Clean Heat Market Mechanism: what the 8% target means for homes

What to know first

These points explain who faces the target, how credits work and what may change for households.

The Clean Heat Market Mechanism, or CHMM, gives parts of the heating industry a reason to support more heat pump installations. In Scheme Year 2, an obligated boiler supplier needs credits equal to 8% of its qualifying gas and oil boiler sales above set thresholds.

It is not a simple one-for-12.5 sales rule. Thresholds and exclusions change the calculation, and companies can acquire credits instead of generating them all through their own products. Information was checked on 26 August 2026.

Why is the Scheme Year 2 target 8%?

CHMM began on 1 April 2025 with a 6% target. Following consultation, the government increased the rate to 8% from 1 April 2026. The mechanism applies across the UK and is administered by the Environment Agency.

The government chose the bottom of its proposed 8% to 10% range. It said 8% was achievable and realistic after recent heat pump market growth. Consultation responses had also raised the lack of Year 1 data and the need for wider supporting policies.

Current regulations use 8% for scheme years beginning on or after 1 April 2026 unless amended again. The government has also said later target decisions may be consulted on, so the rate needs checking when discussing future years.

The full market effect is not yet clear. Scheme Year 1 ended on 31 March 2026, but its credit-transfer window closes on 30 September and credits are surrendered on 1 October 2026. Final Year 1 compliance was therefore incomplete on 26 August 2026.

How is the 8% target calculated?

The calculation starts with qualifying boiler sales. These are total in-scope sales minus permitted exclusions, mainly exports and boilers intended for new-build properties. Boilers with a thermal capacity above 70kW are outside the scheme.

These are the statutory Year 2 calculation rules.

Suppose a participant has 30,000 qualifying gas boiler sales and 2,000 qualifying oil boiler sales:

((30,000 − 19,999) + (2,000 − 999)) × 8% = 880.16

The Environment Agency would round this to 880 units. This Year 2 example uses the structure in its official guidance and substitutes the current 8% rate.

Good to know

The 8% is not attached to each boiler purchase. Buying a boiler does not create a household obligation to install a heat pump.

What counts as a CHMM credit?

A credit comes from a completed, certified retrofit, not merely from making or shipping a heat pump. The Microgeneration Certification Scheme, or MCS, is CHMM’s only approved certification scheme. The Environment Agency matches eligible MCS records with the heat pump supplier’s account.

The heat pump must provide space heating through a water-based, or hydronic, system and have a thermal capacity below 45kW. A qualifying standalone installation creates one credit; a qualifying hybrid creates half a credit.

A typical air-to-water air source heat pump may qualify if the installation meets all the conditions. An air-to-air system does not because it distributes warm air rather than hot water. The credit belongs to the heat pump supplier identified under the scheme, not the householder or installer.

The process works broadly as follows:

1. An installer completes an eligible retrofit and records it through MCS.

2. The heat pump supplier receives the credit.

3. An obligated supplier uses its credits or receives transferred credits.

4. It surrenders credits by 1 October after the scheme year.

5. It may carry forward part of a shortfall; remaining units cost £500 each, payable by 30 November.

Credit prices and contracts are agreed privately. The Environment Agency records transfers but does not set their financial or contractual terms.

Before the final scheme year, a participant may carry forward up to the greatest of 35% of its target, 300 units where the gas-sales threshold is met, or 50 where the oil-sales threshold is met. The delayed target must be met the following year.

Participants may carry over up to 10% of the credits held immediately before surrender. Non-obligated credit holders may carry over up to 10% of the credits they generated during the year.

Could the 8% target change prices, marketing or products?

Potentially, but there is no required consumer price effect. The rules do not tell a company to add a boiler charge, reduce heat pump prices or offer a particular incentive. Each business chooses how to meet its target through credits, transfers, permitted flexibility or payment.

The government’s assessment expected a higher target to:

That is an expectation, not evidence that every price will fall. A company might fund discounts, increase heat pump marketing, improve installer support, buy credits, absorb costs or combine these approaches.

The eligibility rules may also encourage investment in hydronic heat pump ranges. However, CHMM does not require a company to launch a particular product or manufacture it in a particular place.

These are cautious editorial interpretations of the scheme’s incentives, not actions required by the regulations.

Claims that CHMM will definitely make boilers dearer or heat pumps cheaper go beyond the evidence. Effects will depend on competition, customer demand, credit prices, installer capacity and each company’s strategy.

Expert insight

“An installed and certified heat pump creates the credit; warehouse stock does not. Suppliers therefore have a reason to support the route to completed installation, but the support offered remains their commercial choice.”

Giles Crosse

Energy Editor

Experienced editor, journalist and communications consultant specialising in consumer energy and low carbon technologies.

• Editor and campaign author for Shell, EDF Energy and Good Energy.
• Consultant to the United Nations and contributor to the World Economic Forum.
• Journalist for Reuters, the BBC, The Economist and The Guardian.

More about Giles Crosse

What might installers notice?

Installers may see more manufacturer training, design support, leads, promotions or commissioning help. This is an inference from an installation-based target, not a regulatory requirement.

Accurate certification matters because the installation must appear in MCS data and match the correct heat pump supplier. An incentive should not replace a sound survey, system design or clear contract.

What does CHMM mean if you are considering a heat pump?

CHMM should not determine whether a heat pump suits a home. It changes market incentives; it does not assess heat loss, radiator sizes, hot-water needs, electrical work, noise, siting or likely running costs.

Compare the full installed offer. Useful points to check include the room-by-room heat-loss calculation, design flow temperature, radiator or cylinder changes, controls, warranties, expected electricity use, quote exclusions and responsibility for extra work. Heat-loss assessment and correct system sizing are central parts of heat pump design.

Property-specific assessment should come from an appropriate professional. For the Boiler Upgrade Scheme, GOV.UK directs owners who are unsure about suitability to an MCS-certified installer. A planning authority, conservation officer, freeholder or local electricity network operator may also need to be involved where relevant.

Good to know

CHMM is separate from household funding. As checked on 26 August 2026, the Boiler Upgrade Scheme in England and Wales offers £7,500 towards an air-to-water heat pump. For applications properly made from 21 July 2026 to 31 March 2027, eligible off-gas-grid properties replacing oil or LPG can receive £9,000. Scotland and Northern Ireland have different support arrangements.

Key takeaways

• The 8% target applies to qualifying boiler suppliers, not households.

• It uses qualifying gas and oil boiler sales above statutory thresholds.

• A qualifying standalone hydronic heat pump creates one credit; a hybrid creates half.

• Companies can generate, acquire and surrender credits, with limited flexibility.

• Remaining shortfalls cost £500 per target unit.

• As at 26 August 2026, final Year 1 compliance was incomplete, so a standard price effect had not been established.

• CHMM does not replace technical assessment, a clear contract or grant checks.

Frequently asked questions