UK CBAM: What businesses need to know about the new carbon charge on imports

From 1 January 2027, some high-carbon businesses importing certain carbon-intensive goods into the UK will face a new CBAM (Carbon Border Adjustment Mechanism) charge.

The UK CBAM aims to prevent carbon leakage by ensuring imported goods face a comparable carbon cost to products produced in the UK.  By applying a carbon price to certain imports, it seeks to support wider decarbonisation efforts and reduce the risk of emissions shifting overseas. This can happen when companies move production to countries with less stringent climate policies, resulting in emissions being transferred from one country to another.

“CBAM is another way to encourage more responsible and sustainable global behaviour on an urgent planetary issue,” says Fiona Donnelly CA, Director of Sustainability at ICAS.

“The UK regime does, however, bring new data and reporting requirements for supply chain participants, which in turn bring extra overheads and burden, in addition to the monetary charge. The details of the UK CBAM warrant careful scrutiny, early consideration and planning.”

What is UK CBAM?

UK CBAM will commence on 1 January 2027.  It will apply to those importing specified CBAM goods into the UK for business purposes on or after that date, and who meet the relevant liability and registration conditions.

It covers five high-carbon sectors:

• Aluminium
• Cement
• Fertiliser
• Hydrogen
• Iron and steel

Not every product within these sectors will be covered. The goods in scope are identified by specific commodity codes. The rules can become more complex where imported goods contain relevant precursor components or are processed after import.

If you’re unsure whether the goods you’re importing are in scope, check the commodity code against HMRC’s CBAM lists.

The legislation currently contains a drafting error so that certain ferro-silicon goods (commodity code 7202 29) are within the scope of CBAM. This will be corrected so that the legislation aligns with the policy intention that all ferro-silicon goods are excluded from the scope of CBAM.

Responsibilities of importers and suppliers

The importer will be responsible for the UK CBAM liability and for reporting information to HMRC, including the emissions embodied in the imported goods. They must register with HMRC if they expect the value of UK CBAM goods to meet or exceed the £50,000 threshold during the first accounting period, from 1 January 2027 to 31 December 2027.

Importers will need emissions data from overseas suppliers and supply chain partners to meet reporting requirements. They should start discussions early to agree what information they need and how it should be provided.

Overseas suppliers of affected goods should also speak to their in-scope UK customers to understand which commodities may fall within UK CBAM and what emissions data they’ll need. Where customers request actual emissions data rather than elect to use government default values, suppliers should assess the data, processes, systems and training needed to provide that information. They will also need to engage qualified verifiers and establish the likely scope and cost of verification.

Importers may also want to:

• Prepare cash flow forecasts that account for potential UK CBAM payments and additional CBAM-related administration costs.
• Review procurement strategies and contractual terms.
• Consider including UK CBAM data requirements in supplier contracts.

CBAM rates and Carbon Price Relief

The amount businesses pay will depend on the embodied emissions in the imported goods, the applicable CBAM rate and any Carbon Price Relief available for qualifying carbon price already paid overseas.

To calculate the emissions, there are two options available: either use the default emissions as determined by the government or use actual data on the embodied emissions.  

The UK Government will publish further detail on the default emissions before CBAM goes live on 1 January 2027. For actual emissions, businesses will need to obtain verified emissions intensity data along with evidence that these emissions have been verified by a qualified verifier.  

There will be a single rate per UK CBAM sector. The rates will reflect the effective carbon price in the UK, with reference to the UK Emission Trading Scheme (ETS).

Carbon Price Relief may reduce the amount payable where the carbon tax has already been paid offshore on the imports.

The diagram below shows how the UK CBAM liability is calculated:

 Source: UK Government, Carbon Border Adjustment Mechanism policy summary

Although the importer is responsible for reporting and paying the liability, suppliers and other supply chain partners will need to provide the underlying verified data.

What should businesses do now?

The UK Government published further information on UK CBAM in July 2026, with more guidance and legislation expected as implementation progresses.

Businesses that import potentially affected goods should start preparing now. This includes:

• Checking whether goods are in scope using the HMRC's CBAM lists.
• Reviewing whether registration with HMRC will be required.
• Identifying what data is required and the format.
• Establishing clear UK CBAM governance arrangements, including responsibility for oversight and day-to-day operational duties.

Overseas suppliers should begin to identify UK customers and the goods that could be affected and understand what information their customers will need. They should also consider whether they have the data, systems and skills required to provide it.

“Many taxpayers may not be aware of these new requirements under CBAM, so I’d urge agents to consider whether they apply to their clients,” says Katie Close CA, Director of Tax at ICAS.

“Familiarising yourself with the different EU and UK regimes is a priority if you or your clients are in scope and trade in the EU. Those with reporting requirements will need to start thinking about data collection, system frameworks and working with their suppliers if they import UK CBAM goods. Having those conversations now will help ensure businesses are prepared when the scheme goes live in 2027.”

What the EU experience can tell us

The European Union’s Carbon Border Adjustment Mechanism (EU CBAM) has a similar purpose to the UK mechanism, but its structure, sectors and thresholds differ.

The EU CBAM began fully on 1 January 2026 following a transitional phase. Businesses trading between the UK and EU will need to keep both regimes in mind.

Both regimes continue to evolve, as does the wider relationship between the UK and the EU. In May 2025, the UK Government announced its commitment to link the UK ETS with the EU ETS. If successful, this could harmonise carbon pricing and create the conditions for mutual exemptions from the UK and EU CBAMs.

Businesses should continue to monitor UK and international developments as part of their CBAM governance arrangements. There may be opportunities for assurance providers to explore becoming accredited verifiers for carbon-pricing information at installations. HMRC sets out the relevant requirements in its carbon pricing verification form. This could create a new revenue opportunity for suitably qualified providers.

The success of UK CBAM will depend on whether it supports decarbonisation without placing disproportionate costs and administrative burdens on businesses. Technology, including digital reporting tools, may help organisations automate data collection and reduce the compliance burden.

Despite these differences, UK importers can learn from businesses already preparing for the EU regime. 

Learn more about UK CBAM

In early 2026, ICAS and Chartered Accountants Ireland co-hosted a webinar exploring their experiences and practical tips. Catch up on the webinar now or read the key takeaways from the event.

Disclaimer: This article provides general information and is intended to prompt further consideration. It isn’t a substitute for professional advice based on the circumstances of an individual business.