UK CBAM 2027: The Complete Guide for Importers — Scope, £50,000 Threshold, Emissions, Rates and Deadlines

Last reviewed: 30 September 2026. UK CBAM is enacted law, but several numbers it depends on have not been published yet. As of 30 September 2026, no UK default emissions values and no UK CBAM rates (including the promised illustrative rate) have been published, and no UK–EU ETS linking agreement is in force. We flag every open item in What is still to be confirmed.

Looking for the EU regime? Read What is EU CBAM?. This guide covers the United Kingdom’s separate tax and should not be used to apply EU CBAM rules to UK imports.

The UK Carbon Border Adjustment Mechanism (UK CBAM) is a new UK tax charged on the greenhouse gas emissions embodied in certain imported aluminium, cement, fertiliser, hydrogen, and iron and steel goods. It applies to goods imported into the UK on or after 1 January 2027 (Finance Act 2026, s.158).

The person liable is the importer, generally the person in whose name, or on whose behalf, the customs declaration is made. An importer only has to register once its CBAM goods reach £50,000 in customs value. That is measured with two tests: a look-back over the previous 12 months, checked on the first day of each month, and a look-ahead over the next 30 days. This is a value test. It is not the EU's 50-tonne test.

Once an importer is registered, its liability is broadly the embodied emissions × the sectoral CBAM rate, minus any Carbon Price Relief for qualifying carbon prices already paid overseas. The embodied emissions come from verified supplier data or from government default values. The rate is set every quarter from UK ETS auction prices, reduced to reflect free allocation.

2027 is treated as a single annual accounting period. Businesses that become liable during 2027 have until 31 January 2028 to register. The first return and payment are due by 31 May 2028. Record-keeping starts on 1 January 2027.

This guide explains each step, with links to the legislation and HMRC guidance behind it, three worked examples and a detailed UK–EU comparison.

UK CBAM at a glance

What is UK CBAM?

UK CBAM is a tax charged on the emissions embodied in specified imported goods. Part 5 of the Finance Act 2026 creates it, and HMRC collects and manages it. Its stated purpose is to make carbon-intensive imports face a carbon price comparable to the one UK producers pay under the UK Emissions Trading Scheme (UK ETS), so that UK decarbonisation is not undone by production moving overseas (HMRC policy summary).

Three structural features distinguish it from EU CBAM:

1. It is a tax paid with a return. There are no CBAM certificates to buy and surrender. The importer calculates the liability on a return and pays HMRC.
2. It has no reporting-only transition. The charge applies from the first day, 1 January 2027. The only transitional features are a longer first accounting period and a later first registration deadline.
3. Registration depends on value, not weight. The £50,000 tests use the customs value of CBAM goods.

The government's tax information and impact note estimates Exchequer receipts of £140 million in 2027–28, rising to £180 million in 2028–29 (TIIN, updated 9 September 2026). HMRC also estimates that the £50,000 threshold removes over 80% of otherwise affected importers, and that over 70% of those removed are SMEs (same source).

Where the law stands: enacted, made, draft and pending

When does UK CBAM start?

UK CBAM applies to CBAM goods imported into the UK on or after 1 January 2027 (FA 2026 s.158(1)). Goods imported before that date are outside the charge and do not count towards the registration threshold (HMRC: work out the date you'll need to register).

"Imported" has a specific meaning. In most cases the tax point is when a CBAM good becomes liable to import duty, or would do so if the duty had not been disapplied. For goods not subject to import duty, it is when the goods enter the UK (HMRC policy summary, section 4; FA 2026 s.144). Goods held in a customs warehouse, a freeport customs site or inward processing therefore reach the tax point only when they are released into free circulation.

The date matters twice. It decides whether the goods fall within UK CBAM at all, and it decides which quarterly CBAM rate applies to them.

Which sectors and products are covered?

UK CBAM covers five sectors at launch: aluminium, cement, fertiliser, hydrogen, and iron and steel (FA 2026 s.143(3)). Within those sectors it applies only to the goods listed by commodity code in Schedule 16.

The gases are listed in the annex to the HMRC policy summary.

What is not covered at launch:

• Electricity. It is not one of the Schedule 16 sectors, and HMRC lists it as excluded. EU CBAM, by contrast, covers imported electricity.
• Glass and ceramics. They were proposed in December 2023 but dropped from the 2027 scope (HMT factsheet, 28 November 2025). The government says sector scope will be "kept under review beyond 2027".
• Refined oil products. These are not in scope. The government has said it is considering the feasibility of including refined products in future (same factsheet). This is a policy consideration, not a legislated extension.

Which commodity codes are covered?

Coverage is decided by the commodity code under which the good is correctly classified, not by whether it is loosely described as "a steel product" or "an aluminium product." Schedule 16 defines CBAM goods by reference to the UK's Goods Classification Table. The ordinary customs classification rules apply for CBAM purposes (Sch 16 para 2). The return asks for the 8-digit commodity code in force when the good passed the tax point (SI 2026/802 reg 10; policy summary, section 7).

This has practical consequences:

• Many downstream articles are outside scope. A steel-framed machine, a car part or an aluminium kitchen utensil is not a CBAM good unless it is classified under a listed code. Heading 7615 (aluminium table and kitchen articles), for example, is not listed.
• Scrap is excluded where the table says so. Ferrous waste and scrap (7204) is expressly excepted. Aluminium waste and scrap (7602) is simply not listed. HMRC confirms that imported scrap in the aluminium and iron and steel sectors is outside scope "identified via their relevant commodity code" (policy summary, section 3).
• Some ferro-alloys are excepted. These include ferro-silicon, ferro-silico-manganese, ferro-molybdenum and others under 7202. Other 7202 codes remain in scope.
• Scope follows tariff changes. HMRC may amend Schedule 16 when the tariff nomenclature changes, so that goods do not fall in or out of scope by accident (Sch 16 para 2(3)).
• The UK and EU lists are close but separate. The UK list closely follows the EU's Annex I headings, minus electricity, but it is a separate legal text. For example, Schedule 16 lists 2507 00 80 ("other kaolinic clays") without the "except non-calcined kaolinic clays" qualification now printed in the EU Annex I. Codes should be checked against each regime's own list.

HMRC publishes sector-by-sector tables in Check which goods are in scope of CBAM. Classification itself is a customs determination, and CBAM Pulse cannot make it for you. Where a code is uncertain, the usual routes are HMRC's classification guidance or an advance tariff ruling.

Goods processed in the UK under special procedures. If a CBAM good is processed under inward processing, customs warehousing, a free zone or authorised use into a non-CBAM good that is then released into free circulation, CBAM is still charged. It applies only to the emissions embodied in the original CBAM good (FA 2026 s.145). If the processed good is exported before the tax point, there is no liability.

Geographic scope, Northern Ireland and the Crown Dependencies

UK CBAM applies across the whole UK, including Northern Ireland. HMRC also states that goods entering the UK from the Crown Dependencies, including the Isle of Man, from the Overseas Territories and from the UK Continental Shelf "will be subject to CBAM" (policy summary, section 3).

The Act contains specific tax-point rules for:

• Union goods entering Northern Ireland;
• goods arriving from the Isle of Man;
• certain goods moved from Northern Ireland to Great Britain (s.144(5)–(6)).

Valuation for Union-customs-code movements follows the Union Customs Code (SI 2026/802 reg 3). A Northern Ireland-specific relief applies to Union goods exported from Northern Ireland to the EU and re-imported within three years in the same state (s.147(2)(d)).

Goods of UK origin are not charged (s.147(2)(a)). Origin follows the UK's non-preferential rules of origin, not the country of shipment.

Whether and how EU CBAM applies in Northern Ireland under the Windsor Framework is a separate question, and the UK legislation does not answer it. Northern Ireland businesses with EU-facing trade should take specific advice.

Who is responsible for paying UK CBAM?

The importer is liable (FA 2026 s.146). Where a customs declaration is made, the importer is the person in whose name it is made. If the declaration is made on behalf of someone else, it is the person on whose behalf it is made. Where no declaration is required, it is the person on whose behalf the good is imported.

HMRC's guidance is explicit: if a tax agent, employee, freight forwarder, haulier, customs broker, express operator or fast-parcel operator imports goods or completes the declaration on your behalf, you are still classed as the importer (HMRC: check if you're classed as the importer). The importer can be established in the UK or outside it (same source).

A liable person may appoint a tax agent to submit CBAM returns. HMRC states that the agent "cannot register for CBAM on behalf of the liable person and no liability will be attached to the tax agent" (policy summary, section 4).

Using a customs broker does not move CBAM liability to the broker. What matters is whose name, or whose behalf, the declaration is made in. Contracts that move the economic cost (for example Incoterms, surcharges or indemnities) are commercial arrangements and do not change who the statutory importer is.

Private individuals importing for non-business purposes are not liable (s.147(1)(b)). "Business" includes public bodies and charities acting for commercial purposes (s.155).

The £50,000 UK CBAM threshold explained

A person must register with HMRC once it "triggers registration" under either of two statutory tests in Schedule 17, paragraph 2(2):

If both tests are met, the earlier date applies (HMRC). During 2027 the look-back only reaches back to 1 January 2027 (policy summary).

Which value counts. The threshold uses the customs value, determined under Part 12 of the Customs (Import Duty) (EU Exit) Regulations 2018. Where no duty applies, the value is worked out as if those rules applied. Union-code movements use the UCC valuation rules (SI 2026/802 reg 3). All CBAM goods count together across all five sectors, including hydrogen. It is not a per-sector or per-code threshold.

Why this is not the EU's 50-tonne test. EU CBAM exempts an importer whose covered imports total no more than 50 tonnes of net mass in a calendar year. That exemption does not apply to electricity or hydrogen (Regulation (EU) 2023/956, Article 2a). A UK importer of a few tonnes of high-value steel tubes can exceed £50,000 while being far below 50 tonnes. A bulk importer of cheap clinker can do the reverse. The two tests have to be tracked separately. For the other jurisdiction, see the EU CBAM 50-tonne threshold.

Three points that are easy to miss:

1. The threshold is an entry test, not an allowance. A person who has triggered registration becomes a "registrable person" until registered, and then a "registered person" until HMRC deregisters them (Sch 17 para 2(10)). HMRC deregisters a person only when satisfied they are no longer required to be registered. It may refuse where returns or tax are outstanding, or where it expects the person to be required to register again within 12 months (para 3).
2. Imports before the trigger date are treated differently. Section 147(1)(a) states that CBAM is not charged where, at the time of import, the importer is neither registrable nor registered. This appears to distinguish imports made before the registration trigger from later imports. Imports before the trigger still count towards the threshold and must be recorded (see record keeping). Businesses relying on this treatment should verify it against current HMRC guidance or professional advice.
3. Splitting activities to stay under the threshold can be counteracted. HMRC can direct that connected persons whose activities have been "artificially separated" be treated as a single taxable person (Sch 17 Part 7).

What imports do not count toward the threshold?

HMRC lists the cases where imported CBAM goods do not contribute to the £50,000 threshold (HMRC guidance, 16 July 2026; Sch 17 para 2(3)):

• Private, non-business imports.
• Goods of UK origin under non-preferential rules of origin.
• Goods re-imported with returned goods relief (generally within three years, unaltered). This includes Union goods exported from Northern Ireland to the EU and re-imported within three years in the same state.
• Temporary admission with full duty relief. If the goods are later released into free circulation with duty due, their value then counts. Partial or no relief means the value counts from entry.
• Goods under a special customs procedure such as inward processing, customs warehousing, a freeport customs site or authorised use, until they are released into free circulation. Goods processed into a non-CBAM good count only for the value of the original CBAM good they contain. Goods exported before the tax point do not count at all.
• Outward processing. Only the increase in value counts. HMRC's example: goods exported at £70,000 and re-imported at £130,000 add £60,000 to the threshold.

UK CBAM registration: dates and information required

Normally, a person must register within 30 days of the day it first triggers registration (Sch 17 para 2(4)). For anyone who triggers registration in 2027, the deadline is 31 January 2028 (SI 2026/830 reg 2(2)). HMRC says the registration service "will open by 1 January 2028" (HMRC registration collection). The 2027 extension does not apply to triggers in 2028, where the normal 30-day rule applies.

A later registration deadline does not postpone liability for 2027. A person who becomes registrable during 2027 is liable for chargeable imports from their trigger date, must keep records from 1 January 2027, and must file the 2027 return by 31 May 2028.

Registration is through a Government Gateway account. The following information is required (SI 2026/802 reg 7):

• name, contact details and principal place of business;
• business type;
• EORI number;
• VAT number, if any;
• the date registration was triggered;
• the value of CBAM goods imported, or expected, in the relevant test period;
• the estimated weight of CBAM goods by sector for the next 12 months.

Evidence supporting these entries must be kept (reg 8). Registered persons must notify HMRC of changed or incorrect registration information within 30 days (Sch 17 para 4).

How UK CBAM liability is calculated

Conceptual formula:

UK CBAM liability = (embodied emissions in tCO₂e × sectoral CBAM rate for the quarter of import) − Carbon Price Relief where embodied emissions = net weight of the imported good (tonnes) × emissions intensity (tCO₂e per tonne).

The charge is set by FA 2026 s.149(1). Relief is capped at the liability (SI 2026/809 reg 13(6)). The detailed method is in SI 2026/995 and the draft notices.

Each element in turn:

• Weight is the weight of the good excluding packing materials and containers, at the time of import, reported in kilograms (SI 2026/802 reg 4). HMRC converts it to tonnes. HMRC's record guidance follows the customs net-mass convention (data element 6/8) (HMRC records guidance). If weight is wrong or unsupported, HMRC may determine it using estimates, comparisons or other evidence (SI 2026/802 reg 12).
• Emissions intensity is either a verified actual figure from the producing installation or a UK default value (see the next section). For cement and fertilisers, the functional unit is tonnes of clinker and tonnes of nitrogen respectively. Intensity is converted to a per-tonne figure for the imported product using equations in the Emissions and Verification notice (policy summary; SI 2026/995 reg 5(4)–(5)).
• Rate is the sectoral domestic price for the sector and the quarter in which liability arises (s.149(2)). This is why the 2027 annual return must state the quarter in which each good passed the tax point.
• Carbon Price Relief is available where the embodied emissions were subject to a qualifying overseas carbon pricing scheme and the verification evidence is in place (see Carbon Price Relief).

HMRC may require use of a digital facility to calculate the CBAM shown on a return (Sch 17 para 7(4)(b)).

What "embodied emissions" means: direct emissions, precursors, system boundaries

UK CBAM charges direct emissions only at launch. Including indirect emissions (electricity used in production) has been delayed until 2029 at the earliest "to reflect continued support for the Energy Intensive Industries (EII) Compensation Scheme" (HMT factsheet; TIIN).

• System boundaries define which production processes and which emissions count for each good. They mirror UK ETS boundaries and are set out in the System Boundaries Document v1.00. The same document identifies precursors and explains how to determine weight.

• Precursors. A precursor is a CBAM good used to make another CBAM good. The resulting product is a complex good. Its embodied emissions include the emissions embodied in its relevant precursors, for example crude steel in a steel tube (SI 2026/995 regs 5 and 7). The same regulations include special rules for joint production (precursor and final good made at one installation) and for multifunctional production.

• Greenhouse gases other than CO₂ are converted to CO₂e: N₂O = 265, CF₄ = 6,630, C₂F₆ = 11,100 tCO₂e per tonne (SI 2026/995 reg 8).

• The installation's calculation, in outline (SI 2026/995 reg 5):

  1. Identify the calendar-year monitoring period.
  2. Attribute the verified relevant emissions to that type of good.
  3. Convert non-CO₂ gases to CO₂e.
  4. Total the emissions.
  5. Add precursor emissions.
  6. Divide by the tonnes of that good produced, rounding to five decimal places.

  The importer then multiplies that intensity by the imported weight.

Actual emissions vs default emissions values

For each imported good, the importer chooses between verified actual emissions data from the producing installation and a UK government default value (SI 2026/995 regs 4–5). If actual data is unavailable, or its verification cannot be evidenced, the default value must be used (HMRC records guidance).

Using verified actual data

To use actual emissions, an importer needs from its supply chain:

• the emissions intensity of the specific good (tCO₂e per tonne or functional unit), calculated under SI 2026/995 and the Emissions and Verification notice;
• evidence that the data was verified as satisfactory: the verifier's verification report or a good-specific verification summary (SI 2026/995 regs 14 and 16);
• the monitoring period the intensity relates to;
• for complex goods, confirmation of how precursor emissions were treated (actual or default).

Which monitoring year may be used (SI 2026/995 reg 9):

HMRC's worked reading for 2027 is that for a good imported in May 2027, the importer "must use verified emissions intensity data from the January to December 2027 monitoring period if it exists". If no verified 2027 data exists, 2026 data can be used (policy summary). The first return is not due until 31 May 2028, so suppliers' verified 2027 data may exist by the time it is prepared. Importers should agree with each supplier which verified year will be available and when.

Using default values

• One default value per CBAM good. From 1 January 2027 there will be a single default value for each CBAM good. HM Treasury will publish the values in a notice before CBAM starts and may amend them later (policy summary; Sch 17 para 11).
• How the calculation works. Embodied emissions = weight × default value (SI 2026/995 reg 4). No verification report is required (reg 16(2)).
• Set so as to remove any advantage. The Act allows default values to be set "at a level that ensures that there would not be an advantage" to using them. That explicitly includes the advantage of not bearing the cost of determining or verifying actual emissions (Sch 17 para 11(3)–(4)).
• Mixing actual and default data. Default values can be used for precursors even when actual data is used for the final good. The reverse is not allowed: actual precursor data cannot be used if the final good uses a default (policy summary).
• Status. As of 30 September 2026, the UK default values notice has not been published. CBAM Pulse will not estimate UK default values. EU CBAM default values are a different dataset under different law and should not be used as a proxy. See EU CBAM default values versus actual emissions for that separate regime.

The choice cannot be reversed later

A filed return cannot be amended to replace default-value emissions with actual emissions (Sch 17 para 8(2)). Amendments are otherwise allowed only to correct errors, within three years of the end of the accounting period (policy summary). Verified supplier data that arrives after a return has been filed using defaults cannot be used to reclaim tax on that return. The data strategy therefore has to be settled before each return is filed.

Why accurate supplier data may be worth the cost

If the default values are set to remove any advantage, as the Act allows, they will tend to be higher than a typical installation's verified intensity. Whether actual data pays off depends on:

• the import volume;
• the gap between the supplier's verified intensity and the published default;
• the sectoral rate;
• the cost of obtaining the data and the verification.

Actual data also underpins Carbon Price Relief, which needs verified installation data (see below). The trade-off cannot be quantified until the defaults and rates are published. The data request, however, needs to go to suppliers well before the 2027 return is prepared.

Supplier data and verification requirements

Actual emissions data counts only if an independent, accredited verifier has confirmed it as satisfactory. The installation, not the importer, appoints the verifier (policy summary).

Verifier requirements (SI 2026/995 reg 12; policy summary):

• independent of the importer, the producing installation and any precursor installation;
• accredited for the relevant activity scope (a fertiliser-accredited verifier is not automatically eligible for steel);
• accredited to ISO/IEC 17029:2019 and ISO 14065:2020;
• accredited by an accreditation body that is a full member of the Global Accreditation Cooperation Incorporated (Global ACI) and meets the notice's requirements (reg 15).

Verification activities described in the policy summary:

• strategic and risk analysis;
• a verification plan;
• a team led by a lead auditor, with an independent reviewer;
• a physical site visit during the monitoring period, subject to exceptions in the notice;
• a 5% materiality threshold on the good's emissions intensity.

The verifier issues a verification report to the operator. It may attach good-specific verification summaries, which the operator can send to the importer instead of the full report. The importer must keep the report or summary for six years (SI 2026/995 reg 16).

The policy summary states the UK methods are "broadly designed to support interoperability with the EU CBAM." The UK nonetheless has its own verification and accreditation rules. An EU CBAM verification report should not be assumed to satisfy UK requirements (or the reverse) without checking the verifier's accreditation and the report's content against both regimes. HMRC says further guidance on monitoring, verifying and reporting actual emissions will follow "later this year" (HMRC records guidance).

Carbon Price Relief for carbon prices paid overseas

Carbon Price Relief (CPR) reduces UK CBAM liability where the embodied emissions were subject to a qualifying carbon pricing scheme and the importer holds a completed, independently verified carbon pricing verification form (FA 2026 s.150; SI 2026/809 Parts 3–5). The importer calculates the relief itself. The relief cannot exceed the CBAM liability.

Qualifying carbon pricing schemes

A qualifying scheme is a carbon tax, an emissions trading scheme, or a charge on the embodied emissions of imported goods that meets all of these conditions (SI 2026/809 reg 6):

• It is administered by or for a city, region, national government or supra-national body, which also determines how the revenue is used.
• Participation is mandatory by law for CBAM-producing installations, or for those above an emissions level.
• It imposes a cost on relevant emissions, directly or indirectly. Indirect pricing must use emissions factors from sources named in a Treasury notice. The policy summary names IPCC, IEA and UNFCCC methods.
• Its rules, scope and headline price are publicly available.

HMRC's provisional list, based on information as of 19 June 2026, names 16 schemes (UK CBAM: current qualifying carbon pricing schemes, 27 August 2026):

• Australia Safeguard Mechanism
• Canada Federal Output-Based Pricing System
• Chile Carbon Tax
• China National ETS
• EU ETS
• India Carbon Credit Trading Scheme
• Japan GX-ETS
• Kazakhstan ETS
• Korea ETS
• Montenegro ETS
• New Zealand ETS
• Serbia Carbon Tax
• Singapore Carbon Tax
• South Africa Carbon Tax
• Swiss ETS
• Taiwan Carbon Fee

HMRC states the list is not exhaustive. It will be updated, and a scheme that stops meeting the criteria stops qualifying.

Paying an environmental charge overseas does not automatically qualify. Emissions covered by free allowances, or falling below a threshold, have a zero price and generate no relief. Rebates and compensation reduce the relief. HMRC notes that where all emissions are covered by free allowances, or a scheme gives full rebates, "no carbon price relief will be available" (same source).

Evidence and verification

The importer must obtain the carbon pricing verification form from the installation or the supply chain. It must be completed by a verifier that is:

• accredited by a Global ACI full member;
• accredited to ISO/IEC 17029:2019, ISO 14064-3:2019, ISO 14065:2020 and ISO 14066:2023;
• independent of the installation, the importer and the authorities administering the scheme (SI 2026/809 regs 7–9; HMRC: get a carbon pricing verification form).

The form records the installation's total relevant emissions for one of the two calendar years before the year of import, broken down by scheme element. For 2027 imports, that means 2025 or 2026 data. The elements are headline price, free allowances, thresholds, graduated prices and greenhouse-gas removals, plus any compensation. No relief is available without a valid form (HMRC).

How CPR is calculated

HMRC's method (HMRC: work out your CPR; SI 2026/809 regs 12–14):

1. Take the installation's total relevant emissions from the form.
2. Split them by scheme element.
3. Multiply each priced element by its publicly available price. Where the price varies, use the mean over the calendar quarter before the quarter of import. Add the results together.
4. Divide by the total emissions to get the effective carbon price.
5. Deduct any compensation per tonne.
6. Multiply the effective carbon price by the embodied emissions that were subject to the scheme.
7. Convert to sterling using HMRC's exchange rate for the calendar quarter before the import, rounding down to two decimal places. HMRC says it will publish these rates from 1 January 2027.

Goods subject to more than one scheme, including through precursors, need a separate calculation for each scheme.

Hypothetical illustration (not real prices): an installation emitted 1,000,000 tCO₂e. 700,000 t were covered by free allowances and 300,000 t were priced at a hypothetical €30. The effective carbon price is (300,000 × €30) ÷ 1,000,000 = €9.00/tCO₂e. That is far below the €30 headline price because free-allocated emissions carry no price. Worked example 2 carries this through to a liability.

UK CBAM rates and the UK ETS

The UK CBAM rate is the "sectoral domestic price," calculated and published by HM Treasury for each sector for each quarter (FA 2026 s.149). It is not the current UK ETS allowance (UKA) market price.

The statutory method for quarter Q has two steps:

1. Average ETS price. Take the mean of all UK ETS auction clearing prices in the quarter before quarter Q. If no auctions cleared, use the most recent quarter in which allowances were sold (SI 2026/809 reg 3). A consequence is that the Q1 2027 rate will be based on UK ETS auctions held in October–December 2026.
2. Free-allocation adjustment. Reduce that price by the sector's baseline free allocation percentage, multiplied by a reduction factor. The baseline percentage is the average share of UK sectoral emissions covered by free allowances in the 2019 (EU ETS), 2022 and 2023 (UK ETS) scheme years, ignoring years with no sectoral emissions (s.149(3)–(5)).

Sectoral CBAM rate = average UK ETS auction price (previous quarter) × [1 − (baseline free allocation % × UK CBAM reduction factor)]

The reduction factor is the "UK CBAM reduction factor" that the UK ETS rules apply to free allocation for CBAM sub-installations (SI 2026/809 reg 4). The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026 (SI 2026/278) sets it at:

Each value can be changed by an order made before the end of the preceding year.

The UK ETS Authority has decided to phase out free allocation for CBAM sectors over an indicative nine years from 2027 (HMT factsheet). As free allocation falls, the adjustment shrinks and the CBAM rate moves closer to the full average auction price.

Rates are published at the beginning of each quarter from 1 January 2027. The rate that applies is the one for the quarter in which the good was imported (policy summary). The government promised an illustrative example CBAM rate in Autumn 2026. As of 30 September 2026, HM Treasury has not published the illustrative rate or the sectoral figures that will feed the calculation.

Hypothetical illustration only. Suppose the average auction price is a hypothetical £50.00 and a sector's baseline free allocation percentage is a hypothetical 60%. With the 2027 factor of 0.975, the adjustment is 60% × 0.975 = 58.5%, and the rate is £50.00 × (1 − 0.585) = £20.75/tCO₂e. This is not a government figure. It shows why the CBAM rate can sit well below the UKA price while free allocation remains high.

UK CBAM deadlines, returns and payments

2027 is a single annual accounting period, with the return and payment due by 31 May 2028. From 2028, periods are quarterly, and the return and payment are due by the last working day of the second month after the quarter ends. Transitional dates apply to the first two quarters of 2028 (Sch 17 paras 6–7; SI 2026/830 reg 2; policy summary).

Note on the Q3 2028 deadline. HMRC's policy summary currently publishes 30 November 2028. Finance Act 2026 s.155 defines "working day" in a way that creates a potential discrepancy: 30 November is St Andrew's Day, a Scottish bank holiday under the Banking and Financial Dealings Act 1971. CBAM Pulse has not independently resolved the discrepancy. Check current HMRC guidance before relying on the deadline.

What a return contains, for each consignment and each different good (SI 2026/802 reg 10, as amended by SI 2026/995 reg 17; policy summary):

• the 8-digit commodity code;
• the net weight in kg;
• the verified emissions intensity, or the default value used;
• the CPR amount in GBP;
• the place of origin under non-preferential rules;
• whether a UK-origin CBAM input was used;
• for 2027, the quarter in which the good passed the tax point;
• a declaration that the return is true and accurate.

Nil returns. A registered or registrable person must file a return for every period, even if the liability is nil. That includes periods with no CBAM imports, or where CPR reduces the liability to zero (policy summary; Sch 17 para 7).

Payment methods listed by HMRC: Direct Debit, BACS/CHAPS, Payment Initiation Service Provider, Faster Payment, credit or debit card, and cheque.

Corrections. Returns may be amended to correct errors within three years of the end of the period, but not to swap default values for actual data (see above). Overpayment claims are limited to amounts paid within three years before the claim (Sch 17 paras 8, 25–26).

Record-keeping requirements

Every business that imports a CBAM good, not only registered persons, must keep records of that good from 1 January 2027, in writing (including electronically), for six years (SI 2026/802 regs 5–6; HMRC records guidance). The six years run from the end of the accounting period the record relates to, or from the date the record was created.

HMRC notes that customs declarations (C88/SAD), entry acceptance advice, bills of lading, commercial invoices, packing lists and carrier weight records can serve as evidence.

In practice: the data model is needed before the first return. A business that starts collecting supplier data in spring 2028 will find that verified 2027 data and CPR forms depend on suppliers' own verification cycles. Default-value returns cannot later be amended to use actual data.

Penalties and HMRC enforcement

UK CBAM largely plugs into existing UK tax penalty codes, with two fixed penalties specific to CBAM (Sch 17 Part 11). For the failure-to-notify and inaccuracy penalties, the Act provides that CBAM failures do not "involve an offshore matter," so only the standard (category 1) percentages apply. It also makes assessment of those penalties discretionary for HMRC ("may" rather than "shall") (Sch 17 paras 34, 36).

A reasonable-excuse defence applies to the £500 penalties. Insufficiency of funds is not a reasonable excuse, and neither is reliance on another person unless reasonable care was taken (Sch 17 para 40).

HMRC's wider powers:

• Assessment. Where there is a default, including failure to register, to file, to keep records, or filing an inaccurate return, HMRC may assess CBAM to the best of its judgement (Sch 17 para 20). The normal time limit is 4 years from the end of the accounting period, or 1 year from when HMRC has sufficient evidence if earlier. It extends to 20 years for deliberate conduct or failure to register or notify changes (para 24).
• Compulsory registration. HMRC can register a person who has not registered within the deadline (para 2(7)).
• Weight determination. HMRC can substitute its own determination of weight (SI 2026/802 reg 12).
• Information powers. HMRC's Schedule 36 information powers are extended to third parties involved in producing, importing, supplying, storing or transporting CBAM goods (FA 2026 Sch 19). The tax is also brought into the avoidance-disclosure and serial-avoidance regimes.
• Criminal offences. Fraudulent evasion (including wrongly obtaining relief or repayments) and knowing or reckless misstatement are criminal offences. Both carry up to 14 years' imprisonment on indictment (FA 2026 Sch 18).

UK CBAM vs EU CBAM

UK CBAM and EU CBAM are separate legal systems. They share a policy aim and a similar product list, but differ in legal form, threshold, pricing, filing calendar, emissions scope and penalties. A business importing covered goods into both markets may need to run both processes in parallel.

EU sources: consolidated Regulation (EU) 2023/956 (Articles 2a, 7, 9, 26; Annexes II, III, VII); Regulation (EU) 2025/2083; Implementing Regulation (EU) 2025/2621; Directive (EU) 2023/959; Commission: price of CBAM certificates.

For the EU side in more depth, see our guides to the EU CBAM 50-tonne threshold, EU CBAM certificate prices and the EU CBAM factor and free-allocation phase-in.

Could UK–EU ETS linkage change CBAM obligations?

Status on 30 September 2026: The UK and EU are negotiating an agreement to link the UK ETS and EU ETS. No linking agreement has been signed or brought into force, and no CBAM exemption exists in either direction. HMRC's policy summary (9 September 2026) states: "There are currently no jurisdictions exempt from CBAM." This section may change quickly.

The position so far:

• Political commitment (19 May 2025). The UK–EU Summit Common Understanding said the two sides "should work towards" linking their ETSs. It said the agreement "should create the conditions for goods originating in our jurisdictions to benefit from mutual exemptions from the respective European Union and United Kingdom Carbon Border Adjustment Mechanisms subject to compliance with the relevant provisions" of each side's law (Common Understanding, paras 35–37).
• Negotiations. Following the EU negotiating mandate, the UK says negotiations have begun. In December 2025 the two sides stated an aim to conclude them "by the time of the next EU-UK Summit" (UK–EU joint statement; UK ETS policy overview, updated 7 September 2026). The UK government says it "will not be providing a running commentary."
• UK legal mechanism. FA 2026 s.156 lets HM Treasury, by regulations subject to the affirmative procedure, exclude from UK CBAM the emissions in goods originating in a country with an ETS linked to the UK ETS. It also lets those goods be disregarded for the £50,000 threshold. No such regulations have been made.

Several steps would have to happen before an exemption applies: a concluded and signed agreement, its entry into force, UK regulations under s.156 and the corresponding EU legal changes. Until then:

• EU-origin goods imported into the UK are within UK CBAM from 1 January 2027. The EU ETS is on HMRC's qualifying-schemes list, so Carbon Price Relief may reduce the charge for emissions that actually carried an EU ETS price.
• UK-origin goods imported into the EU remain within EU CBAM.

What exporters to the UK need to know

Overseas producers are not liable for UK CBAM, but their data largely determines what their UK customers pay. The government's impact note expects overseas businesses to face additional costs if they choose to have their emissions and carbon price information verified (TIIN).

Exporters should expect UK customers to ask for:

• Installation-level verified emissions intensity per commodity code, for a named calendar year, with a verification report or good-specific summary from a verifier accredited under the UK rules.
• Production-process and precursor data. Which precursors were used, from which installations, and whether they were reported with actual or default values.
• A completed carbon pricing verification form, where the installation is covered by a qualifying scheme, showing emissions by scheme element and any compensation.
• Consistency between the weight, codes and origin on commercial documents and what the importer declares.

Producers already reporting for EU CBAM will find the concepts familiar: system boundaries, precursors and calendar-year monitoring. They should still check that their verifier's accreditation and report format meet UK requirements. Our EU CBAM supplier emissions data and EU CBAM verification rules guides cover only the EU side.

What customs brokers and advisers need to know

Brokers, forwarders and express operators do not become liable for UK CBAM by making declarations for a client (HMRC). Their role still changes:

• Data custody. They hold much of the data the importer needs: commodity codes, customs values, net mass, origin, procedure codes and dates. Clients will ask for CBAM-ready extracts.
• Classification exposure. Because scope follows the commodity code, a misclassification can move goods in or out of CBAM as well as change duty.
• Information requests. HMRC's Schedule 36 powers now reach persons involved in the importation, storage, transport or supply of CBAM goods (FA 2026 Sch 19).
• Agent role. A tax agent may file CBAM returns for a client but cannot register them, and does not take on the liability.

Beyond customs:

• Finance teams need accruals from 2027 for a liability first payable in May 2028.
• Procurement teams need supplier onboarding and contracts that address carbon data, verification and CPR evidence.
• ESG teams need to reconcile supplier emissions data with CBAM-grade verified data.
• Tax teams own registration, returns, penalty exposure and HMRC correspondence.

What UK importers should do before 1 January 2027

This checklist organises preparation. It does not guarantee a correct return or compliance.

1. Identify commodity codes. Extract every import line from the last 12–24 months and flag codes listed in Schedule 16. Check uncertain classifications.
2. Map covered import flows by sector, supplier, installation, origin and customs procedure (warehousing, inward processing, freeport, temporary admission).
3. Calculate historical and forecast customs value of CBAM goods. Model both the monthly 12-month look-back and the rolling 30-day look-ahead.
4. Set up threshold monitoring. Run a first-of-month check and a pre-shipment check for large orders. Record the date each test is met.
5. Confirm who the statutory importer is for each flow: own name, direct representation or indirect representation. Check non-UK-established importer arrangements.
6. Capture net weight in kg per consignment from declarations or supplier documents, excluding packaging.
7. Identify manufacturing installations, not just trading suppliers, for each CBAM good.
8. Send supplier data requests for verified intensities, monitoring years, precursor treatment and verifier details.
9. Decide an actual-vs-default strategy by supplier or good. Remember that a default-value return cannot later be amended to actual data.
10. Check verification. Confirm verifiers hold the right accreditation and scope, and agree when 2026 and 2027 reports will arrive.
11. Document overseas carbon prices. Check suppliers' schemes against HMRC's qualifying list and request carbon pricing verification forms for 2025 or 2026 emissions.
12. Configure internal records. Set up a CBAM ledger holding code, date, quarter, value, weight, origin, intensity source, verification reference, CPR evidence and exemption evidence, retained for six years.
13. Assign ownership across customs, tax, procurement, finance and sustainability, and decide whether a tax agent will file.
14. Monitor HMRC and HM Treasury publications: default values, quarterly rates, exchange rates, final notices and verification guidance.
15. Prepare for registration and the first return. Have Government Gateway access, EORI, VAT number and 12-month weight estimates by sector ready for when registration opens by 1 January 2028. Build the 2027 return file progressively rather than in May 2028.

Worked examples

All figures below are hypothetical and chosen for illustration. They are not HMRC or HM Treasury rates, default values, exchange rates or thresholds beyond those stated in legislation.

Example 1: An importer approaching the £50,000 threshold

Scenario A: backward-looking test. A UK distributor imports steel bolts (heading 7318) from a non-UK supplier. Customs values in 2027 are:

• On 1 May 2027, the look-back total is £42,000, so the test is not met.
• On 1 June 2027, the look-back total is £53,000, so the backward-looking test is met.
• No single 30-day window was expected to reach £50,000, so the forward-looking test was never met.

The backward-looking registration test is triggered on 1 June 2027 in this hypothetical example. Because the trigger falls in 2027, HMRC's transitional rule gives a registration deadline of 31 January 2028. Section 147(1)(a) states that CBAM is not charged where, at the time of import, the importer is neither registrable nor registered. This appears to distinguish the example's pre-trigger imports from later ones; businesses relying on this treatment should verify it against current HMRC guidance or professional advice. Records are needed for all these imports; the 2027 return is due by 31 May 2028, with quarterly returns after that.

Scenario B: forward-looking test. On 3 March 2027, a fabricator signs a purchase order for aluminium profiles (heading 7604) with an expected customs value of £190,000, arriving on 20 March 2027. On 3 March it expects to import £50,000 or more within 30 days, so registration is triggered on 3 March 2027. The 20 March consignment is imported while the business is registrable.

Example 2: A hypothetical UK CBAM liability calculation

Hypothetical assumptions:

• Import: 100.000 tonnes net of hot-rolled steel coil (chapter 72) on 15 May 2027 (Q2 2027).
• Verified actual emissions intensity: 1.90000 tCO₂e/t, from the 2026 monitoring period. This assumes no verified 2027 data exists for the good when the return is prepared; see the monitoring-period rules above.
• Hypothetical Q2 2027 iron and steel rate: £20.75/tCO₂e (from the illustration in UK CBAM rates).
• The producing installation is covered by a qualifying ETS with a hypothetical effective carbon price of €9.00/tCO₂e (from the CPR illustration), based on a verified form for 2026 emissions.
• Hypothetical HMRC exchange rate for Q1 2027: €1.18 = £1.

The ETS headline price (€30 in the illustration) is irrelevant on its own. Relief follows the effective price after free allocation.

If the importer had used the UK default value, embodied emissions would be 100 t × the published default. CPR would then depend on how HMRC's notice treats default values in the relief calculation (SI 2026/809 reg 13(3)). That cannot be modelled until both are published.

Example 3: One group importing into both the UK and the EU

A group imports steel fasteners (7318) from the same non-EU, non-UK producer. Its UK company imports into the UK and its Dutch subsidiary imports into the Netherlands. In the calendar year:

The same producer data may support both regimes, but not automatically. Each requires verification under its own accreditation rules. The UK uses a single default per good while the EU uses country-specific defaults with mark-ups. Each has its own evidence requirements for foreign carbon prices.

For fertilisers or cement, the gap widens further: EU CBAM counts indirect emissions for those goods, while UK CBAM does not. A group should therefore run two threshold monitors, two data specifications and two filing calendars. Assuming the heavier regime covers the lighter one does not work.

Common UK CBAM mistakes

What is still to be confirmed before UK CBAM starts?

Checked on 30 September 2026:

• UK default emissions values. The HM Treasury notice has not been published. HMRC says the values will be set "later this year."
• UK CBAM rates. No quarterly rate, sectoral baseline free allocation percentage or illustrative example rate (promised for Autumn 2026) has been published.
• HMRC exchange rates for CPR. To be published from 1 January 2027.
• Force-of-law notices. Both are drafts, due to take effect from 1 January 2027 once commenced. Final text should be checked then.
• Guidance on monitoring, verifying and reporting actual emissions, including what counts as a "good-specific verification summary." HMRC says this will follow "later this year."
• CPR details, including how default values interact with relief (SI 2026/809 reg 13(3) notice) and updates to the qualifying-schemes list.
• Registration service. Due to open by 1 January 2028.
• SI 2026/809 approval. Made and laid; Commons approval was pending on 30 September. Parliament's SI tracker lists a 12 October Delegated Legislation Committee debate and the approval period ending 20 October 2026. Check the live tracker for subsequent changes.
• UK ETS reduction factors. Each year's factor can be changed by order before the end of the preceding year.
• Q3 2028 filing date. HMRC publishes 30 November 2028; St Andrew's Day creates a potential statutory-working-day discrepancy that CBAM Pulse has not independently resolved. Check current HMRC guidance before relying on the date.
• UK–EU ETS linkage. Under negotiation; no exemption in force.
• Indirect emissions. Excluded; not before 2029.
• Future sector expansion. Refined products are under consideration. Glass, ceramics and other sectors are kept under review.

Frequently asked questions

What is UK CBAM? UK CBAM is a UK tax on the greenhouse gas emissions embodied in certain imported aluminium, cement, fertiliser, hydrogen, and iron and steel goods. It is created by Part 5 of the Finance Act 2026 and administered by HMRC.

When does UK CBAM start? It applies to CBAM goods imported into the UK on or after 1 January 2027.

What is the UK CBAM threshold? A business must register once its CBAM imports reach £50,000 in customs value. This is tested on the first day of each month over the previous 12 months, or on any day where £50,000 or more is expected within the next 30 days.

Is the UK CBAM threshold £50,000 or 50 tonnes? £50,000 in value. The 50-tonne net-mass test belongs to EU CBAM.

Which sectors are covered by UK CBAM? Aluminium, cement, fertiliser, hydrogen, and iron and steel, limited to the commodity codes listed in Schedule 16 to the Finance Act 2026.

Is electricity covered? No. Electricity is not a UK CBAM sector at launch, unlike EU CBAM.

Are glass and ceramics covered? No. They were dropped from the 2027 scope. The government says sector scope will be kept under review.

Who pays UK CBAM? The importer: the person in whose name, or on whose behalf, the customs declaration is made, whether established in the UK or not.

Does my customs broker pay CBAM? No. HMRC states that you remain the importer when a customs broker, forwarder or agent declares goods on your behalf. A tax agent can file returns but cannot register you, and takes on no liability.

How is UK CBAM calculated? Embodied emissions (net weight × emissions intensity) × the sectoral CBAM rate for the quarter of import, minus any Carbon Price Relief for qualifying overseas carbon prices.

What is a UK CBAM default emissions value? A standard emissions intensity per CBAM good set by HM Treasury notice, used when verified actual data is unavailable. As of 30 September 2026, the values have not been published.

Can I use actual supplier emissions? Yes, if the producing installation's emissions intensity has been verified by an independent verifier accredited under the UK rules, and you hold the verification report or good-specific summary.

Do emissions need to be verified? Yes, for actual data. Default values do not need verification.

When is the first UK CBAM return due? By 31 May 2028, covering 1 January to 31 December 2027.

When must UK CBAM first be paid? Also by 31 May 2028. Quarterly returns and payments follow from 2028.

Is UK CBAM the same as EU CBAM? No. They are separate regimes with different thresholds, liable persons, pricing, filing calendars and emissions scope. Businesses trading into both may need to comply with both.

Will UK goods be exempt from EU CBAM if the UK and EU link their ETS systems? The 2025 Common Understanding says a linking agreement should create the conditions for mutual CBAM exemptions. As of 30 September 2026, no agreement or exemption is in force.

What should businesses do now? Identify covered codes, monitor the £50,000 tests, keep records from 1 January 2027, request verified emissions and carbon-price evidence from suppliers, and follow HMRC's publication of default values and rates.

Final takeaway

UK CBAM is not a future consultation. It is enacted UK tax law that starts charging on 1 January 2027. The first payment is not due until 31 May 2028, which makes it easy to postpone, but the inputs that decide the bill are set during 2027:

• which imports are covered codes;
• when the £50,000 threshold is crossed;
• whether suppliers deliver verified emissions data;
• whether overseas carbon prices can be evidenced;
• whether records exist for every consignment.

The two most important numbers, the default values and the quarterly rates, were still unpublished as of 30 September 2026. Businesses can nevertheless build the data process now, so that the calculation can be run once HMRC and HM Treasury publish them.

Primary sources

• Finance Act 2026, Part 5 (ss.142–158) and Schedules 16–19
• The Carbon Border Adjustment Mechanism (Administrative Provisions) Regulations 2026, SI 2026/802
• The Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026, SI 2026/809
• The Carbon Border Adjustment Mechanism (Transitory Provision) Regulations 2026, SI 2026/830
• The Carbon Border Adjustment Mechanism (Emissions and Verification) Regulations 2026, SI 2026/995
• The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026, SI 2026/278 (UK CBAM reduction factors)
• HMRC: CBAM policy summary (updated 9 September 2026)
• HMRC: Prepare for the Carbon Border Adjustment Mechanism (collection)
• HMRC: Force-of-law notices (draft), System Boundaries Document and carbon pricing verification form
• HMRC: Current qualifying carbon pricing schemes (27 August 2026)
• HM Treasury: CBAM factsheet (28 November 2025)
• HMRC: Tax information and impact note (updated 9 September 2026)
• UK–EU Summit Common Understanding (19 May 2025) and UK ETS policy overview (updated 7 September 2026)