UK carbon border tax starts January 2027
Importers of carbon-intensive goods face a significant change. The UK carbon border tax starts January 2027, when the Carbon Border Adjustment Mechanism (CBAM) takes effect. Therefore, affected businesses should prepare well in advance.
Which goods are covered
CBAM will apply to specified goods imported from outside the UK. The mechanism covers five sectors:
- Aluminium
- Cement
- Fertiliser
- Hydrogen
- Iron and steel
However, not every product within these sectors falls inside the scope. Consequently, businesses must check the relevant commodity codes carefully.
Why the Government is introducing CBAM
The tax places a comparable carbon price on imported goods. UK manufacturers already pay that price domestically. As a result, the playing field becomes more even. Importantly, this approach should deliver genuine global emissions reductions. Otherwise, UK decarbonisation would simply displace carbon emissions overseas.
Who becomes liable
Liability generally falls on the importer named on the customs declaration. That person must keep detailed records. Specifically, you will need information about the weight of goods and their associated emissions. In addition, you may need to register with HMRC.
Understanding the registration threshold
A £50,000 threshold determines whether registration applies. Businesses must monitor two separate tests:
- A forward-looking test, covering expected imports over the next 30 days.
- A backward-looking test, covering relevant imports over the preceding 12 months.
If a person meets either test, they become liable to register. Therefore, regular monitoring is essential rather than optional.
Key dates and deadlines
The first CBAM accounting period runs from 1 January to 31 December 2027. After that, the first return and payment fall due by 31 May 2028. From 2028 onwards, accounting periods move to a quarterly cycle. Helpfully, the backward-looking test only applies from 1 January 2027 during the first year.
Talk to us
Since the UK carbon border tax starts January 2027, act now rather than later. Check your position, review your commodity codes and get your systems ready. Contact our team today for practical support.
