UK CBAM Preparation 2027: What Importers Must Do Now

Key Takeaways

• UK CBAM starts 1 January 2027 — first accounting period covers the whole of 2027, with returns due by 31 May 2028
• Registration threshold: Importers bringing in under £50,000 annual value of in-scope goods are exempt from registration
• Five sectors covered: Iron & steel, aluminium, cement, fertilisers, and hydrogen — electricity is NOT included in UK CBAM
• Quarterly reporting begins 1 January 2028, replacing the initial annual cycle
• Two emissions data options: Actual verified producer data OR government-set default values
• HMRC enforcement: Existing tax powers will be used for CBAM compliance and penalties
• Start preparing now: Secondary legislation expected later in 2026, but data collection should begin immediately

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Introduction

The UK Carbon Border Adjustment Mechanism (CBAM) moves from policy to practice on 1 January 2027. For UK importers of iron, steel, aluminium, cement, fertilisers, and hydrogen, this means new registration requirements, quarterly emissions reporting, and the purchase of CBAM certificates tied to the carbon content of imported goods.

Unlike the EU CBAM, the UK scheme excludes electricity but includes indirect emissions from the outset. The registration threshold exempts smaller importers — those bringing in under £50,000 annual value of in-scope goods — but for anyone above that threshold, preparation needs to start now.

This guide walks through what UK CBAM means for importers, the timeline from now through 2028, and the specific steps you need to take to ensure compliance when the regime goes live.

UK CBAM Timeline: Key Dates and Deadlines

Understanding the implementation schedule is critical for planning. The UK CBAM rolls out in distinct phases, each with specific obligations.

Now through late 2026: Final secondary legislation is expected to be published later in 2026, according to analysis from TLT LLP. This will set out the detailed administrative requirements, form numbers, and procedural rules. While you wait, focus on supply chain engagement and data readiness.

1 January 2027: UK CBAM financial obligations begin. From this date, imports of in-scope goods carry an embedded carbon cost that must be reported and eventually paid for via CBAM certificates. The first accounting period runs for the whole of 2027.

31 May 2028: Deadline for submitting the first UK CBAM return, covering the entire 2027 accounting period. This gives importers five months after year-end to compile emissions data, calculate liabilities, and file.

1 January 2028: Reporting frequency shifts from annual to quarterly. From this point forward, CBAM returns are due quarterly rather than annually, increasing the administrative burden but spreading the workload across the year.

Ongoing from 2028: Quarterly reporting cycles with returns due within one month of each quarter end. CBAM certificate purchases must align with reported emissions for each period.

The timeline compresses quickly. If you import in-scope goods above the threshold, you have less than two years to establish data collection systems, engage suppliers, and register with HMRC.

Who Needs to Register: The £50,000 Threshold

The UK CBAM includes a de minimis exemption for smaller importers. According to TLT LLP’s analysis of the government’s policy summary, importers who bring in less than £50,000 annual value of in-scope goods are exempt from registration and reporting obligations.

This threshold applies to the total annual value of all CBAM in-scope goods imported by your business, not per shipment or per supplier. You need to aggregate the customs value of all iron, steel, aluminium, cement, fertiliser, and hydrogen imports to determine whether you exceed the threshold.

Calculating your position:

1. Review your 2025 import data for all commodity codes falling within the five CBAM sectors
2. Sum the customs value (not including duty or VAT) of all in-scope goods
3. Project 2026 volumes — if you’re close to £50,000, factor in growth
4. If you exceed £50,000 in any 12-month period, registration becomes mandatory

Important considerations:

• The threshold applies to the importer of record — if you use a customs agent, you remain the liable person if you’re named as the importer on declarations
• Related companies may need to be considered together if they share import arrangements
• Once you exceed the threshold, you must register within a specified period (to be confirmed in secondary legislation)
• Voluntary registration is expected to be available for importers below the threshold who want to claim CBAM certificate credits

If you’re near the threshold, treat it as a trigger for action rather than a line to hover around. The administrative cost of compliance may be worthwhile even for smaller volumes if your customers demand CBAM-compliant supply chains.

Sectors Covered: What’s In Scope

UK CBAM covers five industrial sectors, aligned broadly with the EU CBAM but with one significant difference:

In scope:

• Iron and steel (all forms, including precursor goods like iron ore and pig iron)
• Aluminium (including unwrought aluminium, aluminium bars, rods, and certain fabricated products)
• Cement (all types, including clinker)
• Fertilisers (nitrogen-based, including urea and ammonium nitrate)
• Hydrogen (when produced for industrial use)

Notably excluded:

• Electricity — unlike EU CBAM, the UK scheme does not currently cover electricity imports. This reflects the UK’s different energy market structure and interconnector arrangements.

Precursor goods: The UK CBAM includes emissions from precursor goods used in manufacturing. For example, if you import steel products, the embodied emissions include not just the steelmaking process but also the iron production and any upstream processes. The government’s policy summary confirms that emissions from UK-produced precursor goods can be deducted from total embodied emissions, preventing double-counting.

Indirect emissions: The UK CBAM includes indirect emissions (emissions from electricity used in production) from the outset. This differs from the EU CBAM’s transitional phase, which initially covered only direct emissions. For energy-intensive sectors like aluminium and fertilisers, indirect emissions can represent 30-50% of total embodied carbon.

Check your commodity codes against the UK Trade Tariff to confirm whether specific products fall within CBAM scope. The final secondary legislation will include detailed code lists.

Data Collection Requirements: What You Need from Suppliers

The core administrative burden of UK CBAM lies in gathering accurate emissions data from your supply chain. You have two options for determining embodied emissions, each with different data requirements.

Option 1: Actual verified emissions data

This approach uses real emissions figures from the production facility where your goods were manufactured. You need:

• Verified emissions report from the producer, covering the specific production batch or period
• Verification statement from an accredited verifier (requirements to be confirmed in secondary legislation)
• Production process details including energy sources, process emissions, and any carbon capture applied
• Electricity emissions factor for the grid where production occurred (for indirect emissions calculation)
• Precursor goods emissions if applicable, traced back through the supply chain

Actual data typically yields lower CBAM liabilities for efficient producers but requires significant supplier engagement. Many non-EU producers currently lack the monitoring systems needed to provide verified data.

Option 2: Government default values

Where actual data is unavailable or unreliable, you can use UK government default emissions values. These are set by sector and country of origin, reflecting typical production emissions for that region.

Default values are generally higher than actual emissions for efficient producers, creating a financial incentive to collect real data. However, they eliminate the administrative burden of supplier verification and may be preferable for:

• Small-volume imports where data collection costs exceed CBAM savings
• Complex supply chains with multiple production stages across different countries
• Suppliers unwilling or unable to provide verified data

Monitoring period options:

The government’s policy summary outlines two approaches for linking emissions data to imports:

1. Date of importation — emissions intensity is fixed based on the data applicable when goods enter the UK
2. Date of production — emissions intensity reflects the production period, which may differ from import date

Your choice affects how you track and report data. Production-date alignment is more accurate but requires tighter coordination with suppliers on production schedules and documentation timing.

Registration Process: How to Register with HMRC

HMRC will administer UK CBAM using existing tax enforcement powers. The registration process is expected to mirror other HMRC environmental taxes, though specific form numbers and portal details await secondary legislation.

Expected registration steps:

1. Determine liable person — typically the importer of record named on customs declarations. If you use a customs agent, confirm whether they will handle CBAM registration on your behalf or whether you retain responsibility.

2. Gather required documentation:

   • Business details (company name, registration number, address)
   • EORI number (mandatory for all customs-related registrations)
   • Estimated annual value of CBAM in-scope imports
   • List of commodity codes you import within CBAM scope
   • Primary countries of origin for CBAM goods

3. Submit registration — expected via HMRC’s online portal (specific system TBC in secondary legislation). Registration must be completed before your first CBAM return is due.

4. Receive CBAM registration number — this must be referenced on all CBAM returns and certificate purchases.

5. Set up internal systems — establish processes for quarterly data collection, calculation, and reporting before your first return deadline.

Timing: Register well before your first return is due. The first accounting period covers all of 2027, with the return due 31 May 2028. However, waiting until 2028 to register leaves no time to test systems or correct errors. Aim to register in Q1 2027 once the portal opens.

Multiple entities: If your business operates through multiple legal entities, each entity exceeding the threshold must register separately. Group registration is not currently proposed in the UK CBAM policy.

Quarterly Returns Process: What Data to Submit

From 1 January 2028, CBAM returns shift to a quarterly cycle. Each return must include specific data elements, and accuracy is critical — HMRC will use existing tax powers to penalise errors and late submissions.

Each quarterly return must include:

• Total quantity of each CBAM good imported during the quarter (by commodity code)
• Total embodied emissions expressed in tonnes of CO2e (carbon dioxide equivalent)
• Emissions breakdown between direct and indirect emissions
• Country of origin for each import batch
• Production facility details where actual data is used
• Default vs actual data indicator — which method was applied to each import
• CBAM certificates to surrender — calculated based on reported emissions and the prevailing certificate price

Calculation methodology:

The embodied emissions figure is calculated as:

Total CBAM liability = (Embodied emissions in tCO2e) × (CBAM certificate price)

Where embodied emissions equals:

• Direct emissions from production processes
• Plus indirect emissions from electricity consumption
• Minus any embedded carbon price already paid in the country of origin (to avoid double charging)

Deadlines:

Quarterly returns are expected to be due within one month of quarter end. This means:

• Q1 (Jan-Mar): return due end of April
• Q2 (Apr-Jun): return due end of July
• Q3 (Jul-Sep): return due end of October
• Q4 (Oct-Dec): return due end of January (following year)

The first return (covering all of 2027) breaks this pattern, with an extended deadline of 31 May 2028.

Penalties:

HMRC has confirmed it will use existing tax enforcement powers for CBAM compliance. This means penalties for late filing, inaccurate returns, and failure to surrender sufficient certificates will align with other environmental taxes. Expect fines proportional to the CBAM liability underpaid, plus potential interest charges.

CBAM Certificate Purchase: How It Works

CBAM certificates are the mechanism through which importers pay for the carbon content of their imports. The system mirrors the EU CBAM approach but uses UK-specific pricing and administration.

How certificates work:

1. Certificate price — set weekly by the UK government, based on the average UK Emissions Trading Scheme (UK ETS) allowance price from the previous week. This creates a direct link between domestic carbon pricing and the border adjustment.

2. Purchase timing — certificates must be purchased before the return deadline for each period. You cannot file a return without holding sufficient certificates to cover reported emissions.

3. Surrender process — when you submit your quarterly return, you surrender the required number of certificates. Surrendered certificates are retired and cannot be reused.

4. Banking and selling — the policy summary indicates that certificate banking (carrying unused certificates forward) will be permitted. Selling surplus certificates back to the government may also be available, though details await secondary legislation.

Free allowances adjustment:

The UK CBAM includes a mechanism to adjust certificate requirements based on free allowances received by UK domestic producers under the UK ETS. This prevents UK manufacturers from being undercut by imports while they still receive some free allocation during the ETS phase-out period.

For importers, this means the effective CBAM rate may be slightly lower than the headline certificate price for sectors where UK producers still receive free allowances. The adjustment factor will be published alongside weekly certificate prices.

Budgeting for CBAM costs:

Model your potential CBAM liability using default emissions values as a conservative baseline. For steel imports, typical embodied emissions range from 1.8-2.5 tCO2e per tonne of product. At a carbon price of £50-70 per tonne (reflecting recent UK ETS levels), this translates to £90-175 per tonne of steel in CBAM costs.

Factor this into your landed cost calculations and customer pricing. CBAM is not recoverable as a duty — it’s an environmental cost that may need to be absorbed or passed through depending on your market position.

Interaction with EU CBAM: Key Differences for UK Importers

Many UK businesses already face EU CBAM obligations on exports to the European market. The UK scheme runs in parallel but with important differences that affect dual-market importers.

Key differences between UK and EU CBAM:

Aspect	UK CBAM	EU CBAM
Start date	1 Jan 2027 (financial obligations)	1 Jan 2026 (full financial obligations)
Electricity	Not included	Included
Indirect emissions	Included from outset	Phased in during transitional period
Threshold	£50,000 annual value exemption	No de minimis threshold
Reporting frequency	Quarterly from 2028	Quarterly from 2026
Certificate pricing	Linked to UK ETS	Linked to EU ETS allowance prices
Administration	HMRC	European Commission via national authorities

Dual compliance considerations:

If you import goods into both the UK and EU, you may face CBAM obligations in both jurisdictions. The schemes are not mutually recognisable — CBAM certificates purchased for EU obligations cannot be used for UK returns, and vice versa.

However, the government’s policy summary confirms that returned goods relief applies to UK CBAM. If you export CBAM goods from the UK to the EU (paying EU CBAM) and then re-import them within 3 years in the same state, no UK CBAM liability arises. This prevents double-charging on goods moving temporarily between markets.

Documentation efficiency:

While you cannot cross-use certificates, you can streamline data collection. A single verified emissions report from a supplier can support both UK and EU CBAM returns, provided it meets both schemes’ verification standards. Maintain a central repository of supplier emissions data and allocate it to UK vs EU imports based on destination.

Supply Chain Considerations: Contractual Changes Needed

UK CBAM introduces new compliance obligations that may require updates to your commercial contracts and supplier agreements.

Review and amend:

• Supplier data clauses — add requirements for suppliers to provide verified emissions data within specified timeframes. Include consequences for non-compliance (e.g., switching to default values at supplier’s cost)
• Audit rights — secure the right to audit supplier emissions calculations, either directly or through third-party verifiers
• Price adjustment mechanisms — consider whether CBAM costs should be passed through to customers or absorbed. If pass-through is planned, define the calculation methodology in contracts
• Force majeure — assess whether CBAM-related disruptions (e.g., supplier inability to provide data) should trigger force majeure provisions
• Indemnities — allocate liability for inaccurate emissions data between you and your suppliers

Supplier engagement strategy:

Start conversations with key suppliers now. Explain the UK CBAM requirements, the data you’ll need, and the timeline. Efficient suppliers may already be preparing for EU CBAM and can extend their systems to cover UK imports.

For suppliers resistant to providing data, model the cost impact of using default values. In some cases, the CBAM cost differential between actual and default data may be enough to motivate cooperation.

Customs agent coordination:

If you use a customs broker for declarations, clarify CBAM responsibilities. HMRC holds the importer of record liable, but many agents offer CBAM administration services. Confirm:

• Whether the agent will handle registration and returns
• How emissions data will be transmitted between you and the agent
• Who purchases and surrenders certificates
• Fee structure for CBAM services

Cost Impact Estimation: Modelling Your CBAM Liability

Understanding your potential CBAM exposure helps with budgeting and pricing decisions. Build a simple model using your import data and default emissions values.

Step-by-step estimation:

1. List all CBAM in-scope imports from the past 12 months, by commodity code and tonnage
2. Apply default emissions factors (to be published by the government) or use industry benchmarks:
   • Steel: 1.8-2.5 tCO2e per tonne
   • Aluminium: 8-16 tCO2e per tonne (highly dependent on electricity source)
   • Cement: 0.6-0.9 tCO2e per tonne
   • Fertilisers: 1.5-3.0 tCO2e per tonne
   • Hydrogen: 9-12 tCO2e per tonne (grey hydrogen); near-zero for green hydrogen
3. Multiply by projected UK ETS prices — recent trading has been £50-70 per tonne, but this is volatile
4. Adjust for free allowance factors — reduce the effective rate based on UK ETS free allocation to domestic producers
5. Compare actual vs default — if you can secure verified data showing lower emissions, calculate the savings potential

Example calculation:

A UK manufacturer imports 500 tonnes of aluminium from a non-EU producer annually. Using a conservative default factor of 12 tCO2e per tonne and a certificate price of £60 per tonne:

Embodied emissions = 500 tonnes × 12 tCO2e/tonne = 6,000 tCO2e
CBAM liability = 6,000 tCO2e × £60/tCO2e = £360,000 per year

If the producer can provide verified data showing actual emissions of 8 tCO2e per tonne (reflecting hydroelectric power usage), the liability drops to £240,000 — a £120,000 annual saving that may justify the cost of data collection.

Actionable Checklist: Month-by-Month Preparation for 2026-2027

Use this timeline to structure your UK CBAM preparation. Adjust based on your import volumes and supply chain complexity.

May-June 2026:

• Audit 2025 import data to identify all CBAM in-scope commodity codes
• Calculate total annual value of CBAM goods to assess against £50,000 threshold
• Map your supply chain — identify all production facilities for CBAM goods
• Assign internal CBAM owner (compliance, customs, or sustainability team)

July-September 2026:

• Begin supplier engagement — notify of upcoming UK CBAM data requirements
• Review existing EU CBAM preparations (if applicable) for overlap opportunities
• Model potential CBAM costs using default emissions factors
• Assess IT systems — can your current customs/ERP systems handle quarterly CBAM reporting?

October-December 2026:

• Monitor secondary legislation publication — review detailed administrative requirements
• Prepare registration documentation (EORI, company details, import estimates)
• Train relevant staff on CBAM calculation methodology and reporting obligations
• Update supplier contracts to include emissions data clauses

January-March 2027:

• Complete HMRC registration once portal opens
• Implement data collection systems for actual emissions (if using this route)
• Establish quarterly internal reporting cycle to align with CBAM deadlines
• Test CBAM calculations using Q1 2027 import data (no filing required yet, but validate your process)

April-December 2027:

• Collect and verify emissions data for all CBAM imports throughout the year
• Monitor UK ETS prices and CBAM certificate prices for budgeting
• Maintain supplier relationships — address data gaps proactively
• Prepare for first return compilation (due May 2028)

January-May 2028:

• Compile full 2027 CBAM return
• Purchase required certificates before filing deadline
• Submit return by 31 May 2028
• Transition to quarterly reporting cycle from Q2 2028 onwards

Frequently Asked Questions

Is my business exempt from UK CBAM? If your annual imports of CBAM in-scope goods total less than £50,000 in customs value, you are exempt from registration and reporting. Calculate your total across all five sectors (iron & steel, aluminium, cement, fertilisers, hydrogen) to determine your position.

What happens if I miss a CBAM return deadline? HMRC will apply existing tax enforcement powers, meaning penalties for late filing and interest charges on unpaid CBAM liabilities. The exact penalty structure will be set out in secondary legislation, but expect it to align with other environmental taxes.

Can I use EU CBAM data for UK CBAM returns? You can use the same underlying emissions data (verified reports from suppliers) for both schemes, provided it meets UK verification standards. However, you must file separate returns and purchase UK CBAM certificates — EU certificates are not valid for UK obligations.

How is the CBAM certificate price determined? The UK government will set the certificate price weekly, based on the average UK Emissions Trading Scheme (UK ETS) allowance price from the previous week. This creates a direct link between domestic carbon pricing and the border adjustment.

Do I need to register if I only import CBAM goods occasionally? The £50,000 threshold is based on annual import value, not frequency. If your total CBAM imports in any 12-month period exceed £50,000, registration is required regardless of how many shipments you make. Once registered, you must continue filing returns even in quarters with zero imports (nil returns).

What if my supplier refuses to provide emissions data? You can use government default emissions values instead of actual data. Default values are typically higher than actual emissions for efficient producers, so your CBAM liability may be greater. Factor this into your supplier negotiations — the cost differential may motivate cooperation.

Are there any transitional relief measures? The UK CBAM policy includes returned goods relief (no CBAM on goods re-imported within 3 years in the same state) and temporary admission relief (goods under temporary admission with full customs relief are not subject to CBAM). Beyond these, no general transitional relief has been announced.

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This article reflects UK CBAM policy as published in the government’s policy summary and analysis from TLT LLP. Final administrative details will be confirmed in secondary legislation expected later in 2026. Check HMRC guidance for updates before filing your first return.