UK CBAM 2027: What Importers Need to Know

UK CBAM: the basics

The UK is launching its own carbon border adjustment mechanism on 1 January 2027, a year after the EU's definitive regime. The policy summary published by HMRC (updated 16 July 2026) sets out the full picture.

"CBAM will commence on 1 January 2027." HMRC, Carbon border adjustment mechanism (CBAM): Policy Summary (updated 16 July 2026)

The mechanism is being set up through two layers of legislation. The primary legislation is the Finance Act 2026 (ukpga/2026/11). The secondary legislation went through two consultation rounds, February to March 2026 and April to May 2026, and the final rules are to be laid later in 2026.

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Scope: which goods are covered

Sector	Covered from 1 Jan 2027
Aluminium	Yes
Cement	Yes
Fertiliser	Yes
Hydrogen	Yes
Iron and steel	Yes
Glass	No (excluded)
Ceramics	No (excluded)

A few scope rules matter up front. The mechanism applies to direct emissions, plus relevant precursor goods for complex goods. Indirect emissions (from electricity generation) are not in scope at launch; the government has said their inclusion is delayed until 2029 at the earliest. Coverage is determined by specific 8-digit commodity codes, with scrap excluded for aluminium and iron and steel. It applies across the whole UK, including Northern Ireland, the Crown Dependencies, the Overseas Territories, and the UK Continental Shelf.

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Registration threshold: £50,000

A minimum registration threshold applies, based on the total value of CBAM goods imported over a rolling 12-month period:

Threshold	Effect
£50,000 or more	Must register with HMRC, submit returns, pay CBAM
Below £50,000	No registration, no returns, no payment

"There will be a £50,000 minimum registration threshold when applying the CBAM liability tests." HMRC, CBAM Policy Summary (2026)

HMRC estimates this threshold removes over 80% of otherwise-affected importers (predominantly SMEs) from direct registration while capturing the vast majority of the carbon leakage risk.

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Calculating CBAM liability

The formula:

CBAM liability = (embodied emissions × CBAM rate) − carbon price relief (CPR)

Liability is computed as embodied emissions times the CBAM rate, minus any carbon price relief. The CBAM rate is a single rate per sector, not one uniform price. It is calculated from the average UK ETS allowance auction clearing price in the preceding quarter, reduced by a free-allocation adjustment that reflects the sector's historical free allowance coverage and phases out over time. Rates are published quarterly by the government ahead of each operational quarter and are set out in SI 2026/809 (Calculation of CBAM Rate and Determination of Carbon Price Relief).

Emissions are determined one of two ways: actual verified emissions, supported by independent verification reports compliant with international accreditation, or default emissions values published by the government for each good. From 1 January 2027 there is a single default value per good.

Carbon Price Relief is claimable if the goods already paid a qualifying carbon price abroad. It requires verification documentation and calculation records.

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Timing and accounting

Event	Date
UK CBAM commences	1 January 2027
Monitoring period for 2027 imports	January-December 2027
First returns/payments	31 May 2028 (5 months after year-end)
Quarterly rate publication	Ahead of each quarter

Liability arises when a CBAM good passes the tax point. Goods processed in the UK before the tax point, or re-exported as non-CBAM goods, may attract no liability. For processing scenarios, only the difference in value applies.

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UK vs EU CBAM: key differences

Feature	EU CBAM (2026)	UK CBAM (2027)
Start date	1 January 2026	1 January 2027
Sectors	Steel, aluminium, cement, fertilisers, hydrogen, electricity	Steel, aluminium, cement, fertilisers, hydrogen (no electricity)
Indirect emissions	Reported; not charged for Annex II sectors	Not in scope at launch; expected from 2029 at the earliest
Price basis	EU ETS auction average (quarterly 2026, weekly from February 2027)	UK ETS auction average (quarterly)
Registration threshold	50 tonnes/year	£50,000 value threshold
Importers exempted	~90% of importers (de minimis)	>80% of importers

If you trade with both markets, note that the two mechanisms are separate. Relief from one does not automatically transfer to the other, although the UK is negotiating with the EU on ETS linking, which could eventually exempt both sides from CBAM.

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The short version

1. UK CBAM starts 1 January 2027, one year after the EU's
2. It covers 5 sectors: aluminium, cement, fertiliser, hydrogen, iron and steel (no glass or ceramics)
3. A £50,000 registration threshold exempts over 80% of importers
4. Direct emissions only at launch; indirect emissions are out of scope
5. Sector rates are based on the UK ETS price and published quarterly

Related: How CBAM Affects Your Exports | CBAM Reporting Deadlines | What Is CBAM?

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Frequently asked questions

Does UK CBAM apply to indirect emissions?

No. At launch, only direct emissions (plus relevant precursors) are in scope. Indirect emissions are excluded, in line with support for the Energy Intensive Industries Compensation Scheme. The government has said indirect emissions could enter scope from 2029 at the earliest.

What's the CBAM rate in pounds?

Rates are sector-specific and published quarterly, derived from the average UK ETS auction price minus a free-allocation adjustment. The first rates will be published before January 2027.

Can I claim relief for carbon price paid abroad?

Yes. Carbon Price Relief reduces your liability if the goods already paid a qualifying carbon price in their country of origin, subject to verification documentation.

Is there a de minimis like the EU's 50-tonne rule?

The UK uses a £50,000 value-based threshold instead of the EU's mass-based 50-tonne de minimis.

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Regulation status

Field	Value
Last reviewed	2026-08-13
Based on	UK Finance Act 2026, SI 2026/809, HMRC CBAM Policy Summary (16 July 2026)
Applies to	UK CBAM from 1 January 2027

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References

• HMRC, Carbon border adjustment mechanism (CBAM): Policy Summary
• UK Finance Act 2026
• UK Parliament, CBAM legislation
• EU Regulation 2023/956 (for comparison)

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Last updated: August 2026 | Sources: HMRC CBAM Policy Summary (16.07.2026), Finance Act 2026, SI 2026/809