The UK Carbon Border Adjustment Mechanism, commonly known as UK CBAM, will come into effect on 1 January 2027.

The government has now published further secondary legislation, supporting documents and draft force-of-law notices explaining how the new carbon tax will operate.

UK CBAM will place a carbon price on the embedded emissions of specified carbon-intensive goods imported into the United Kingdom. It is intended to ensure that imported products face a carbon cost comparable to that incurred by UK manufacturers under the UK Emissions Trading Scheme.

For importers, this is no longer a distant policy proposal. Businesses importing aluminium, cement, fertiliser, hydrogen, iron or steel products must begin identifying affected goods, assessing registration exposure and collecting emissions information from overseas suppliers.

What is the UK Carbon Border Adjustment Mechanism?

UK CBAM is a new environmental tax applied to specified carbon-intensive products imported into the UK.

Its purpose is to address carbon leakage. Carbon leakage occurs when manufacturing or investment moves to countries with weaker carbon-pricing or climate requirements, potentially displacing rather than reducing global emissions.

The mechanism is designed to create a more comparable carbon cost between:

  • Goods manufactured in the UK and subject to UK carbon pricing
  • Equivalent goods manufactured overseas and imported into the UK

UK CBAM was established through Part 5 of the Finance Act 2026 and will commence on 1 January 2027. HMRC has since published detailed policy information, registration guidance and supporting regulatory documents.

What are the latest UK CBAM developments?

In July 2026, HMRC published additional UK CBAM material covering registration, administration, carbon-price relief, system boundaries and emissions verification.

The latest package includes:

  • Secondary legislation laid before Parliament
  • Draft force-of-law notices
  • A Carbon Pricing Verification Form
  • A System Boundaries Document
  • Guidance on identifying the liable importer
  • Guidance on the £50,000 registration threshold
  • Record-keeping requirements
  • Registration-date calculations

The force-of-law notice remains in draft and does not currently have legal effect. It is expected to commence alongside UK CBAM on 1 January 2027.

The publication is significant because it moves UK CBAM from high-level policy into detailed operational implementation.

When does UK CBAM start?

UK CBAM starts on:

1 January 2027

Specified goods imported into the UK on or after this date may create registration, record-keeping, reporting and payment obligations.

Businesses should not wait until January 2027 to assess their exposure. Importers may need considerable time to obtain production and emissions data from manufacturers located outside the UK.

Which sectors are covered by UK CBAM?

UK CBAM 2027 New Rules for UK Importers

UK CBAM will initially apply to specified goods within five sectors:

  1. Aluminium
  2. Cement
  3. Fertiliser
  4. Hydrogen
  5. Iron and steel

The government previously considered including ceramics and glass, but these sectors will not be included when UK CBAM begins in 2027. The scope may be reviewed after implementation.

Not every product within the five sectors will automatically be covered.

Liability depends on whether the imported product’s commodity code appears within the official UK CBAM product scope.

Importers must therefore assess products at commodity-code level rather than relying only on a general description such as “steel component” or “aluminium product.”

Who will be responsible for UK CBAM?

The responsible party is referred to as the liable person.

Depending on the import arrangement, this will generally be:

  • The person responsible for completing the customs declaration
  • The person on whose behalf the customs declaration is made
  • The person on whose behalf goods are moved into the UK where customs controls do not apply

In many transactions, this will be the UK importer of record. However, contractual responsibilities, customs arrangements and indirect-representation structures must be reviewed carefully.

Using a customs agent does not automatically transfer the underlying CBAM responsibility away from the importer.

What is the UK CBAM registration threshold?

A business will generally need to register when the value of its applicable CBAM goods reaches or is expected to reach £50,000.

The threshold applies through two tests.

Forward-looking test

From 1 January 2027, a business must register if it expects to import CBAM goods worth £50,000 or more during the following 30 days.

Historic test

On the first day of each month, a business must assess whether it imported CBAM goods worth £50,000 or more during the preceding 12 months.

Goods imported before 1 January 2027 are not included in this calculation.

The threshold is based on the value of applicable CBAM goods, not the calculated amount of embedded emissions.

Businesses importing several smaller shipments may therefore become liable when the combined value crosses the threshold.

When will UK CBAM registration open?

HMRC states that UK CBAM registration will open by 1 January 2028.

This means businesses may become liable during 2027 before the registration service is available.

Where this happens, the importer must retain the relevant records so it can register and complete its obligations once the service opens. Late registration or failure to notify HMRC may result in a penalty.

This makes record keeping from the first applicable 2027 import essential.

How will the UK CBAM charge be calculated?

The UK CBAM charge will broadly depend on:

  • The quantity of imported goods
  • The embedded emissions associated with those goods
  • The applicable UK CBAM sectoral rate
  • Any eligible overseas carbon price already paid
  • Relevant adjustments reflecting UK carbon-pricing arrangements

The mechanism is intended to create a carbon cost comparable to that experienced by domestic producers.

The applicable CBAM rate will be expressed per tonne of carbon dioxide equivalent associated with the imported goods.

The rate will reflect the UK Emissions Trading Scheme and the availability of free allowances for domestic producers.

Which emissions are covered?

From 2027, UK CBAM will initially apply to direct emissions embedded in covered imported goods.

These may include:

  • Emissions produced directly during manufacturing
  • Emissions from relevant production processes
  • Direct emissions associated with specified precursor materials used to manufacture the imported product

Indirect emissions, including certain emissions associated with purchased electricity, will not be included at launch. The government has stated that their inclusion will be delayed until 2029 at the earliest.

The precise emissions boundary will depend on the product and its manufacturing route.

What is the UK CBAM System Boundaries Document?

The System Boundaries Document explains which production processes and direct emissions are relevant when calculating the embedded emissions of UK CBAM goods.

It is intended to support:

  • Overseas manufacturing installations
  • UK importers
  • Independent verifiers
  • Emissions-data providers
  • Compliance advisers

Where actual emissions are used, importers may need data from the overseas installation that manufactured or processed the imported goods.

The required information may extend beyond the final production stage to relevant precursor materials and upstream production processes.

This means a commercial invoice or generic product carbon footprint may not provide enough information for UK CBAM compliance.

Can importers use actual emissions or default values?

Importers will be able to use either:

  • Independently verified actual emissions data
  • Government-published default emissions values

Actual emissions data may provide a more accurate result, particularly where the overseas producer operates an efficient, lower-carbon installation.

However, actual data will require appropriate monitoring, calculation and independent verification.

Default values may reduce the immediate supplier-data burden, but they may produce a less favourable tax outcome where the actual manufacturing process has lower emissions than the default assumption.

Businesses should compare both options before selecting a calculation method.

What is Carbon Price Relief?

UK CBAM liability may be reduced where an eligible carbon price has already been imposed on the embedded emissions in the country of production.

Potentially deductible mechanisms may include:

  • A carbon tax
  • An emissions trading scheme
  • Another recognised carbon border adjustment mechanism

Importers must hold sufficient evidence to support the relief claim.

HMRC has published a Carbon Pricing Verification Form. A separate form will be required for each CBAM good for which relief is claimed.

The form must be completed by an independent and accredited verifier of the installation that manufactured or processed the product.

A general statement from a supplier that carbon costs were paid will not necessarily be sufficient.

What information should importers collect?

Importers should establish a structured UK CBAM data process covering at least the following information:

Product information

  • Product description
  • Commodity code
  • Country of origin
  • Country of production
  • Quantity imported
  • Customs value
  • Import date
  • Customs declaration reference

Supplier information

  • Manufacturer name
  • Installation name and location
  • Production facility details
  • Relevant precursor suppliers
  • Supplier contact responsible for emissions data

Emissions information

  • Production method
  • Relevant system boundary
  • Direct process emissions
  • Fuel-related emissions
  • Precursor emissions
  • Emissions intensity per tonne of product
  • Calculation methodology
  • Reporting period

Verification information

  • Verification status
  • Verifier name
  • Accreditation details
  • Verification report
  • Evidence of data controls
  • Material misstatement or uncertainty information

Carbon-price information

  • Overseas carbon-pricing mechanism
  • Carbon price paid
  • Currency and conversion evidence
  • Rebate, exemption or free-allocation information
  • Carbon Pricing Verification Form
  • Evidence connecting the payment to the relevant goods

What records will businesses need to keep?

A UK importer should be able to demonstrate:

  • Why each imported product was classified as in scope or out of scope
  • How the registration threshold was calculated
  • How embedded emissions were determined
  • Whether actual or default emissions values were used
  • Why any Carbon Price Relief was claimed
  • How the final UK CBAM liability was calculated
  • Which supplier and verification evidence supported the calculation

Records should be traceable from the customs transaction through to the final tax calculation.

A practical control structure should connect:

Customs declaration → commodity code → supplier → manufacturing installation → emissions data → verification evidence → carbon-price evidence → CBAM return

Disconnected spreadsheets, emails and supplier declarations will create a significant compliance and audit risk.

How is UK CBAM different from EU CBAM?

EU and UK CBAM compliance guide for importers and exporters

The UK and EU mechanisms pursue similar carbon-leakage objectives, but they are separate legal regimes.

Important differences include:

AreaUK CBAMEU CBAMStart of financial regime1 January 20271 January 2026Compliance modelTax-based mechanismCertificate-based mechanismInitial sectorsAluminium, cement, fertiliser, hydrogen, iron and steelCement, iron and steel, aluminium, fertilisers, electricity and hydrogenRegistration test£50,000 value thresholdPrimarily mass-based 50-tonne exemption, with exceptionsResponsible authorityHMRCEU and national competent authoritiesGeographic applicationImports into the UKImports into the EU

Businesses trading with both the UK and EU must not assume that one CBAM calculation or submission automatically satisfies the other regime.

A single underlying emissions dataset may support both processes, but legal roles, product scope, thresholds, calculation rules and submission requirements must be assessed separately.

Which businesses are likely to be affected?

UK CBAM may affect more organisations than primary-metal or cement importers.

Potentially affected businesses include:

  • Construction-material importers
  • Steel and aluminium distributors
  • Engineering companies
  • Automotive suppliers
  • Infrastructure contractors
  • Manufacturers importing intermediate components
  • Fertiliser distributors
  • Hydrogen importers
  • Procurement organisations
  • Customs and logistics teams
  • Overseas manufacturers supplying the UK

A finished product may contain steel or aluminium without necessarily being a covered CBAM good. The decisive issue is the product’s customs classification and whether its commodity code is included in the official scope.

What should UK importers do before 2027?

1. Identify potentially covered imports

Extract import data for products within the five relevant sectors.

Review commodity codes, suppliers, origin countries, quantities and customs values.

2. Validate commodity-code classifications

Incorrect commodity codes can lead to missed obligations, inaccurate registration calculations or unnecessary compliance work.

Classification decisions should be documented.

3. Model the £50,000 threshold

Assess historic purchasing patterns and expected 2027 imports.

Include cumulative imports from multiple suppliers and shipments where they fall within scope.

4. Identify the liable person

Confirm who is responsible under the customs arrangement.

Review contracts, Incoterms, customs representation and importer-of-record arrangements.

5. Engage overseas suppliers

Ask suppliers whether they can provide:

  • Installation-level production data
  • Product-specific emissions intensity
  • Relevant precursor information
  • Calculation-method documentation
  • Independent verification
  • Evidence of carbon prices paid

6. Decide between actual and default emissions

Compare expected data availability, compliance cost and possible tax impact.

7. Establish an evidence repository

Maintain controlled records for customs, emissions, verification and carbon-price information.

8. Assign internal responsibility

UK CBAM may require coordination across:

  • Finance and tax
  • Procurement
  • Customs
  • Sustainability
  • Supply-chain management
  • Legal and compliance
  • Data and IT teams

9. Estimate potential financial exposure

Use expected import volumes, indicative emissions intensities and possible UK carbon rates to create an initial liability scenario.

10. Prepare for reporting and assurance

Calculation methods should be reproducible, documented and reviewable.

Common UK CBAM readiness risks

Businesses should address the following risks before implementation:

  • Incorrect commodity-code classification
  • Unclear importer or liable-person status
  • Incomplete supplier emissions data
  • Supplier data not aligned with UK system boundaries
  • Missing precursor emissions
  • Unverified actual emissions
  • Unsupported overseas carbon-price claims
  • Failure to aggregate imports against the £50,000 threshold
  • Inconsistent customs and sustainability records
  • Reliance on manually controlled spreadsheets
  • Late supplier engagement
  • Confusion between UK CBAM and EU CBAM requirements

The largest operational risk is likely to be the availability and quality of supplier data.

Overseas manufacturers may not currently calculate emissions using the boundaries, production routes or verification requirements expected under UK CBAM.

How Sustainzone supports UK CBAM readiness

Sustainzone helps organisations establish a controlled and evidence-based UK CBAM compliance process.

Our support can include:

  • UK CBAM applicability assessments
  • Commodity-code and product-scope mapping
  • Import-data review
  • Registration-threshold modelling
  • Liable-person assessment
  • Supplier data templates
  • Embedded-emissions calculations
  • Actual-versus-default value analysis
  • Carbon Price Relief evidence review
  • Supplier engagement
  • Data-quality controls
  • Audit-ready evidence structures
  • UK and EU CBAM alignment
  • Scenario modelling and readiness reporting

The objective is not simply to calculate a tax figure. Businesses need a repeatable process connecting customs, supplier, emissions, verification and financial information.

Key UK CBAM deadlines

DateRequirementJuly 2026Secondary legislation and supporting HMRC material publishedBefore January 2027Importers should complete product, supplier and data-readiness assessments1 January 2027UK CBAM commencesDuring 2027Liable businesses must retain records for applicable importsBy 1 January 2028HMRC registration service expected to be available2029 at the earliestPossible inclusion of indirect emissions

Frequently asked questions

What does CBAM stand for?

CBAM stands for Carbon Border Adjustment Mechanism. It applies a carbon cost to specified emissions-intensive goods imported into a jurisdiction.

When does UK CBAM begin?

UK CBAM begins on 1 January 2027.

What products are covered by UK CBAM?

Specified products within the aluminium, cement, fertiliser, hydrogen, iron and steel sectors will be covered. Applicability will depend on the product’s commodity code.

Is every UK importer required to register?

No. Registration will generally be required where applicable CBAM imports reach or are expected to reach the £50,000 threshold under the relevant historic or forward-looking test.

Is the £50,000 threshold based on emissions?

No. The registration threshold is based on the value of applicable imported CBAM goods.

Can businesses use government default emissions values?

Yes. Importers may use government default values or independently verified actual emissions data, subject to the detailed requirements.

Can an overseas carbon tax reduce the UK CBAM charge?

Potentially. Carbon Price Relief may be available where an eligible carbon price was paid overseas and the importer holds the required supporting evidence.

Are electricity-related emissions included from 2027?

Indirect emissions are not expected to be included at commencement. Their inclusion has been delayed until 2029 at the earliest.

Is UK CBAM the same as EU CBAM?

No. The systems have similar objectives but separate product scopes, thresholds, calculation methods, registration processes and legal requirements.

Can a customs agent manage UK CBAM?

A customs agent may support the process, but businesses must confirm who is legally treated as the liable person. Appointing an agent does not automatically remove the importer’s responsibility.

Final assessment

The July 2026 UK CBAM publications provide businesses with substantially more detail on how the mechanism will operate.

Importers now need to move from general awareness to implementation.

The immediate priorities are to identify affected commodity codes, determine the liable person, model the £50,000 registration threshold and begin obtaining installation-level emissions information from suppliers.

Businesses that delay this work until 2027 may face incomplete supplier data, unsupported relief claims, inaccurate liabilities and weak audit evidence.

UK CBAM readiness should therefore be treated as a combined customs, tax, emissions-data and supply-chain programme rather than a standalone sustainability exercise.

This article provides general information and does not constitute legal or tax advice. Businesses should assess the requirements against their specific products, customs arrangements and import activities.