It is surprising to learn that the average 3 bedroom house will only need 4-8kW of heat on a very cold day. We are so used to seeing big outputs on boilers that we think its much greater. In the UK the smallest heat-only and system boilers available to buy are 11-13kW - easily big enough.
The main factor for sizing the boiler is the hot water cylinder coil. The vast majority of cylinders are heated by the boiler via an internal coil (a bit like a kettle element). The coil has a kW capacity that it needs from the boiler in order to heat the cylinder in a reasonable amount of time (known as hot water recovery time). This might be 12kW or 25kW. Whatever it is will determine what size boiler you need.
As a general guide, the bigger the cylinder the more kW power you will need to reheat it. Cylinders commonly range between 120 litres and 300 litres, so it follows that a 300 litres cylinder will need twice as much as power at 150-litre cylinder. Of course 300 litres is enormous and in reality cylinders in the smaller sizes are sufficient.