UK Carbon Import Tax Arrives in 2027: What Small Businesses Need to Do Now

The new Carbon Border Adjustment Mechanism could change the cost, administration and competitiveness of importing certain industrial goods. Early preparation is now a commercial priority, not simply a tax task.

By Julian Frincu, Business Consultant
8 September 2026

A major change is approaching for businesses that import carbon intensive goods into the United Kingdom.

From 1 January 2027, the UK Carbon Border Adjustment Mechanism, known as CBAM, will place a carbon price on certain imported products.

The policy is designed to reduce carbon leakage. This happens when production moves to countries with lower carbon costs and the resulting goods are then imported into the UK.

CBAM aims to place imported products on a more comparable footing with goods made by UK producers that already face domestic carbon pricing.

For small businesses, however, the immediate concern is practical. The new system can affect purchasing, supplier relationships, record keeping, pricing and profit margins.

Treating it as something for an accountant to solve at the last minute would be a mistake.

Which businesses could be affected?

CBAM applies to selected goods from six sectors:

• Aluminium
• Cement
• Fertiliser
• Hydrogen
• Iron
• Steel

Not every product within these sectors is automatically covered. Businesses must check the eight digit commodity code for each imported product against HMRC’s list of goods included within the scheme.

A business may still be classed as the importer even when a freight forwarder, customs broker, haulier or another agent completes the declaration.

Outsourcing the paperwork does not necessarily transfer the legal responsibility.

This is an important point for smaller companies that rely heavily on third parties to manage their imports. Business owners should establish who is legally considered the importer rather than assuming their agent carries the responsibility.

The £50,000 threshold needs regular attention

An importer must register when the value of relevant CBAM goods imported during the preceding 12 months exceeds £50,000.

Registration may also become necessary when the business expects relevant imports during the next 30 days to exceed £50,000.

This means the threshold is not something to check only once a year.

A growing business, a large order or a change in supplier could move an importer into the scheme sooner than expected.

Some imported goods may not count towards the threshold. Businesses should therefore use the detailed HMRC guidance rather than relying on a rough total of everything they import.

Management systems should be capable of separating CBAM goods from other imported products and monitoring their value throughout the year.

A crucial timing detail

The tax takes effect on 1 January 2027, but HMRC says registration will open on 1 January 2028.

Businesses that become liable during 2027 will need to keep complete records so they can register and report when the service becomes available.

The first accounting period will run from 1 January to 31 December 2027, with the first payment due at the end of May 2028.

After that, accounting periods will normally be quarterly, with payment generally due two months after each period ends.

The fact that registration does not open until 2028 should not be misunderstood as a delay to the tax itself. Relevant activity from the beginning of 2027 will still matter.

Record keeping applies more widely than many owners may expect

HMRC states that anyone importing CBAM goods from 1 January 2027 will need to keep records.

This includes businesses that remain below the £50,000 registration threshold. Those records may be needed to demonstrate why the business is not liable for the tax.

For each relevant import, records should include:

• The eight digit commodity code and product description
• The date the goods entered the UK or cleared customs
• The value of the goods
• The net weight in kilograms
• Evidence supporting any exemption
• Proof of origin where required

Relevant documents may include import declarations, commercial invoices, bills of lading, packing lists and carrier weight records.

Records must generally be kept for six years.

HMRC may issue a fixed penalty of £500 when the required records are not maintained. Separate penalties may also apply when a business fails to provide requested documents or information.

Supplier information could become a weak point

Businesses may choose to use actual emissions information when calculating their liability.

However, the data must be supported by an appropriate verification report or verification summary obtained from the supplier.

If actual emissions information is unavailable or cannot be properly verified, the importer must use default emissions values set by HMRC.

This creates an important supply chain question.

Can overseas suppliers provide accurate and verified emissions information in the format the business will need?

A supplier offering a competitive price today may become less attractive if its information is incomplete, slow or unreliable.

Businesses should begin speaking to suppliers before the rules take effect. Waiting until a return is due could make it difficult to obtain historical information or correct gaps in the records.

Supplier agreements may also need to be reviewed so that responsibility for providing emissions information is clearly understood.

The real impact is commercial

From my perspective as a business consultant, the biggest mistake would be to see CBAM only as a compliance issue.

Its effect could reach several parts of the business.

Pricing

Higher import costs may need to be absorbed by the company or passed to customers.

Passing the full cost to customers may affect demand, particularly in competitive markets where alternative products are available.

Profit margins

A relatively small increase in unit cost can materially reduce profit when products are imported and sold in large volumes.

Businesses operating with narrow margins could be particularly exposed.

Cash flow

Tax payments, verification costs and professional support may create additional cash requirements.

Owners should understand when payments are likely to fall due and include them within cash flow forecasts.

Suppliers

The ability to provide reliable emissions information may become an important part of supplier selection.

Price and product quality will remain important, but information quality could become another deciding factor.

Operations

Import, finance and purchasing records will need to work together.

A business may experience problems if information is held across different systems, departments or external agents and cannot be retrieved easily.

Competitiveness

Businesses that understand their exposure early will have more options.

They may be able to renegotiate with suppliers, consider alternative products, improve purchasing arrangements or adjust their prices gradually.

Businesses that react late may have fewer choices and less time to protect their margins.

What should businesses do during 2026?

There is still time to prepare in a controlled way.

I recommend seven practical actions.

1. Review imported products

Create a complete list of products that may fall within the six affected sectors.

Do not assume that finished products are outside the rules without checking their commodity codes.

2. Confirm commodity codes

Check the correct eight digit commodity code for every potentially relevant product.

Incorrect classifications could lead to inaccurate calculations or missed responsibilities.

3. Monitor import values

Review the value of relevant imports over the previous 12 months and planned orders for the next 30 days.

Continue monitoring this information throughout the year.

4. Establish who is responsible

Determine who is legally classed as the importer for every purchasing arrangement.

Confirm what information customs agents, freight forwarders and other representatives will provide.

5. Speak with suppliers

Ask suppliers what emissions information and verification documents they can provide.

Identify gaps while there is still time to address them.

6. Improve record keeping

Make sure the business can easily retrieve information about product value, weight, dates, origin, commodity codes and supporting documents.

Responsibility for maintaining these records should be assigned to a specific person or team.

7. Model the financial impact

Consider how possible additional costs could affect prices, cash flow and profit margins.

Businesses should complete this exercise before entering major orders or long term supplier agreements.

Do not wait for complete certainty

Some detailed information, including rates and default emissions values, was still due to be published when this article was prepared.

That is not a reason to postpone every action.

Businesses can already identify relevant products, review commodity codes, assess import values, speak with suppliers and improve their records.

Preparation does not require predicting every future cost.

It means knowing where the business is exposed, what information is missing and which decisions may need to be made when the remaining figures become available.

A final thought

New regulation often feels remote until it begins to affect a quotation, an invoice or a profit margin.

CBAM is a good example.

For many small businesses, the carbon calculation may be technical, but the consequences are straightforward: additional cost, administration, supplier risk and pricing pressure.

The businesses in the strongest position will be those that start asking questions now.

Check what you import, establish who holds responsibility, improve the information received from suppliers and understand how additional costs could flow through the business.

Good compliance reduces risk. Good planning protects the business.

Official guidance

HMRC: Prepare for the Carbon Border Adjustment Mechanism
https://www.gov.uk/government/collections/carbon-border-adjustment-mechanism

HMRC: Check if you will need to register
https://www.gov.uk/government/collections/check-if-youll-need-to-register-for-carbon-border-adjustment-mechanism-cbam

HMRC: Keeping records for CBAM
https://www.gov.uk/guidance/keeping-records-for-carbon-border-adjustment-mechanism-cbam

HMRC: CBAM factsheet
https://www.gov.uk/government/publications/factsheet-carbon-border-adjustment-mechanism-cbam/factsheet-carbon-border-adjustment-mechanism

Important: This article provides general business information and does not constitute tax, customs or legal advice. Businesses should review current HMRC guidance and obtain specialist advice where necessary.