The UK is introducing its own Carbon Border Adjustment Mechanism (CBAM) from 1 January 2027, marking a significant change for businesses importing certain carbon-intensive goods into the UK.
With the legislation now in place and HMRC publishing detailed guidance, businesses have much more information to help them prepare. While some technical details, including default emissions values and emissions verification guidance, are still to be published before the scheme begins, now is the time for businesses to understand how the new requirements could affect them.
What is UK CBAM?
The Carbon Border Adjustment Mechanism (CBAM) is a new UK tax that will apply to certain imported goods based on the greenhouse gas emissions generated during their production, often referred to as their embedded emissions.
The policy is intended to ensure imported goods face a comparable carbon cost to equivalent goods produced in the UK. This aims to reduce the risk of carbon leakage, where production moves to countries with lower carbon costs, potentially undermining UK decarbonisation efforts.
Which goods are covered?
From 1 January 2027, UK CBAM will initially apply to specified imported goods within the following sectors:
- Aluminium
- Cement
- Fertiliser
- Hydrogen
- Iron and steel
It is important to note that not every product within these sectors is covered. Whether goods fall within the scope of CBAM depends on their commodity code, so businesses should check HMRC’s guidance to determine whether their imports are affected.
Who is responsible for CBAM?
Responsibility for complying with CBAM generally rests with the UK importer.
Where customs duty is payable, this will usually be the person or organisation named on the customs declaration. Where customs duty is not payable, responsibility normally rests with the person or organisation importing the goods. Freight forwarders or customs agents acting on behalf of an importer do not automatically become liable simply because they submit customs declarations.
Depending on the circumstances, the importer may be responsible for:
- Determining whether imported goods are within the scope of CBAM.
- Registering for CBAM where required.
- Keeping the necessary records.
- Submitting CBAM returns.
- Paying any CBAM liability due.
When will businesses need to register?
Registration is not required for every importer. Businesses become liable to register once they meet HMRC’s registration threshold for in-scope imports.
From 1 January 2027, businesses should check at the beginning of each month whether they have imported £50,000 or more of in-scope CBAM goods during the previous 12 months. A business may also become liable if it expects to exceed the threshold within the following 30 days.
HMRC has confirmed that the online registration service will open by 1 January 2028. Businesses that become liable before registration opens will still need to keep the required records from the date they become liable so they can register once the service becomes available.
What information will businesses need?
One of the biggest practical changes will be obtaining information about the embedded greenhouse gas emissions associated with imported goods.
Importers wishing to report actual emissions will need verified emissions information from overseas manufacturers or suppliers.
Where verified actual emissions data is unavailable, HMRC will publish default emissions values that can be used instead. Further guidance on emissions verification and default values will be issued before CBAM comes into force.
For many businesses, this means engaging with overseas suppliers well in advance of January 2027 to understand what emissions data can be provided.
Can businesses claim relief?
Potentially. Where a recognised carbon price has already been paid in another country on the imported goods, businesses may be able to claim Carbon Price Relief, reducing the amount of UK CBAM payable.
To claim relief, businesses will need to satisfy HMRC’s conditions and retain the required supporting evidence.
Key dates
1 January 2027 UK CBAM comes into force.
Throughout 2027 Liable businesses must keep records of in-scope imports and emissions information.
By 1 January 2028 HMRC’s CBAM registration service is expected to open.
31 May 2028 Deadline for the first annual CBAM return and payment covering imports made during 2027.
From 2028 onwards CBAM accounting periods move to quarterly returns.
How can businesses prepare now?
Although the first return is not due until 2028, businesses should begin preparing during 2026 by:
- Reviewing whether any imported goods fall within the scope of CBAM.
- Checking whether annual import values are likely to exceed the registration threshold.
- Speaking with overseas suppliers about emissions information.
- Reviewing customs and compliance procedures.
- Monitoring further HMRC guidance as additional technical information is published.
Preparing early should help businesses avoid unnecessary disruption once the legislation takes effect.
Final thoughts
The introduction of UK CBAM represents another significant development in UK customs and import compliance.
Businesses importing aluminium, cement, fertiliser, hydrogen or iron and steel products should now begin assessing whether the new rules will apply to them and what information they will need from their supply chain.
While the first return and payment are not due until 31 May 2028, the scheme begins on 1 January 2027, making now the ideal time to review your imports, engage with suppliers and ensure your business is ready for the new requirements.