UK CBAM Starts 1 January 2027: What’s Settled and What’s Still Draft
The UK Carbon Border Adjustment Mechanism takes effect on 1 January 2027. Part 5 of the Finance Act 2026, which received Royal Assent on 18 March, puts the headline architecture into primary law. The detail importers actually need to plan against — registration mechanics, the calculation methodology, verification requirements — sits in four sets of draft regulations and three force-of-law notices, all still in consultation. The Tranche 2 consultation on emissions and verification closes on 21 May.
What that means in practice: the shape of UK CBAM is now legally fixed, but several of the numbers and procedures importers will rely on remain provisional. The position below distinguishes the two carefully.
What the Finance Act 2026 now settles
Five sectors are in scope at commencement: aluminium, cement, fertiliser, hydrogen, and iron and steel. Glass and ceramics are excluded at commencement and kept under review. Within each sector, only specific commodity codes are caught — the operative list sits in Schedule 15 of the Act.
The liable person is whoever is responsible for the goods at release into free circulation. Where there are no customs controls, the liability falls on the person on whose behalf the goods are moved. Importers using third-party clearance agents need to be clear which entity that is in their structure.
Several exclusions are also now in primary law. Personal-use imports are out. Imported scrap is out. Goods re-imported under returned goods relief — unaltered, within three years — carry no CBAM liability. Outward processing re-imports are charged only on the processing emissions that took place outside the UK.
What the draft regulations add — and where to hedge
The £50,000 registration threshold sits in the Tranche 1 Administrative Provisions Regulations. It operates as a rolling test — a 30-day forward look and a 365-day backward look — against the value of CBAM goods at the tax point. Records must be kept for six years from the end of the relevant accounting period.
The CBAM rate is built from the UK ETS average auction clearing price for the quarter preceding the import quarter, adjusted by the baseline free allocation percentage for the relevant sector. Carbon price relief is available where overseas carbon pricing has been paid through a qualifying scheme, calculated as the effective carbon price multiplied by the embodied emissions and capped at the UK CBAM liability. A verification form completed by an accredited verifier is required to claim it.
The Tranche 2 Emissions and Verification Regulations bring four greenhouse gases into scope — CO₂, N₂O, CF₄ and C₂F₆, the last three via CO₂-equivalent factors. Indirect emissions are out at commencement and not under consideration before 2029. Scope 3 emissions are not covered. The emissions calculation is an eight-step exercise at installation level, then apportioned to product level — one of several structural differences from the EU regime, which apportions at installation. Verifiers must be accredited by any GAC-member accreditation body, which is broader than the EU position of restricting accreditation to member-state national bodies.
All of the above remains draft. Final wording may change before the regulations are laid. Importers with views worth feeding into the consultation should note the 21 May deadline.
Where UK CBAM diverges from EU CBAM
For clients with both UK and EU CBAM exposure, the differences sit at the operational level:
- Form: UK is a tax. EU is a certificate-based system.
- Indirect emissions: Out at commencement for the UK. In for some EU sectors.
- Apportionment: UK at product level. EU at installation level.
- Verifier accreditation: UK accepts any GAC-member body. EU restricts to member-state NABs.
- First return: UK importers’ first return covers calendar 2027 and is due 31 May 2028. EU CBAM is already in its definitive period.
One practical consequence: a single verification meeting both UK and EU requirements does not need to be repeated. Clients with dual exposure should plan their verifier engagement on that basis.
What is not yet settled
Three things importers cannot plan against with full confidence. Default emissions values have not been published — the Treasury will issue a notice on gov.uk before 1 January 2027 setting out the methodology and the values themselves. Based on HMRC’s signalling, those values are likely to carry an uplift to discourage over-reliance on defaults rather than actual installation data.
The registration opening date is not yet fixed. HMRC’s IT service for returns goes live in spring 2028, but registration is expected ahead of commencement. The right framing is “ahead of 1 January 2027” rather than any specific calendar date.
UK–EU ETS linking, agreed at the 19 May 2025 Summit, is live but proceeding on its own timeline. HMRC has confirmed that linking will not delay CBAM.
Does the European Partnership Bill affect UK CBAM?
Not in the short term. On 13 May 2026 the Government announced a European Partnership Bill in the King’s Speech. The Bill, once introduced, would confer powers on UK ministers to dynamically align UK law with EU law in defined areas, including emissions trading and electricity trading. The background briefing describes the Bill as creating the conditions for “mutual exemptions from respective Carbon Border Adjustment Mechanisms”, with £7 billion of UK exports cited as the prize.
Read that as a statement of policy intent rather than a current position. The Bill has been announced, not introduced. The underlying UK–EU agreement on which it depends remains in negotiation. None of it changes the design of UK CBAM as it stands — the Finance Act 2026, the draft regulations, the 1 January 2027 commencement, the five sectors, the £50,000 threshold and the carbon price relief route all proceed unaffected. UK importers should plan on the regime going live as legislated. If mutual exemptions arrive later, they would sit on top of the existing architecture, most likely as exempt-origin treatment for EU-origin goods.
Three things to do before 1 January 2027
- Establish whether you cross the £50,000 threshold. Run the rolling 12-month test against your import data using the commodity codes in Schedule 15. Borderline importers need a monitoring process, not a one-off check.
- Map your liable persons. For each importing entity, identify who is responsible at release to free circulation under your current customs arrangements. Indirect representation, group structures and consignment stock all create complications worth resolving early.
- Engage suppliers on emissions data. Default values are likely to be punitive. Actual installation data, properly verified, will almost always produce a lower liability — but supplier conversations take time, and a single verification meeting both UK and EU CBAM requirements is materially cheaper than running two.
Free check — find out if you are in scope
Tuesday’s UK CBAM webinar reached capacity at over 100 registrations. We will run a second session in the coming weeks for those who missed it.
In the meantime, we are offering a free CBAM impact check for any business that may be affected. You give us access to your Customs Declaration Service (CDS) import data, we run the £50,000 threshold test against the last 12 months, identify any commodity codes that fall within Schedule 15 of the Finance Act 2026, and tell you where you sit — above the threshold, below it, or close enough that you need a monitoring process in place.
The check takes us around a working day. There is no cost and no obligation. To arrange it, contact us or call 01455 417030.
For background, our analysis of EU CBAM in its definitive period and the Q1 2026 certificate price sets out how the EU regime is now operating — useful context for clients with dual exposure. The 2026 year ahead piece places UK CBAM in the wider regulatory calendar.
If your business is likely to be in scope, the time to begin is now. Default values, supplier engagement and verifier selection are not last-quarter exercises.
David Hooper
Managing Director, Hooper & Co International Trade Consultancy
01455 417030