What is the UK CBAM?
The UK CBAM is a tax on the greenhouse gases released when certain carbon-heavy goods were made abroad. It gives imports a carbon price comparable to the one UK producers pay under the UK Emissions Trading Scheme (UK ETS).
The aim is to prevent carbon leakage, where production and its emissions move to countries with weaker carbon pricing.
The tax is created by Part 5 of the Finance Act 2026, which received Royal Assent on 18 March 2026. Section 158 says Part 5 applies to goods imported into the UK on or after 1 January 2027.
The detail sits in four main sets of regulations made in July and September 2026, all in force from 1 January 2027.
HMRC estimates that about 10,000 businesses import CBAM goods. The official costing, certified by the Office for Budget Responsibility, puts annual receipts at £140 million to £180 million from 2027-28 to 2030-31.
Which goods are covered?
The UK CBAM covers goods from five sectors, identified by their commodity codes. HMRC publishes a list of in-scope headings for each sector, with some codes excluded.
| Sector | Example commodity codes | Gases covered |
|---|---|---|
| Aluminium | 7601 unwrought aluminium, 7606 plates and sheets, 7610 structures | Carbon dioxide and perfluorocarbons |
| Cement | 2523 10 clinker, 2523 21 and 2523 29 Portland cement, 2507 00 80 kaolinic clays | Carbon dioxide |
| Fertiliser | 2808 nitric acid, 2814 ammonia, 3102 nitrogenous fertilisers, 3105 mixed fertilisers | Carbon dioxide and nitrous oxide |
| Hydrogen | 2804 10 hydrogen | Carbon dioxide |
| Iron and steel | Most of chapter 72, plus headings such as 7308 structures and 7318 screws and bolts | Carbon dioxide |
Glass and ceramics were in the original December 2023 proposal but will not be in scope from 2027. In chapter 72, ferrous waste and scrap (7204) and most ferroalloys, such as ferro-silicon (7202 21), ferro-silico-manganese and ferro-molybdenum, are excluded, but ferro-manganese, ferro-chromium and ferro-nickel remain in scope. At Budget 2026 (28 October 2026) the government said Finance Bill 2026-27 will correct a minor error in the Finance Act 2026 by adding 7202 29 (other ferro-silicon) to the ferro-silicon exceptions, from 1 January 2027.
Fuels could follow. Also at Budget 2026, the government said it intends to bring refinery products such as petrol, diesel and jet fuel into the UK CBAM, subject to a consultation that runs until 20 January 2027. No start date has been set. See UK CBAM and refinery products.
The charge applies to direct emissions only. Indirect emissions from the electricity used in production have been delayed until 2029 at the earliest. Emissions from in-scope precursor goods, such as the steel used to make a steel structure, are added to the total.
Who pays the UK CBAM?
The importer is the liable person. That is the person in whose name the customs declaration is made. If a customs agent declares the goods on your behalf, you are still the importer.
You can appoint a tax agent to submit CBAM returns. The agent cannot register for you, and no liability passes to the agent.
- Private individuals importing CBAM goods for non-business use are not liable.
- Goods with a UK place of origin are outside the charge.
- Goods that qualify for returned goods relief, or enter under temporary admission with full duty relief, are not charged.
- Goods under a special customs procedure are only in scope once released into free circulation.
- Union goods sent from Northern Ireland to the EU and reimported unaltered within 3 years carry no CBAM liability.
The tax applies across the whole UK, including Northern Ireland. Goods entering from the Crown Dependencies, including the Isle of Man, and from Overseas Territories are also in scope.
The £50,000 registration threshold
You must register with HMRC if the value of your CBAM imports meets or exceeds £50,000 under either of two tests. Value means the customs value used, or that would be used, to work out import duty.
- Backward test: on the first day of each month, look back over the previous 12 months. If your CBAM imports reached £50,000, you may be liable from the date the threshold was met.
- Forward test: if you expect to import £50,000 or more of CBAM goods in the next 30 days, you must register.
If both tests apply, use the earliest date. Imports made before 1 January 2027 do not count towards the threshold.
The threshold is not an allowance
Under section 147 of the Finance Act 2026, CBAM is not charged only if the importer is neither registered nor required to register. Once you are registrable, the charge applies to your CBAM imports, not just the value above £50,000.
HMRC estimates the threshold removes over 80% of otherwise affected importers, and that over 70% of those removed are small or medium-sized businesses.
Normally you have 30 days to register after becoming liable. For the first year, businesses liable in 2027 have until 31 January 2028. Registration will open by 1 January 2028 through a Government Gateway account.
If you become liable before registration opens, HMRC says you must keep records of all the CBAM goods you import. Records must be kept for 6 years.
How the UK CBAM rate is set
The tax due is the sector's CBAM rate multiplied by the tonnes of carbon dioxide equivalent (tCO2e) embodied in the goods. HM Treasury calculates and publishes a rate for each sector at the start of every quarter from 1 January 2027.
Each rate starts from the mean UK ETS auction clearing price in the previous quarter. It is then reduced to reflect the free allowances UK producers in that sector receive.
The reduction is based on the sector's historical share of free allowances, adjusted by a yearly factor set at 0.975 for 2027.
The rate that applies to a good is the rate for its sector in the quarter it was imported. On 16 October 2026 HMRC published illustrative rates using current data: £9.69 per tCO2e for iron and steel, £9.79 for aluminium, £8.78 for cement, £1.45 for fertiliser and £9.24 for hydrogen. These are not the rates that will apply. HMRC says the rates for January to March 2027 will be published before the end of 2026.
Full method and worked example
Our UK CBAM rates page sets out the formula step by step, with HMRC's worked example for cement. It will list each official quarterly rate once it is published.
Embodied emissions: actual data or default values
Importers can work out embodied emissions in one of two ways. They can use actual emissions data from the overseas installation, or a default value set by the government.
- Default values: emissions equal the weight of the good multiplied by the default value. There is one default value per CBAM good, whatever its origin, for 2027 and 2028.
- Actual values: the installation's emissions intensity for a single calendar-year monitoring period, checked by an independent verifier.
Verifiers must be accredited against ISO 14065:2020 and ISO/IEC 17029:2019. The accreditation body must be a full member of the Global Accreditation Cooperation (Global ACI).
HMRC published the default values on 16 October 2026. They include a 10% mark-up in every sector except fertiliser, and a return filed using default values cannot later be amended to use actual data. Our UK CBAM default values page lists them by CN code. HMRC says the monitoring and verification rules are broadly designed to be interoperable with the EU CBAM, to reduce administrative burdens.
Relief for carbon prices paid overseas
If the goods were made under a qualifying carbon pricing scheme abroad, the importer can claim Carbon Price Relief. The relief is the effective carbon price paid multiplied by the embodied emissions subject to that scheme.
Any compensation the producer received for that carbon cost must be deducted. The relief can never exceed the CBAM due on the goods.
To claim, you need a carbon pricing verification form completed by an independent, accredited verifier. Relief worked out in a foreign currency is converted to sterling using the HMRC exchange rate for the calendar quarter before import, then rounded down to two decimal places. HMRC will publish the rates at the start of each quarter from 1 January 2027.
HMRC published a provisional, non-exhaustive list of 16 qualifying schemes on 27 August 2026. It includes the EU ETS, the Swiss ETS and China's national ETS. Korea's ETS, India's Carbon Credit Trading Scheme and the carbon taxes of Singapore and South Africa are also listed.
Separately, section 156 of the Finance Act 2026 lets the Treasury exempt goods from countries whose emissions trading scheme is linked to the UK ETS. HMRC states that no jurisdiction is currently exempt.
Key dates and penalties
| Date | What happens |
|---|---|
| 18 March 2026 | Finance Act 2026 receives Royal Assent, creating CBAM in Part 5 |
| 13 July to 8 September 2026 | Four main sets of CBAM regulations made |
| 16 October 2026 | HMRC publishes illustrative CBAM rates and the default values |
| Before the end of 2026 | Rates for imports from 1 January to 31 March 2027 published |
| 1 January 2027 | CBAM applies to imports |
| By 1 January 2028 | HMRC registration service opens |
| 31 January 2028 | Deadline to register for anyone liable during 2027 |
| 31 May 2028 | First return and payment, covering 1 January to 31 December 2027 |
| 31 July 2028 | Return and payment for 1 January to 31 March 2028 |
| 29 September 2028 | Return and payment for 1 April to 30 June 2028 |
| 30 November 2028 | Return and payment for 1 July to 30 September 2028 |
| 28 February 2029 | Return and payment for 1 October to 31 December 2028 |
| 2029 at the earliest | Possible inclusion of indirect emissions |
From 2028 accounting periods become quarterly. The return and payment window then moves gradually towards 2 months after each quarter ends.
HMRC will apply its existing penalty powers. Penalties can apply for failing to notify liability, file a return or pay, for errors in returns, and for ignoring an information notice. A new general penalty covers other CBAM duties, such as reporting a change of address. Fraudulent evasion is a criminal offence.
Questions
When does the UK CBAM start?
The UK CBAM applies to in-scope goods imported on or after 1 January 2027. The first return and payment, covering all of 2027, is due by 31 May 2028.
Which goods does the UK CBAM cover?
It covers specified goods from the aluminium, cement, fertiliser, hydrogen, and iron and steel sectors, identified by commodity code. Glass and ceramics are not in scope from 2027.
Who has to pay the UK CBAM?
The importer pays, meaning the person in whose name, or on whose behalf, the customs declaration is made. Private individuals importing for non-business use are not liable.
Do I need to register if I import less than £50,000 of CBAM goods?
Not if you have never triggered registration. You must register if your CBAM imports reach £50,000 over the previous 12 months, or you expect them to within the next 30 days. CBAM is not charged on goods imported while you are neither registered nor required to register, but once registered you stay liable until HMRC deregisters you. Keep records either way to show whether you are liable.
What is the UK CBAM rate per tonne?
No real rate applies yet. HMRC's illustrative rates, published on 16 October 2026, range from £1.45 per tCO2e for fertiliser to £9.79 for aluminium. The rates for January to March 2027 will be published before the end of 2026, then every quarter. Each is based on UK ETS auction prices, minus a free allocation adjustment.
When is the deadline to register for the UK CBAM?
Anyone liable during 2027 has until 31 January 2028 to register. Registration opens by 1 January 2028. After that, the normal deadline is 30 days from becoming liable.
Can I reduce UK CBAM if a carbon price was paid abroad?
Yes. Carbon Price Relief can be claimed where the goods were made under a qualifying scheme, such as the EU ETS, with an independently verified form. The relief cannot exceed the CBAM due.
Is the UK CBAM the same as the EU CBAM?
No. They are separate taxes with different thresholds, rates and deadlines. HMRC says its emissions monitoring rules are broadly designed to be interoperable with the EU's.
Sources
- HMRC: Budget 2026 overview of tax legislation and rates, paragraphs 1.73 (ferro-silicon scope amendment) and 2.28 (refinery products) (28 October 2026) (checked 4 November 2026)
- HM Treasury and HMRC: CBAM consultation on sectoral scope expansion to include refinery products (28 October 2026) (checked 4 November 2026)
- HMRC: Carbon Border Adjustment Mechanism (CBAM) policy summary (updated 2 November 2026) (checked 4 November 2026)
- HMRC: Illustrative CBAM rates and worked example, 16 October 2026 (checked 21 October 2026)
- HMRC: Check the default values for the CBAM, 16 October 2026 (checked 21 October 2026)
- GOV.UK: Prepare for the Carbon Border Adjustment Mechanism (CBAM) collection (checked 10 October 2026)
- GOV.UK: Factsheet, Carbon border adjustment mechanism (CBAM) (checked 10 October 2026)
- legislation.gov.uk: Finance Act 2026, Part 5 (Carbon border adjustment mechanism) (checked 10 October 2026)
- legislation.gov.uk: The CBAM (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026, SI 2026/809 (checked 10 October 2026)
- legislation.gov.uk: The CBAM (Emissions and Verification) Regulations 2026, SI 2026/995 (checked 10 October 2026)
- HMRC: Work out the date you'll need to register for CBAM (checked 10 October 2026)
- HMRC: Keeping records for CBAM (checked 10 October 2026)
- HMRC: Check which goods are in scope of CBAM (checked 10 October 2026)
- HMRC: Work out your Carbon Price Relief (checked 10 October 2026)
- HMRC: UK CBAM list of current qualifying carbon pricing schemes (27 August 2026) (checked 10 October 2026)
- HMRC: Tax information and impact note, Carbon Border Adjustment Mechanism (checked 10 October 2026)
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