Policy paper

Carbon border adjustment mechanism (CBAM): Policy Summary

Published 10 February 2026

1. Introduction

The Carbon Border Adjustment Mechanism (CBAM) legislation and guidance is being developed in the following stages:

1) Primary legislation

Primary legislation for CBAM was introduced in the Finance (No.2) Bill 2025 to 26. You can find the Bill on the UK Parliament website, which also contains the latest versions and associated documents. The legislation is currently subject to Parliamentary scrutiny and may change as a result.

2) Secondary legislation

Draft secondary legislation will be released in two stages The first set was published on 10 February 2026 for a 6-week technical consultation, alongside draft notices which will have force of law. This consultation will close at 11:59pm on 24 March 2026. The second set of draft legislation will be published in Spring 2026 for technical consultation. The government will review all responses and will lay the final secondary legislation later in the year.

Summary of this document

This document provides a summary of CBAM policy. It includes the core policy framework which is set out via primary legislation in the Finance (No.2) Bill 2025 to 26 and details set out in the draft secondary legislation and notices. Further details will be included in secondary legislation, notices and GOV.UK guidance. The details below may therefore be subject to change; updates will be reflected in this document.

The draft secondary legislation published in February 2026 provides further detail on:

The Carbon Border Adjustment Mechanism (Administrative Provisions) Regulations 2026

Part	Link to explanation of policy area
Part 2 and 3	Information needed to register and submit returns
Part 4	Reimbursement arrangements
Part 5	Weight
Part 6	Record keeping requirements

The Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026

Part	Link to explanation of policy area
Part 2	Calculation of the CBAM rate
Part 3, 4 and 5	Principles for claiming, verifying and calculating Carbon Price Relief
Part 6	Currency conversion for CPR
Part 7	Record keeping requirements for CPR

The Carbon Border Adjustment Mechanism (Transitory Provision) Regulations 2026

Part	Link to explanation of policy area
not applicable	Modifications to dates relevant to registration, payment and accounting periods, and related penalties

Who should read this document

The following stakeholders should read this document:

• importers of goods from the aluminium, cement, fertilisers, hydrogen, and iron and steel sectors and downstream producers that use these goods in their supply chains
• overseas operators of installations involved in processing or manufacturing of goods from the aluminium, cement, fertiliser, hydrogen, and iron and steel sectors
• independent emissions verifiers

Further questions

If you have any questions about CBAM or would like to be added to the CBAM mailing list to stay up to date on the latest developments, please email the CBAM policy team.

2. Background

CBAM will commence on 1 January 2027.

This will ensure highly traded, carbon intensive products from jurisdictions outside the UK face a comparable carbon price to that paid by UK manufacturers, so that UK decarbonisation efforts lead to a true reduction in global emissions rather than simply displacing carbon emissions overseas.

3. Scope of CBAM

Geographic scope

CBAM will apply:

• to specified goods that are imported into the UK on or after 1 January 2027
• across the whole of the UK, including Northern Ireland. Goods which enter the UK from the Crown Dependencies including the Isle of Man, Overseas Territories and UK Continental Shelf will be subject to CBAM

Sectoral and product scope

CBAM will place a carbon price on the emissions embodied in imports of specified goods in the following sectors;

• aluminium
• cement
• fertiliser
• hydrogen
• iron and steel

Within these sectors, CBAM will only apply to specific ‘CBAM goods’ that are imported into the UK. These goods are determined by the product level scope of CBAM and are identified by the commodity codes as listed in the Annex (correct as at the date of this publication).

The commodity codes also identify a small number of goods within these sectors that will be excluded from CBAM. For example, imported scrap products within the aluminium and iron and steel sectors, identified via their relevant commodity code will not be within the scope of CBAM from 1 January 2027.  

In the event of changes to the UK Tariff affecting commodity codes in scope of CBAM, the codes will be updated to maintain the product scope of CBAM. These changes will take effect in line with changes to customs legislation to ensure that goods do not unintentionally fall in or out of scope of CBAM due to commodity code changes.

4. When CBAM goods are imported

Tax point

The CBAM tax point is the point at which the CBAM charge arises.

In most cases, the tax point arises when a CBAM good is imported into the UK and becomes liable to import duty (or would become liable if legislation did not disapply that duty). For goods that are not subject to import duty, the tax point occurs when the goods enter the UK.

CBAM will be charged on the entire CBAM good, except for specific exceptions which are outlined below.

Goods processed under special customs procedures

Where a CBAM good is declared for a special customs procedure, it may undergo processing in the UK before being imported into the UK and the tax point arises. This can happen whilst the good is declared to:

• a storage procedure (free zones)
• an inward processing procedure
• an authorised use procedure (or Union end-use procedure)

Where a CBAM good is processed into a non-CBAM good while under a special customs procedure, a CBAM charge will still arise when the non-CBAM good passes the tax point. However, the CBAM liability will be calculated only on the portion of the original CBAM good declared to the procedure, before it was processed, that forms part of the processed non-CBAM good.

Where a CBAM good is processed into a good which is another CBAM good, or a non-CBAM good is processed into a CBAM good, the CBAM charge will continue to arise when the new processed CBAM good passes the tax point and the CBAM liability will be based on the CBAM good which passes the tax point.  

In all cases, the value of the CBAM good which the CBAM charge is based on, will count towards the £50,000 minimum registration threshold. Further information on the minimum registration threshold for CBAM can be found in the registration section below.

Where a good is processed in any of these ways and is exported from the UK before the tax point arises, there will be no CBAM liability and it will not count towards the registration threshold.

Goods processed outside of the UK

CBAM goods can be exported for processing outside of the UK. This can happen under the outward processing procedure, or when a good leaves Northern Ireland to be processed in the EU before returning to Northern Ireland.

If the exported good is processed and re-enters the UK as a CBAM good, when the good passes the tax point, the CBAM charge will arise based on the CBAM good that passes the tax point. However, if the original good was a CBAM good that was of UK origin and/or subject to a carbon price in the UK, the carbon price previously incurred can be used to adjust the CBAM liability down. Only the difference in value between the original good and the processed CBAM good will count towards the £50,000 minimum registration threshold.

Where a CBAM good is exported for outward processing and is re-imported as a non-CBAM good, there will be no CBAM liability as the good is no longer chargeable.

Liable person

The person liable for CBAM is the importer of the CBAM goods.

This will be the person in whose name the customs declaration is made. Where the customs declaration is made on behalf of another person, the importer is the person on whose behalf the declaration is made.

Where there is no requirement to make a customs declaration, the importer is the person on whose behalf the CBAM good is imported.

The liable person will be able to appoint a tax agent to act on their behalf and submit CBAM returns. The tax agent cannot register for CBAM on behalf of the liable person and no liability will be attached to the tax agent.

Exemptions

Goods imported for non-business use

Only individuals importing CBAM goods in the course of a business that meet either of the CBAM liability tests will be liable for CBAM. This means private individuals importing CBAM goods for non-commercial purposes will not be liable for CBAM.

Goods with UK place of origin

CBAM will be charged on goods which originate from outside of the UK according to the UK’s non-preferential rules of origin. Those with a UK place of origin are not in scope of CBAM.

Returned goods relief

Where a CBAM good is imported into the UK and returned goods relief is available in respect of the good, there will be no CBAM liability. There will also be no CBAM liability for Union goods exported from Northern Ireland into the EU and reimported into the UK providing the goods is:

• reimported within 3 years of export from Northern Ireland
• returned in the same state in which it was exported

Where all the conditions are met, the returning CBAM good will not need to be declared on a CBAM return or be factored into the calculation for the £50,000 minimum registration threshold when applying the CBAM liability tests.

For compliance purposes, the liable person will need to keep evidence to demonstrate they have met the relevant criteria.

The person importing the CBAM good does not need to be the same person that exported the good to claim this relief for CBAM.

UK pre-cursor goods

CBAM will not apply to emissions embodied in UK-produced precursor goods that are imported into the UK as part of a complex CBAM good. The emissions attributable to the UK-produced precursor should be deducted from the total embodied emissions of the imported CBAM good, and CBAM will only apply to the remaining emissions.

Goods imported into the UK under temporary admission

Where a CBAM good is imported into the UK under a temporary admission procedure and full relief is given from customs duty, the good is not treated as an import for CBAM purposes, and CBAM will not be charged on those goods.

If there was no entitlement to make a declaration for full relief on entering the UK, CBAM will apply to those goods from the date they entered the UK. If the full relief no longer applies whilst the goods are still in the UK, CBAM will apply from the date the relief no longer applies.

If a good enters temporary admission procedure with either partial or no relief from customs duty, CBAM will apply to those goods.

Further detail on exemptions will be set out in detailed guidance ahead of 1 January 2027.

5. Calculating CBAM liability

The overall approach to determining CBAM liability in Figure 1.

Figure 1: Overview of CBAM liability calculation

1. CBAM charge: the CBAM charge which is calculated by multiplying the imported embodied emissions by the CBAM rate

2. Carbon price relief (CPR): the CPR which is calculated by multiplying the relevant imported embodied emissions by the effective carbon price

3. CBAM liability: CBAM liability which is calculated by subtracting the carbon price relief from the CBAM charge.

The CBAM charge will be based on the direct emissions embodied within the imported CBAM goods. When determining the embodied emissions subject to CBAM, the liable person has 2 options available to them:

• using actual data about the emissions embodied within CBAM goods

• using default emissions values as determined by the government

The government will publish further details on default emissions values in advance of the introduction of CBAM in 2027.

Actual emissions data

When using actual emissions data, the liable person will need to obtain the embodied emissions data from the producer of the CBAM goods. They will need to get this information expressed as tonnes of carbon dioxide equivalent (tCO2e) from their supply chains and hold evidence that these emissions figures have been independently verified.

System boundaries define which direct emissions and production processes are relevant for CBAM goods. They determine, for example, which emissions released from burning gas to heat raw materials fall within scope. In the context of CBAM, direct emissions are only those emissions identified as relevant within the established system boundaries. CBAM system boundaries will reflect UK Emissions Trading Scheme (ETS) system boundaries.

The CBAM charge will also apply to the emissions embodied in relevant precursor goods used in the production of complex CBAM goods. A relevant precursor good refers to an in-scope CBAM good which is used as an input into the production process of a complex good which is also within scope of CBAM. To measure the emissions of a complex CBAM good, it will be necessary to include the emissions embodied in relevant precursor goods.

Figure 2: Emissions treatment for precursor and complex goods

Precursor goods manufactured in the UK: the emissions associated with the manufacture of precursor goods are subject to the UK ETS. An example of a precursor good is clinker.

Complex goods manufactured in the UK: the precursor good is used as an input material to produce a complex good. Emissions associated with the manufacture of the complex good are subject to the UK ETS.

Complex goods imported into the UK: the emissions associated with the manufacture of a complex goods, including those of the precursor good used in the production of the complex good will be subject to the UK CBAM.

All embodied emissions will be measured and reported in tonnes of carbon dioxide equivalent (tCO2e). Verification of emissions data for CBAM will be required by a body accredited by International Accreditation Forum ^{[footnote 1]}.

In Spring 2026, the government will publish a further set of draft secondary legislation and notices which will cover detail on system boundaries and the monitoring, reporting and verification of emissions for CBAM.

Default emissions values

Whilst it is preferable for the liable person to use independently verified actual emissions data, where this is not possible, the liable person can use default emissions values for CBAM goods.

From 1 January 2027, there will be one default emissions value set per CBAM good. Default emissions values will be published in a notice on GOV.UK in advance of CBAM coming into force. Where required they may be amended or updated by HM Treasury.

Weight

The weight of a CBAM good is required to determine CBAM liability, as it provides the basis for calculating the embodied emissions of an imported good, which forms the basis of the tax charge.

To work out the embodied emissions contained within an imported CBAM good, the emissions intensity of the CBAM good needs to be multiplied by the weight of that good (expressed as tonnes of CO2e).

The liable person will therefore be required to know the weight of the CBAM good they have imported and hold records evidencing how they arrived at his figure.

This must include the weight of the good:

• excluding packing materials and packing containers of any kind
• at the time the good was imported into the UK
• expressed in kilogrammes (kgs)

Records must be kept and must show the weight of the good, along with any evidence relied on to determine that weight. This may include information or documents obtained from another person.

Where it appears that the correct weight has not been provided, or the required records have not been kept, HM Revenue and Customs (HMRC) may determine the weight for CBAM purposes. When doing so, they may make estimates or assumptions, compare the CBAM goods to similar goods, or use any relevant information or documents to help assess the weight.

CBAM rate

The CBAM rate is the tax rate that will apply to the emissions embodied in CBAM goods imported into the UK. There will be a single rate per sector in scope of CBAM.  

The CBAM rates will reflect the effective carbon price in the UK. The rates will therefore be set in reference to the UK’s primary carbon pricing mechanism, the UK ETS. The headline carbon price under the UK ETS is the same for all sectors. To arrive at a rate per sector, there will be an adjustment to account for the allocation of Free Allowances (FAs) under the UK ETS: the free allocation (FA) adjustment.

This FA adjustment will be based on a sectoral average of emissions covered by FAs over a baseline period, adjusted annually by a ‘reduction factor’ to reflect the phase out of FAs under the UK ETS. The baseline period will only take into consideration years in which there were domestic emissions for that sector. The CBAM rates will be calculated and published by the government at the beginning of each quarter from 1 January 2027. A trial CBAM rate will be set out one quarter before CBAM begins, in Q4 2026.

The relevant CBAM rate for calculating a liable person’s CBAM liability will be the rate for the relevant sector which applied when the CBAM good was imported.  

The following diagram sets out the calculation for the CBAM rates, and the subsequent text provides further detail on the different elements of the calculation:

Figure 3: Illustrative example of CBAM rate calculation

This figure shows an illustrative example of CBAM rate calculation. The calculation is comprised of 3 elements:

1. The average ETS price, calculated as the mean average of all UK ETS auction clearing prices for the relevant quarter. In a scenario where all ETS auctions fail to clear in a given quarter, the last positive average ETS price will be used.

2. The free allocation adjustment, which is calculated as 1 minus the average proportion of sectoral direct emissions covered by FAs, multiplied by a reduction factor. This average is determined by using UK ETS baseline data reporting data related to the average sectoral direct emissions generated in 2019, 2022 and 2023 by sub-installations producing CBAM goods, and average FAs allocated to those same sub-installations over the same period. Years will be discounted if there were no direct emissions for that sector. The reduction factors will reflect the reduction factors applied to phase out FAs under the UK ETS.

3. The final output is the CBAM rate for the given sector for that quarter.

Carbon price relief

The liable person can claim Carbon price relief (CPR) which will reduce their CBAM liability if the embodied emissions in the CBAM goods they have imported have been subject to a qualifying carbon pricing scheme and they have the necessary verification documents, as well as other relevant information, to calculate the amount of CPR. This includes where a CBAM good has been subject to more than one qualifying carbon pricing scheme and/or produced in more than one installation within the same jurisdiction.

The total relief claimed cannot exceed the amount of CBAM liability due.

Qualifying schemes

A qualifying carbon pricing scheme must meet the following criteria:

• it is administered by a tier of government at city, national or regional level or by a supra-national organisation
• the use of the revenue collected by or on behalf of the scheme is determined by the relevant tier of government or supra-national organisation
• participation for installations that manufacture or process a CBAM good is mandated by law, including in instances where mandatory participation is after installations emit a specified amount of emissions
• the rules and scope of the scheme, as well as the headline carbon price of the scheme, are publicly available
• the scheme imposes a cost on the relevant emissions produced by participants of the scheme either directly or indirectly. In the case of the latter, the scheme must use emissions factors taken directly from or calculated using the methodology of any of the following sources:
  • the Intergovernmental Panel on Climate Change
  • the International Energy Agency
  • the United Nationals Framework Convention on Climate Change

CPR emissions data will need to be verified by a body accredited by a full member of the Global Accreditation Cooperation Incorporated (GACI). GACI replaces the International Accreditation Forum.

What is required to calculate CPR

It is the responsibility of the liable person to calculate the CPR In order to do so, they will, as specified below, need to use a combination of verified information and publicly available information, to do so, they will need:

• a completed verification report, in the form of a template that will be provided by HMRC. The report will need to be acquired from the installation that manufactured or processed the CBAM good for which relief is being claimed. It will need to be completed by a suitably qualified verification body and include the following information:
  • the quantity of relevant emissions (those emissions within system boundaries) produced by the installation (in which the good was produced) in tCO2e
  • a breakdown showing which elements of the qualifying carbon pricing scheme are applicable to the relevant elements. This will vary between schemes and may include a breakdown of emissions subject to the headline carbon price, FAs, thresholds, graduated carbon prices, or greenhouse gas removal schemes
  • the monetary support that the installation in which the goods were produced has received or is due in relation to the emissions emitted by the installation (if applicable)
  • in instances where the qualifying carbon pricing scheme prices emissions indirectly, information on the emissions factors used
  • the publicly available headline carbon price of the qualifying carbon price the CBAM good was subject to and, if applicable, the price for greenhouse gas removals. The headline carbon price, if not fixed, must be calculated by the liable person as the mean average from the quarter before the quarter in which the CBAM good was imported
  • data on the emissions embodied in the CBAM good for which relief is being claimed. This can be either actual emissions data or the applicable default value

If within a qualifying carbon pricing scheme an installation has used greenhouse gas removal credits or similar to fulfil its obligations, the rules allowing for this and the price of such credits or similar must be publicly available. If this is not the case, the price of any greenhouse gas removal credits or similar cannot be used to generate CPR.

Compensation must be accounted for in the calculation if it is connected to the emissions emitted by the installation subject to the qualifying carbon pricing scheme and the rules of the compensation scheme are publicly set out by the jurisdiction of the qualifying carbon pricing scheme.

How to calculate CPR

The information above should be used by the liable person to calculate the CPR in accordance with the following steps:

1. Identify the relevant emissions in tCO2e produced by the installation in a given calendar year in line with CBAM requirements.

2. Identify the amount of emissions in Step 1 that were subject to different elements of the qualifying carbon pricing scheme.

3. Multiply the amount of emissions attributable to each relevant element of the qualifying carbon pricing scheme (those elements that meet specified transparency criteria)) by the applicable price per tonne of carbon dioxide equivalent, disregarding monetary support, for those emissions and add them together.

4. Divide the Step 3 total by the Step 1 emissions figure to produce an overall price per tonne of carbon dioxide equivalent — this is the effective carbon price, subject to any adjustment in accordance with step 5.

5. If applicable, adjust the step 4 price to account for monetary support/compensation the installation received in relation to emissions. To do this, divide the total compensation/rebate received for the same calendar year as in Step 1 to get the effective carbon price for compensation and deduct this from the Step 4 price.

6. Multiply the effective carbon price by the embodied emissions of the relevant good. The embodied emissions may be determined using default values, provided the latter was used to calculate the CBAM rate liability.

Figure 4: Illustrative example of effective carbon price calculation (steps 1 to 4)

This figure shows an illustrative example of the effective carbon price calculation. It is expressed as a price per tCO2e in the currency used by the qualifying carbon pricing scheme. The calculation may vary depending on the qualifying scheme the CBAM good was subject to, and how installations interact with that scheme.

Figure 5: Step 1 — Illustrative example of adjusting the effective carbon price for compensation and rebates (step 5, if applicable)

Figure 5: Step 2 — Illustrative example of adjusting the effective carbon price for compensation and rebates (step 5, if applicable)

This figure shows an example of how the effective carbon price should be adjusted when an installation has received rebates and/or compensation linked to its emissions.

Figure 6: Illustrative example of CPR calculation (step 6)

This figure shows an example of how to calculate CPR. It uses the effective carbon price from figure 3 (or 4, where applicable) and multiplies it by the embodied emissions for the CBAM good. The result is the CPR.

Where a CBAM good has been subject to more than one qualifying carbon pricing scheme, including where a CBAM good has been produced using precursor goods that were subject to different qualifying carbon pricing schemes, the CPR for each price incurred must be calculated separately.

Currency conversion for CPR

For liable persons to deduct CPR from their CBAM liability, any relief amount calculated in an overseas currency must be converted into pounds sterling (GBP). To do this, the liable person must use the exchange rates published by HMRC for the calendar quarter prior to the import of the CBAM good.

For example, if a good is imported in June 2030, the liable person must use the exchange rate published by HMRC for the period covering January to March 2030.

Where a CBAM good has been subject to multiple qualifying carbon pricing schemes, including where a CBAM good has been used in the manufacture and processing of another CBAM good, the liable person must convert to GBP before entering them into the return.

CPR can only be claimed where the relevant elements used to calculate the effective carbon price have been appropriately verified.

This verification must be carried out by an independent verifier who:

• is accredited to the relevant standards specified:
  • ISO 17029: General principles and requirements for validation and verification bodies.
  • ISO 14064-3: Greenhouse gases — part 3, specification with guidance for the validation and verification of greenhouse gas assertions.
  • ISO 14065: General principles and requirements for bodies validating and verifying elements.
  • ISO 14066: Environmental information — competence requirements for teams validating and verifying environmental information.
• is accredited by an accreditation body which is a full member of the Global Accreditation Cooperation Incorporated.
• is independent of  the installation for which the person is verifying elements of the effective carbon price
• is independent of  any government or supra-national institutions administering a qualifying carbon price

Further detail on the methodology for calculating and verifying the effective carbon price will be published in guidance.

International arrangements or agreements

Where appropriate, the government will consider of the use of suitable arrangements or agreements with other jurisdictions. There are currently no international arrangements or agreements in place.

Exemption for goods originating in a jurisdiction with a linked ETS

The UK can exempt goods from CBAM, where either they originate from a country or territory which has entered arrangements with the UK to link their ETS with the UK’s scheme, or a country of territory whose ETS is indirectly linked to the UK ETS.

There are currently no jurisdictions exempt from CBAM.

6. Administration

Registration  

A person must register with HMRC for CBAM if they meet or exceed the minimum registration threshold. The minimum registration threshold considers the total value of CBAM goods that are imported or are expected to be imported into the UK over a given period as set out in the 2 tests below. The value is set at £50,000.

To determine when a person becomes registerable for CBAM the following liability tests must be considered in relation to imported CBAM goods which pass the tax point on or after 1 January 2027. Further detail on the tax point is set out above.

1. Forward looking test

On any given day, a person must consider whether they expect that the total value of their CBAM goods being imported into the UK and passing the tax point over the next 30 days will meet or exceed the £50,000 minimum registration threshold. Where the test is met, the person’s liability to register begins on the day the test was met.

2. Backward looking test

On the first day of the month, a person must look back over the preceding 12-month period to determine if the total value of their CBAM goods that have been imported into the UK and passed the tax point met or exceeded the £50,000 minimum registration threshold. Where the test is met, the person’s liability to register begins on the day they applied the test.

For CBAM goods imported during the first calendar year of CBAM (1 January to 31 to 31 December 2027), a person only needs to look back to 1 January 2027.

If a person meets both tests, their liability starts from the earlier of the 2 dates.

Anyone who is liable for CBAM must register with HMRC, keep records of the CBAM goods they import, submit CBAM returns and pay any tax due to HMRC.

Anyone importing CBAM goods into the UK will be required to keep under review whether they need to register with HMRC and account for CBAM.

Ordinarily, the liable person will have 30 days to register with HMRC from the day they become liable. However, during the first calendar year of CBAM, businesses will have until 31 January 2028 to register.

Between becoming liable for CBAM and completing the registration process, liable persons will need to retain all relevant records relating to their importation of CBAM goods to enable them to complete registration and submit returns when the facility becomes available. Further details on record keeping can be found below.

Anyone who needs to register for CBAM will be able to do so using their Government Gateway account. If they do not have access to the internet or are unable to use it, they must contact HMRC to explore registering via a non-digital method.

When registering for CBAM the liable person will be asked:

• their name and contact details
• their business’ address
• their business type
• their Economic Operators Registration and Identification number (EORI) number and if they are registered for Value Added Tax (VAT), their VAT registration number
• the date they triggered registration
• the estimated weight of CBAM goods that they expect to import in each CBAM sector in the coming 12 months

Further detail on registration will be published in GOV.UK guidance.

Value of CBAM goods

To determine whether the CBAM registration threshold has been met, the liable person must hold information about the value of the CBAM goods they import into the UK.

The value of a CBAM good will be the same value that is used, or would be used, to calculate any applicable customs duty due on its import into the UK.

This means, where a CBAM good is imported into the UK and:

• a charge to duty or import duty applies, the value of the goods for CBAM is the same as determined for the duty  under Part 12 of the Customs (Import Duty) (EU Exit) Regulation 2018 (‘2018 Regulations’) or in line with Chapter 3 of Title III of the UCC 2013 (as the case may be), or
• no charge to duty or import duty applies, the value is to be determined as if the 2018 Regulation or the UCC applies on import

Deregistration

The liable person can apply to HMRC and request to be deregistered. A person will only be deregistered where HMRC is satisfied that the person is not required to be registered and has not been liable in the previous 12 months.

HMRC may decline to deregister a person if:

• there are outstanding amounts of CBAM due from the person
• there are outstanding returns due from the person
• it is considered that the person will be registrable in the following 12 months

Death, Incapacity and Insolvency

Death and incapacity

Where a registered person dies or becomes incapacitated, another person can carry on their business for CBAM purposes.

Where this happens, the person who takes over handling the business must inform HMRC within 21 days along with information:

• showing they have authority to carry on the business
• about the death or incapacitation of the registered person, with evidence

That person will then be treated as the registered person for CBAM purposes by HMRC for 6 months, with the potential for this to be extended where appropriate.

Insolvency

Where a registered person is subject to an insolvency procedure and a person acts as an insolvency office holder in relation to that registered person, HMRC will treat the insolvency office holder as the registered person for CBAM purposes.

In this case, any CBAM liability which arose before the insolvency procedure began continues to be payable by the registered person. Any liability which arises after is treated as an expense of the procedure (unless the procedure is an equivalent procedure under the law of a country or territory outside the United Kingdom).

For CBAM purposes, ‘insolvency office holder’ means:

• an administrative receiver
• an administrator
• a liquidator
• a receiver appointed by the courts or by a mortgagee
• a trustee in bankruptcy
• a trustee (or interim trustee) in the sequestration of an estate
• a person acting in an equivalent capacity under the law of a country or territory outside the United Kingdom

And an ‘insolvency procedure means’:

• administration
• administrative receivership
• bankruptcy
• receivership
• sequestration
• winding up
• an equivalent procedure under the law of a country or territory outside the United Kingdom

7. Accounting periods, returns, payments and repayments

The liable person will need to complete and submit a tax return for CBAM following the end of each accounting period from the time they become registrable, until they satisfy the rules for deregistration. 

Where the liable person has a nil liability for an accounting period (for example, because they did not import any CBAM goods, or they did but their liability was reduced to zero because the goods they imported had already been subject to a qualifying carbon pricing scheme, they will still need to complete and submit a return for that accounting period.

Accounting periods

The first accounting period for CBAM will be 12 months, from 1 January 2027 to 31 December 2027. Returns and payments will be due 5 months after the end of the first accounting period (31 May 2028). This is to provide businesses with sufficient time to obtain supporting information required to complete their first return, whilst also allowing HMRC time to develop and test necessary IT systems.

Subsequent accounting and payment periods from 1 January 2028

From 1 January 2028, CBAM accounting periods will move to a quarterly cycle and gradually transition to a 2 month return and payment window. Returns must be submitted on the last working day of the month.

After the initial annual accounting period with a 5 month return and payment deadline the subsequent accounting periods will be as follows:

Table 2:

Accounting Period	Return and Payment Deadline
1 January 2028 to 31 March 2028	31 July 2028
1 April 2028 to 30 June 2028	29 September 2028
1 July 2028 to 30 September 2028	30 November 2028
1 October 2028 to 31 December 2028	28 February 2029

Information on a return

At the end of each accounting period, the liable person, or their tax agent must complete and submit a CBAM return to HMRC.

If the liable person has imported multiple consignments of the same CBAM good, they must report each consignment separately on the return.

Where the liable person has imported different CBAM goods as part of the same shipment, these must be reported separately on the return.

The following information will be required from the liable person on their CBAM returns, and they must also keep records of this information:

• the CBAM goods imported during the relevant accounting period by reference to the relevant 8-digit commodity code in force when the good passed the tax point, including when a CBAM good is processed into a non-CBAM good in the UK while under a special customs procedure
• the net weight of those CBAM goods in kg at the time of import into the UK
• the embodied emissions in the CBAM good (where not available, a default emissions value would need to be used) in tCO2e
• The embodied emissions in any precursor goods for a CBAM good where these emissions are exempt
• the amount of carbon price incurred on those CBAM goods, if any, in GBP
• for the first accounting period, the quarter in which each CBAM good passed the tax point
• the country of origin of the CBAM good as per non-preferential rules of origin defined by customs

Payment methods

The following methods of payment will be accepted by HMRC for paying CBAM liabilities:

• Direct Debit
• BACS/CHAPS
• PISP
• Faster Payment
• Credit/Debit cards
• Cheques

Return amendments and repayments

The liable person will be able to amend a return to correct an error. A repayment of CBAM liabilities will be allowed where a liable person has made an error on their return that has resulted in an overpayment.

A repayment claim can be made within 3 years from the date the return is submitted.

Liable persons must retain sufficient records to substantiate any correction, and HMRC may request evidence before processing a repayment.

8. Record keeping

Importers of CBAM goods will be required to keep records relating to CBAM.

The following records will need to be held by liable persons for 6 years after the end of the accounting period the goods are attributed to.

Goods imported

Importers of CBAM goods will need to keep records of all CBAM goods imported including commodity code, date of import, value, weight etc. This can be in the form of customs declarations (C88/SAD) or other documents relating to import of goods such as:

• import entry acceptance advice
• bill of lading documents and information concerning the import, export, or declaration of goods by or on behalf of the relevant person
• documents and information concerning the discharge of a customs or export procedure (other than a temporary admission procedure)
• commercial documentation, including records concerning movement of goods within the UK where these are relevant to a customs obligation of the relevant person
• documents and information relating to the calculation of UK customs duty, including evidence of eligibility for any lower rate of duty or relief (this includes temporary admission relief and returned goods relief)
• documents and information relating to any remission or repayment of duty
• documents and information relating to evidence of UK origin that has been provided in relation to exported goods which are then reimported in a complex good to be treated as an exemption

Registration

Liable persons required to register for CBAM will need to a keep record of the information provided in the registration process along with any evidence used to support it.

This will include records relating to the value of CBAM goods imported; the dates these imports occurred and when they triggered the requirement to register; how estimates of the weight of CBAM goods expected to be imported were calculated; and can include any information obtained from a third-party.

Carbon Price Relief

To support their claim for Carbon Price Relief (CPR), liable persons will need to keep the following records:

• evidence pertaining to how the CBAM good was subject to a qualifying carbon pricing scheme
• the verification document pertaining to elements of the effective carbon price
• the headline carbon price of a qualifying carbon pricing scheme and that of Greenhouse Gas Removals (GGRs) if relevant
• the relevant verified information on emissions intensity and the weight of the good if multiplying the effective carbon price by actual embodied data
• evidence of how the CPR in an overseas currency was converted into GBP following HMRC’s requirements
• calculations to support how any of the following was used to determine the CPR claimed on the return

Further information on the required format for submitting the above information will be published within guidance.

Emissions embodied

Where liable persons are providing actual emissions data to determine their CBAM liability, they will need to hold information on the verified emissions intensity for the for each individual CBAM good imported, broken down by the relevant commodity code. Further information on the record keeping requirements when using actual emissions will be set out alongside the published draft legislation in the Spring.

9. Compliance and penalties

HMRC will provide comprehensive support through guidance and communications  to enable businesses to meet the new CBAM requirements.   

HMRC will extend the use of existing powers and penalties to enforce compliance with CBAM where appropriate. This means there will be penalties for:

• failure to notify HMRC of liability for CBAM
• failure to submit a CBAM return
• failure to pay CBAM
• errors in CBAM returns or other documents relied upon by HMRC
• failure to disclose relevant tax avoidance schemes and serial tax avoidance
• failure to comply with an information notice

In addition to the above, HMRC is introducing a general penalty for failure to comply with specific requirements relating to CBAM, such as notifying HMRC when a business address changes or that a business is being carried on by another person due to death, incapacity or in cases of insolvency. HMRC is also introducing legislation to deter the artificial separation of business activities and prevent circumvention of liability to the tax.

Criminal offences will also apply for fraudulent evasion and deliberate misstatement of CBAM.

Assessments

Where the liable person fails to register for CBAM or fails to provide a complete or accurate return, HMRC will make an assessment of the amount of CBAM that is due and notify the liable person accordingly.

Compulsory registration

Where the liable person fails to register for CBAM, HMRC will be able to compulsorily register them and if appropriate, assess for the tax due.

Annex: Commodity codes within scope of CBAM

Aluminium  

Combined Nomenclature (CN) code and description	Greenhouse gases
7601 — Unwrought aluminium	Carbon dioxide and perfluorocarbons
7603 — Aluminium powders and flakes	Carbon dioxide and perfluorocarbons
7604 — Aluminium bars, rods and profiles	Carbon dioxide and perfluorocarbons
7605 — Aluminium wire	Carbon dioxide and perfluorocarbons
7606 — Aluminium plates, sheets and strip, of a thickness exceeding 0,2 mm	Carbon dioxide and perfluorocarbons
7607 — Aluminium foil (whether or not printed or backed with paper, paper-board, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0,2 mm	Carbon dioxide and perfluorocarbons
7608 — Aluminium tubes and pipes	Carbon dioxide and perfluorocarbons
7609 00 00 — Aluminium tube or pipe fittings (for example, couplings, elbows, sleeves)	Carbon dioxide and perfluorocarbons
7610 — Aluminium structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures	Carbon dioxide and perfluorocarbons
7611 00 00 — Aluminium reservoirs, tanks, vats and similar containers, for any material (other than compressed or liquefied gas), of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment	Carbon dioxide and perfluorocarbons
7612 — Aluminium casks, drums, cans, boxes and similar containers (including rigid or collapsible tubular containers), for any material (other than compressed or liquefied gas), of a capacity not exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment	Carbon dioxide and perfluorocarbons
7613 00 00 — Aluminium containers for compressed or liquefied gas	Carbon dioxide and perfluorocarbons
7614 — Stranded wire, cables, plaited bands and the like, of aluminium, not electrically insulated	Carbon dioxide and perfluorocarbons
7616 — Other articles of aluminium	Carbon dioxide and perfluorocarbons

Cement    

CN code and description	Greenhouse gas
2507 00 80 — Other kaolinic clays	Carbon dioxide
2523 10 00 — Cement clinkers	Carbon dioxide
2523 21 00 — White Portland cement, whether or not artificially coloured	Carbon dioxide
2523 29 00 — Other Portland cement	Carbon dioxide
2523 30 00 — Aluminous cement	Carbon dioxide
2523 90 00 — Other hydraulic cements	Carbon dioxide

Fertilisers    

CN code and description	Greenhouse gases
2808 00 00 — Nitric acid; sulphonitric acids	Carbon dioxide and nitrous oxide
2814 — Ammonia, anhydrous or in aqueous solution	Carbon dioxide
2834 21 00 — Nitrates of potassium	Carbon dioxide and nitrous oxide
3102 — Mineral or chemical fertilisers, nitrogenous	Carbon dioxide and nitrous oxide
3105 — Mineral or chemical fertilisers containing 2 or 3 of the fertilising elements nitrogen, phosphorus and potassium; other fertilisers; goods of this chapter in tablets or similar forms or in packages of a gross weight not exceeding 10 kg	Carbon dioxide and nitrous oxide
Except: 3105 60 00 — Mineral or chemical fertilisers containing the 2 fertilising elements phosphorus and potassium	Not applicable

Hydrogen

CN code and description	Greenhouse gas
2804 10 00 — Hydrogen	Carbon dioxide

Iron and steel

CN code and description	Greenhouse gas
2601 12 00 – Agglomerated iron ores and concentrates, other than roasted iron pyrites	Carbon dioxide
72 – Iron and steel	Carbon dioxide
Except: 7202 2 — Ferro-silicon	Not applicable
Except: 7202 30 00 — Ferro-silico-manganese	Not applicable
Except: 7202 50 00 — Ferro-silico-chromium	Not applicable
Except: 7202 70 00 — Ferro-molybdenum	Not applicable
Except: 7202 80 00 — Ferro-tungsten and ferro-silico-tungsten	Not applicable
Except: 7202 91 00 — Ferro-titanium and ferro-silico-titanium	Not applicable
Except: 7202 92 00 — Ferro-vanadium	Not applicable
Except: 7202 93 00 — Ferro-niobium	Not applicable
Except 7202 99 10 — Ferro-phosphorus	Not applicable
Except 7202 99 30 — Ferro-silico-magnesium	Not applicable
Except: 7202 99 80 — Other	Not applicable
Except: 7204 — Ferrous waste and scrap; remelting scrap ingots and steel	Not applicable
7301 — Sheet piling of iron or steel, whether or not drilled, punched or made from assembled elements; welded angles, shapes and sections, of iron or steel	Carbon dioxide
7302 — Railway or tramway track construction material of iron or steel, the following: rails, check-rails and rack rails, switch blades, crossing frogs, point rods and other crossing pieces, sleepers (cross-ties), fish- plates, chairs, chair wedges, sole plates (base plates), rail clips, bedplates, ties and other material specialised for jointing or fixing rails	Carbon dioxide
7303 00 — Tubes, pipes and hollow profiles, of cast iron	Carbon dioxide
7304 — Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel	Carbon dioxide
7305 — Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross-sections, the external diameter of which exceeds 406,4 mm, of iron or steel	Carbon dioxide
7306 — Other tubes, pipes and hollow profiles (for example, open seam or welded, riveted or similarly closed), of iron or steel	Carbon dioxide
7307 — Tube or pipe fittings (for example, couplings, elbows, sleeves), of iron or steel	Carbon dioxide
7308 — Structures (excluding prefabricated buildings of heading 9406 ) and parts of structures (for example, bridges and bridge-sections, lock- gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns), of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel	Carbon dioxide
7309 00 — Reservoirs, tanks, vats and similar containers for any material (other than compressed or liquefied gas), of iron or steel, of a capacity exceeding 300 l, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment	Carbon dioxide
7310 — Tanks, casks, drums, cans, boxes and similar containers, for any material (other than compressed or liquefied gas), of iron or steel, of a capacity not exceeding 300 l, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment	Carbon dioxide
7311 00 — Containers for compressed or liquefied gas, of iron or steel	Carbon dioxide
7318 — Screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers (including spring washers) and similar articles, of iron or steel	Carbon dioxide
7326 — Other articles of iron or steel	Carbon dioxide

1. The government is aware that as of 1 January 2026, the IAF has merged with ILAC to form the GACI. The government will set out full verification guidance due course. ↩