Answer first
Simple payback equals the additional upfront cost divided by annual cash saving. If the funded heat-pump option costs £4,000 more than the boiler alternative and saves £400 a year, the simple payback is ten years. If it saves £100, it is forty years; if it costs more to run, there is no fuel-bill payback under that scenario.
This calculation is a screen, not a full investment model. It ignores fuel-price changes, finance, maintenance, replacement timing, comfort and carbon. Show the assumptions and several scenarios before using payback to decide.
The simple-payback formula
View sourceCurrent standard Scottish heat-pump grant ceiling
View sourceFuture oil, gas and electricity prices remain uncertain
View sourceGet the property figures behind a realistic payback range
Share the property, postcode, current heating and the cost question you want answered. FLO will explain what can be estimated now and what needs a survey before a figure is reliable.
Compare against the decision you really face
If the existing boiler is failing, the alternative is not “do nothing for free”; it is the cost of a suitable replacement and any necessary system work. If the boiler has years of service left, the relevant alternative may be postponement.
Use the funded net heat-pump price only after eligibility is confirmed. Include work that both options need once, rather than charging it only to the heat pump.
Calculate savings as a range
Use surveyed heat demand, a lower and higher heat-pump seasonal performance, actual tariff options and realistic boiler efficiency. For oil, test more than one delivered price.
If a smart tariff or solar is included, keep its cost and saving visible. Do not credit free electricity without accounting for generation timing and other household use.
Know what simple payback omits
It does not value money over time, financing fees, residual equipment value or major replacement. A discounted cash-flow model can address some of these but requires more assumptions.
Comfort improvements, removal of an oil tank, emissions and future property plans may be important without creating an annual cash saving. Record them separately instead of forcing an invented value.
Use payback to ask better questions
A very long or negative result prompts a check of tariff, flow temperature, emitter design, heat demand and alternative scope. A very short result deserves equal scrutiny for omitted costs or optimistic performance.
FLO can provide a transparent heat-demand and annual-use estimate with the quote. The homeowner can then replace the tariff inputs whenever market prices change.
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Questions people also ask
Does the grant count in payback?+
Yes, use the confirmed net cost to you, while showing the gross cost and grant separately.
What if my heat pump will not save money each year?+
There is no bill-saving payback in that scenario; consider other benefits and whether design, tariff or assumptions can be improved.
Is payback the same as return on investment?+
No. Simple payback only measures how long cumulative nominal savings take to equal extra upfront cost.
Evidence used for this answer
Figures are explained in context and links go to the independent source. Prices, tariffs, scheme rules and standards can change, so check the source again before making a financial or technical decision.
- Home Energy Scotland Grant and Loan: terms and eligible costsCurrent Scottish grant and loan limits, eligible heat-pump costs, application conditions and rural uplift rules.
- Energy Saving Trust: how energy-saving figures are calculatedCurrent household fuel-price assumptions, carbon factors and the method used to keep savings estimates current.
- MCS heat-pump design standardTechnical requirements for heat loss, equipment selection, domestic hot water and system design.
- Energy Systems Catapult: heat-pump performance analysisMeasured seasonal performance and cold-weather operation from the Electrification of Heat demonstration project.