UK Carbon Import Tax 2027: Costs and Supplier Checks

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

Updated 18 October 2026: Revised following HMRC’s publication of draft default emissions values and illustrative rates on 16 October 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.

What changed on 16 October 2026?

HMRC has now published draft default emissions values and illustrative CBAM rates. This gives importers a more useful starting point for planning costs before committing to orders for 2027.

The notices remain in draft and have not yet taken legal effect. The illustrative rates explain the methodology using provisional information. They are not confirmed charges or forecasts. HMRC says the first applicable rates will be published before the end of 2026, followed by quarterly updates.

The commercial priority is to build a cost range with clear assumptions, identify missing supplier information and decide when quotations need reviewing. A provisional estimate can support a decision, provided everyone understands what still needs confirming.

Which businesses could be affected?

CBAM applies to selected goods from five sectors:

• Aluminium
• Cement
• Fertiliser
• Hydrogen
• Iron and 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

On the first day of each month, check whether relevant imports in the preceding 12 months meet or exceed £50,000. Imports before 1 January 2027 are excluded.

A separate test applies on any day when relevant imports expected over the next 30 days meet or exceed £50,000. These tests concern the value of CBAM goods, not total business turnover.

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 becoming liable during 2027 must keep records and register by 31 January 2028.

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

Quarterly periods follow. The first two deadlines are 31 July 2028 and 29 September 2028, before the timetable moves to a two month window. See the HMRC timetable.

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 five 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

Monitor both registration tests described above. During 2027, the backward test only looks back to 1 January 2027.

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.

From preparation to purchasing decisions

Default emissions values and tax rates are different

The draft default values table assigns emissions intensity to individual product codes, measured in tonnes of carbon dioxide equivalent per tonne of product. The values are intended for 1 January 2027 to 31 December 2028.

A 10% markup is already included in the published default values except for fertilisers. It is not a 10% tax on the invoice value, and it must not be added again.

In broad terms, the charge combines embodied emissions with the applicable sector rate, with eligible carbon price relief deducted. The HMRC policy summary explains the calculation and exceptions. Technical conversions apply to actual emissions information for cement and fertilisers.

A supplier checklist before committing to 2027 orders

A competitive purchase price matters, but the information behind a quotation matters too. Ask suppliers for clear answers to these questions:

• Which products and manufacturing sites does the information cover?
• Will suitable actual emissions data and verification evidence be available?
• Which reporting period does that evidence relate to?
• Who will provide missing documents, and by what date?
• What does the quotation include, and who bears any additional costs under the proposed purchasing terms?

Keep the answers beside the purchase order. A promise in an email should become a recorded action with a named person, a deadline and a place to store the evidence.

How to compare costs without promising certainty

Prepare a planning scenario using the relevant draft default value. Where suitable actual emissions evidence is available, prepare a second scenario. Compare the resulting estimates alongside administration, verification, freight, quality and delivery considerations.

Actual data does not automatically mean a lower overall cost. The emissions figure may be higher, or obtaining usable evidence may be expensive. Equally, a lower purchase price may lose its advantage once other costs are included.

Use this decision checklist for each significant order:

• Product exposure: record the code, supplier, quantity, expected arrival and importer responsibility.
• Evidence gaps: identify what is missing and assign someone to obtain it.
• Cost assumptions: record which emissions value and rate underpin the estimate, and label provisional inputs.
• Customer commitments: review whether a fixed selling price leaves enough room for uncertain costs. Seek advice before changing contractual terms.
• Review trigger: recalculate when applicable rates, final notices or better supplier evidence become available.

The useful output is a purchasing decision: proceed, seek more information, review the quotation or compare another supplier. An elaborate spreadsheet that leaves responsibility unclear will not solve the problem.

This is also an operations and process improvement task. Purchasing, finance and whoever manages import documentation need one reliable set of records.

What still needs confirming?

The new publications improve planning, but the applicable rates and the final legal status of the notices still need checking before relying on them for a liability calculation. Owners should confirm classification, verification and relief questions with an appropriate customs or tax specialist.

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.

Source note: Regulatory information is drawn from HMRC and HM Treasury publications checked on 18 October 2026. The supplier checklist and commercial recommendations are Skills 2 Grow analysis.

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.