Under the scheme households which currently have a boiler with an energy efficiency rating of G will be able to apply through the Energy Saving Trust for a voucher. This would entitle them to £400 off a new A rated boiler. Households will also be able to receive a discount off a biomass boiler or heat pump.
Ed Miliband, the government's energy and climate change secretary, said: "The boiler scrappage scheme will save around £200 off heating bills per year for families that are replacing their old boilers, and in total will save the same amount of carbon equivalent to taking around 45,000 cars off the road."
It is estimated that most households could save somewhere between £200 and £235 per year.
Installing a new boiler isn't the only way to save money on energy bills and Think Money recommends comparing and switching energy supplier as a way of making gas and electricity bills more affordable.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.