The government has signed off a tidy set of tweaks to the Clean Heat Market Mechanism. The amending regulations were made on 18 November 2025, laid before Parliament on 20 November, and take effect on 12 December 2025, with the target change biting from 1 April 2026. For boiler brands and their boards, that creates a short planning window to lock in budgets, installation capacity and trading strategies ahead of Scheme Year 2.

Two decisions anchor the shift. First, the Year 2 low‑carbon heat target rises to 8% of relevant boiler sales. Second, the Microgeneration Certification Scheme (MCS) will be the sole certification scheme recognised under CHMM from Year 2. Both points were trailed by the Department for Energy Security and Net Zero (DESNZ) in its 31 October consultation outcome and are now being put into law ahead of the 1 April 2026 start to Year 2.

What does 8% mean in practice? Obligations are calculated on “relevant” sales above the thresholds of 19,999 gas boilers and 999 oil boilers in a scheme year. The Environment Agency, as scheme administrator, converts those sales into a target number of heat pump credits to be surrendered after year‑end. Year 1 ran from 1 April 2025; Year 2 starts on 1 April 2026.

Here’s a simple finance director’s cut. A manufacturer with 100,000 UK gas boiler sales and 2,000 oil boiler sales in 2025/26 would have 80,001 and 1,001 “relevant” sales respectively. That’s 81,002 in total; at an 8% Year 2 target the firm needs 6,480 credits (rounded) to surrender by the deadline. One stand‑alone heat pump installation yields one credit; a hybrid counts for half a credit. Firms can meet the target with their own MCS‑certified installs or by buying credits.

Credit market plumbing matters. The official guidance confirms a trading window from 1 October of the scheme year to 30 September of the following year, with credits due for surrender by 1 October after year‑end. Surpluses can be carried over within limits, and shortfalls can be settled through payments set out in guidance. That gives treasury teams a defined timetable for procurement and settlement.

Certification is being simplified. DESNZ has confirmed MCS as the sole scheme for CHMM from Year 2, replacing the previous multi‑scheme approach. MCS was already appointed under the Regulations from 1 April 2025; this amendment removes ambiguity for manufacturers, installers and consumers about which certificates count for credits. Expect installers to prioritise staying current with MCS standards, audits and system updates.

A smaller legal tidy‑up also lands: the definition of a “hybrid heating system” is adjusted so a hybrid doesn’t have to provide domestic hot water where a building doesn’t need it. The change is narrow but useful for unusual sites and avoids excluding legitimate hybrid installs from crediting purely on hot water design.

Compliance costs will swing with two variables: your own install pipeline and the going rate for credits. As a rule of thumb, reduce exposure by pulling installs forward into the scheme year, maximising first‑time pass rates under MCS, and lining up bilateral credit purchases early in the 1 October–30 September window. If finance teams want a budget marker, model a range of plausible credit prices and stress‑test against a 10–20% shortfall in your assumed install volumes.

Installers should see a cleaner process. A single certification route may trim duplicated paperwork and give customers clearer guarantees. That said, stakeholders told DESNZ they worry about a monopoly provider pushing up costs or slowing reform if performance slips. DESNZ acknowledged those concerns in its response and said the broader consumer‑protection framework will be reviewed alongside CHMM operations.

Operational housekeeping remains non‑negotiable. Manufacturers must submit quarterly sales data within 28 days of quarter‑end, file the annual sales return by 30 June with third‑party assurance, and maintain records for seven years. Missed or inadequate submissions let the Environment Agency estimate your sales and set targets accordingly-rarely a comfortable outcome for boards.

The market backdrop is getting more supportive. DESNZ cited MCS data showing certified heat pump installations grew 43% in 2024 year‑on‑year, and it flagged a forthcoming Warm Homes Plan and an updated Impact Assessment to sit beside these regulations. If those measures lift demand and cut installer bottlenecks, the 8% target looks more manageable for mainstream brands.

Bottom line for 2026: the policy direction is set, the targets are higher, and certification is simpler. Manufacturers that firm up MCS‑compliant install capacity, pre‑arrange credit lines and keep reporting tidy will be best placed to meet the 1 October surrender deadline without scrambling for last‑minute, expensive credits.