits a heat pump or needs replacing; if not, the quote should show where a new one goes.
- Some radiators may change. A heat pump runs at a lower flow temperature than an oil boiler, so the survey should check each room. The Electrification of Heat trial found no significant difference in air source performance by house type or age, so an older or rural house is not ruled out by its age.
When oil still wins
A heat pump is not right for every oil home. If the system is badly designed and runs hot all winter, its seasonal efficiency can fall towards the 2.0 break-even, and the saving disappears. If the house loses heat fast and you are not prepared to change radiators, a heat pump may struggle on the coldest days. And if the property has a gas connection you plan to keep, it is not an off-gas home and the £9,000 band does not apply. None of those is a reason to avoid the question; they are the questions to put to the installer at the survey.