Heat Pump Smart Tariffs: How to Save 30% on Running Costs

Introduction

A heat pump can already cut your heating bills compared with gas, oil or LPG. But if you stay on a standard variable tariff, you are leaving a large slice of those savings on the table. The single biggest lever most heat pump owners have for reducing running costs is not the kit itself. It is the electricity tariff that powers it.

Smart tariffs, also called time-of-use tariffs, charge you different rates depending on the time of day. Some heat pump specific tariffs offer off-peak rates of around 7 to 13p per kWh, against a standard cap rate of roughly 24.5p per kWh. When you run your heat pump and heat your hot water cylinder during those cheaper windows, the difference adds up fast. Nesta, the innovation charity tracking the UK heat pump rollout, estimates that switching to a well-matched time-of-use tariff can save a typical heat pump household several hundred pounds a year even before you change your habits.

This guide explains how heat pump smart tariffs work, compares the main UK options for 2026, and shows you exactly how to set your system up so the savings actually land in your account rather than your supplier's marketing slides.

What Are Heat Pump Smart Tariffs and How Do They Work?

A standard electricity tariff charges one unit rate for every kWh you use, regardless of when you use it. Under the OFGEM price cap, that flat rate sat at around 24.5p per kWh in mid 2026, plus a daily standing charge.

A smart tariff works differently. It splits the day into time bands and charges a different rate in each. The most common shapes are:

Two-rate (peak and off-peak): A cheap overnight or daytime window, usually a fixed number of hours, and a higher rate the rest of the time. This is the classic Economy 7 model, modernised.
Multi-rate time-of-use: Three or more bands, typically a cheap off-peak block, a standard daytime rate and an expensive peak window in the early evening when national demand spikes.
Heat pump specific tariffs: Tariffs designed around heat pump usage patterns, often with longer or cheaper off-peak periods and sometimes a discounted flat rate on the electricity your heat pump draws.

The whole model depends on one piece of kit: a smart meter. Without a SMETS2 smart meter sending half-hourly readings, your supplier cannot bill you accurately across different time bands, so you cannot access these tariffs. If you do not yet have one, your supplier will install it free of charge, and it is the first practical step before any tariff switch.

The reason these tariffs exist is grid balancing. Electricity is expensive to supply during the early evening peak, roughly 4pm to 7pm, when millions of households cook, heat and switch on lights at once. It is far cheaper at 2am when demand collapses and wind generation often has nowhere to go. Suppliers pass that wholesale price swing on to you, rewarding you for shifting flexible loads like heating and hot water away from the peak.

For a heat pump owner, this is a gift. A heat pump is one of the most shiftable loads in the home. With a hot water cylinder and a well-insulated house acting as thermal stores, you can do much of your heating when electricity is cheapest and coast through the expensive peak.

Why Heat Pumps and Smart Tariffs Fit Together

Two features of a heat pump system make it ideal for time-of-use pricing.

First, heat pumps usually pair with a hot water cylinder rather than an on-demand combi. A cylinder is a battery for heat. You can heat 150 to 250 litres of water to temperature during a cheap window overnight, then draw on it through the day without the heat pump touching an expensive rate.

Second, a heat pump runs at low, steady flow temperatures and pairs with homes that hold heat reasonably well. That means you can pre-warm the fabric of the building during off-peak hours and let it drift gently rather than firing hard at 6pm. The better your insulation, the longer your home coasts, and the more of your heating you can pull into the cheap window.

This is the crucial point that catches people out. A smart tariff is not automatically cheaper. If your home leaks heat and you are forced to run the heat pump hard through the expensive evening peak just to stay warm, a multi-rate tariff can cost you more than a flat rate. We will come back to insulation later because it decides whether these tariffs work for you.

If you are still weighing up whether a heat pump suits your property at all, our guide on whether heat pumps are worth the real cost walks through the full benefit analysis, and the is my home suitable checker gives you a quick read on your property.

The Main UK Heat Pump Smart Tariffs for 2026

Below is a comparison of the leading heat pump and time-of-use tariffs available to UK households in 2026. Rates move with the wholesale market and the price cap, so always confirm the current figures on the supplier's own page before you switch. The structure of each tariff, which is what matters most for planning, tends to stay stable.

Supplier	Tariff	Off-peak rate (approx)	Peak rate (approx)	Best for
Octopus Energy	Cosy Octopus	11 to 13p per kWh	35 to 40p per kWh	Heat pump owners who can pre-heat in set daily windows
Octopus Energy	Intelligent Octopus Go	7 to 8p per kWh	Standard daytime	Owners with an EV or large overnight load to shift
EDF	Heat Pump Tracker	Discounted heat pump rate	Standard for the rest	Households wanting a simple heat pump discount
E.ON Next	Next Pumped	Reduced heat pump unit rate	Standard for the rest	New heat pump installs on E.ON
Scottish Power	Heat Pump Saver	Reduced heat pump rate	Standard for the rest	Existing Scottish Power customers
British Gas	Heat Power	Reduced heat pump rate	Standard for the rest	British Gas heat pump customers

A few important distinctions:

Cosy Octopus gives you cheap rates in fixed daily windows, typically a block in the early morning and another in the early afternoon, plus an expensive peak in the evening. It rewards households that can actively pre-heat the home and cylinder in those slots. It works best when your system controls let you target those exact hours.

Intelligent Octopus Go offers a very low overnight rate across a long window. It was built around EV charging but suits heat pump owners who can do most of their heating and hot water overnight. If you have both an EV and a heat pump, this is often the sweet spot.

Heat pump specific tariffs from EDF, E.ON, Scottish Power and British Gas generally take a different approach. Rather than a sharp peak and trough, they apply a discounted unit rate to the electricity your heat pump uses, while the rest of your home stays on a more standard rate. These are simpler to live with because they do not demand that you reshape your daily routine, but the headline savings are usually smaller than an aggressive time-of-use tariff used well.

The right choice depends less on the lowest advertised rate and more on how much load you can genuinely shift. A 7p overnight rate is only worth it if you can move a meaningful chunk of your heating into that window. If you cannot, a steady heat pump discount may put more money back in your pocket with far less effort.

Is a Smart Tariff Always Cheaper? The Critical Role of Insulation

This is where many homeowners get burned, so it deserves a section of its own.

A time-of-use tariff trades a cheap off-peak rate for an expensive peak rate. The whole strategy rests on one assumption: that you can avoid the peak. If your home cannot hold heat, you will be running the heat pump through that 4pm to 7pm window at 35 to 40p per kWh just to stay comfortable, and the maths turns against you.

Picture two homes, both needing the same annual heat. The first is a well-insulated property with loft and cavity wall insulation, draught-proofing and decent glazing. It pre-heats overnight and through the cheap afternoon block, then coasts through the evening peak with the heat pump barely ticking over. Almost all its electricity is bought cheap.

The second is a leaky home with cold draughts and thin insulation. It loses heat as fast as the pump can add it, so the heat pump runs flat out across the evening peak. It buys a large share of its electricity at the most expensive rate of the day.

Same tariff, opposite outcomes. The well-insulated home saves substantially. The leaky home can end up paying more than it would on a flat rate.

The lesson is simple. Before chasing the cheapest time-of-use tariff, make sure your home can actually exploit it. Loft insulation, cavity wall insulation and draught-proofing are the cheapest, fastest wins, and they make every other efficiency measure work harder. Our running costs guide covers how insulation and system design drive your real-world SCOP, and the heat pump calculator lets you model your own numbers.

If your home is genuinely hard to heat, a heat pump specific discount tariff with a steadier rate, rather than an aggressive peak-and-trough tariff, is usually the safer choice.

How to Set Up Your Heating System to Maximise Savings

Picking the right tariff is half the job. The other half is configuring your system to actually buy electricity in the cheap windows. Here is how to do it.

Shift Your Hot Water First

Hot water is the easiest load to move. Set your heat pump to heat the cylinder to temperature during your off-peak window, usually overnight or in the cheap afternoon block depending on your tariff. A well-insulated cylinder holds that heat for the rest of the day with minimal loss, so you rarely need to reheat at peak rates.

Run a weekly Legionella protection cycle, which briefly raises the cylinder above 60C to kill bacteria, and schedule it inside an off-peak window too. Our guide on how a heat pump hot water cylinder works explains the controls in detail.

Pre-Heat the Fabric of Your Home

Use your controls to nudge the flow temperature up slightly during the cheap window and let it ease back through the peak. In a well-insulated home, the building fabric stores enough heat to coast through the expensive evening hours. The aim is steady comfort bought cheap, not blasting heat at the last minute.

Avoid deep setbacks. Letting the house go cold and then trying to recover during the peak forces the heat pump to work hard at the worst possible rate. Gentle, continuous operation at low flow temperatures almost always beats aggressive on-off cycling for both comfort and cost.

Use Smart Controls That Understand Time-of-Use

Standard smart thermostats like Nest and Hive can schedule heating, but heat pump aware controls do more. Several manufacturer apps and third-party platforms can read your tariff windows and automatically target heating and hot water at the cheapest periods. Octopus, for example, can integrate directly with compatible systems to optimise around its own rates.

Get your installer to set the weather compensation curve correctly so the system self-adjusts flow temperature to the outdoor conditions. This keeps efficiency high and reduces the temptation to override the system at peak times.

Combine With Solar and Battery Where You Have It

If you have solar PV, you can run the heat pump and reheat the cylinder on free daytime generation in the shoulder seasons. A home battery lets you store cheap off-peak grid electricity and draw on it during the peak, effectively flattening your bill further. Our guide on the ultimate heat pump, solar and battery setup covers how these technologies stack.

A Worked Example: What the Savings Look Like

To make this concrete, take a typical three-bedroom semi with an annual heat demand of around 12,000 kWh and a heat pump running at a seasonal efficiency (SCOP) of 3.5. That means it draws roughly 3,400 kWh of electricity a year for heating.

On a flat tariff at 24.5p per kWh, that electricity costs about 833 pounds a year.

Now suppose the household shifts a large share of that load into off-peak windows. With a well-insulated home and good controls, it is realistic to buy around two thirds of the heating electricity at an off-peak rate of, say, 12p per kWh, with the remaining third at a peak rate.

Off-peak portion: 2,250 kWh at 12p = 270 pounds
Peak portion: 1,150 kWh at 38p = 437 pounds
Total: around 707 pounds

That looks only modestly cheaper, which shows why the peak rate matters so much. Now push the same household harder, with better insulation and smarter scheduling, so it buys 85 percent off-peak:

Off-peak portion: 2,890 kWh at 12p = 347 pounds
Peak portion: 510 kWh at 38p = 194 pounds
Total: around 541 pounds

That is a saving of roughly 290 pounds a year against the flat tariff, around 35 percent off the heating electricity bill, achieved purely by shifting load. The numbers swing entirely on how much you can move out of the peak, which loops straight back to insulation and controls.

For comparison, a household that fails to shift load and runs through the peak on a high peak rate can end up worse off than the flat tariff. The tariff is a tool, not a guarantee.

Beyond Tariffs: Grants, Insulation and Smart Controls Together

The biggest savings come from stacking measures rather than relying on a tariff alone.

Grants reduce the upfront cost. The Boiler Upgrade Scheme offers a 7,500 pound grant towards an air or ground source heat pump installation in England and Wales, which transforms the payback picture before you even think about tariffs. Our heat pump grant page summarises what is available and who qualifies.

Insulation multiplies tariff savings. As we have seen, a smart tariff only pays off in a home that can hold heat through the peak. Loft and cavity wall insulation are the foundation that makes everything else work.

Smart controls automate the savings. The household that saves 35 percent is rarely the one manually flicking switches. It is the one with weather compensation, cylinder scheduling and tariff-aware controls doing the work quietly in the background.

When you combine a grant-funded installation, a sensible insulation package and a well-chosen smart tariff with good controls, the running cost gap between a heat pump and a gas boiler widens dramatically in the heat pump's favour. For a side-by-side on the fuel comparison, see our running costs versus gas boiler analysis.

How to Switch to a Heat Pump Smart Tariff

The process is straightforward:

Check you have a working SMETS2 smart meter. If not, ask your supplier to install one. It is free and it is the gateway to every smart tariff.
Audit your insulation and controls. Be honest about whether your home can coast through the peak. If not, prioritise insulation first or choose a steadier heat pump discount tariff.
Compare tariffs against your real usage. Look at when you can shift load, not just the lowest advertised off-peak rate. Use the heat pump calculator to model your own figures.
Confirm your heat pump qualifies where required. Some heat pump specific tariffs ask for proof of an MCS certified installation. Keep your installation paperwork handy.
Switch, then optimise. Once on the tariff, set up cylinder scheduling, weather compensation and pre-heating to push as much load as possible into the cheap windows.

If your heat pump is not yet installed or you want it commissioned with smart tariff use in mind, a good installer makes all the difference. Ask whoever quotes you to set up the controls and weather compensation for time-of-use operation from day one. You can find vetted, MCS certified professionals through our find an installer service.

Conclusion and Key Takeaways

A smart tariff is the most powerful running cost lever available to most heat pump owners, but only when the rest of the system supports it.

Smart tariffs charge cheaper off-peak rates, often 7 to 13p per kWh against a flat cap rate near 24.5p.
Heat pumps suit time-of-use pricing because the hot water cylinder and building fabric act as thermal stores you can charge when electricity is cheap.
Savings of around 30 percent on heating electricity are realistic for a well-insulated home with good controls, but a leaky home can end up paying more.
Insulation and smart controls decide whether a tariff pays off, so sort those before chasing the lowest headline rate.
Stack a Boiler Upgrade Scheme grant, solid insulation and the right tariff to maximise the gap between heat pump and gas boiler running costs.

Get the tariff, the insulation and the controls working together, and a heat pump becomes not just cleaner than a gas boiler but meaningfully cheaper to run.