Overview
This post explains what the UK Carbon Border Adjustment Mechanism (CBAM) means for UK manufacturers and distributors that import steel, aluminium and other carbon-intensive goods. It covers who pays, the key dates, how the charge is calculated and how Business Central helps you get ready. You will also find answers to common questions.
Key Takeaways
- The UK CBAM starts on 1 January 2027 and applies to imports of aluminium, cement, fertiliser, hydrogen, and iron and steel.
- The importer pays. You need to register once your in-scope imports reach £50,000 over 12 months, or are expected to within 30 days.
- The first return and payment, covering all of 2027, are due by 31 May 2028. That is a full year of liability landing in one bill.
- The charge is based on the embodied emissions of the goods. Verified supplier data is usually cheaper than the government’s default values.
- Business Central already holds most of the data you need: commodity codes, country of origin, weights, suppliers and purchase values.
From 1 January 2027, the UK will put a carbon price on certain imported goods for the first time. The UK Carbon Border Adjustment Mechanism, or CBAM, is designed to make sure that imported steel, aluminium and other carbon-intensive products pay a similar carbon price to goods made in the UK.
For businesses that import these materials, this is a new tax with real cash flow and data consequences. You will need to know which of your purchases are in scope, how much carbon they carry and what that will cost. Most of the information you need already sits in your ERP system. The question is whether it is complete, accurate and connected.
HMRC published its detailed guidance in October 2026, and the start date is now less than two months away. Here is what you need to know.
What Is the UK CBAM?
CBAM is a charge on the greenhouse gas emissions embodied in certain imported goods. UK producers in these sectors already pay for their emissions through the UK Emissions Trading Scheme (UK ETS). CBAM applies a comparable price to imports, so overseas producers with higher emissions do not gain an unfair advantage.
The table below summarises the main rules.
| Rule | What it means |
|---|---|
| Start date | 1 January 2027, for goods imported into the UK, including Northern Ireland. |
| Sectors | Aluminium, cement, fertiliser, hydrogen, and iron and steel. Specific goods are identified by commodity code. |
| Exclusions | Goods of UK origin, scrap aluminium and scrap iron and steel. Electricity is not covered, unlike the EU scheme. |
| Who pays | The importer, usually the person named on the customs declaration. Customs agents can file returns for you, but the liability stays with you. |
| Threshold | £50,000 of in-scope imports over a rolling 12 months, or expected within the next 30 days. |
| The charge | Embodied emissions multiplied by the sector’s CBAM rate, minus any carbon price already paid in the country of origin. |
| Rates | One rate per sector, set each quarter and based on the average UK ETS auction price, adjusted for free allowances. |
Key Dates for UK CBAM
The tax applies from January, but registration and payment come later. That gap is easy to underestimate.
UK CBAM: Key Dates
Liability starts in January 2027. The first bill arrives in May 2028.
STARTS · NEXT
1 Jan 2027
CBAM applies
Imports of in-scope goods start building up a liability from day one.
REGISTRATION
1 Jan 2028
Registration opens
Importers who crossed the threshold in 2027 must register by 31 January 2028.
FIRST RETURN
31 May 2028
Return and payment
One return and one payment covering every in-scope import in 2027.
FROM 2028
Quarterly
Quarterly periods
Reporting moves to quarters. Country-specific default values are planned from 2029.
Source: HMRC guidance on the UK Carbon Border Adjustment Mechanism, October 2026.
The rates for the first quarter of 2027 are due to be published before the end of 2026. HMRC is also taking technical feedback on its monitoring, reporting and verification guidance until 13 November 2026.
Who Is Affected?
Any UK business that imports in-scope goods above the threshold. That is broader than it sounds. CBAM covers raw materials such as steel coil and aluminium ingot, but also some processed and semi-finished products made from them. Depending on the commodity code, that can include items such as tubes, wire, fasteners and structural sections.
The businesses most likely to be caught include:
- Engineering and fabrication manufacturers buying steel and aluminium from overseas mills.
- Metal stockholders and distributors importing sheet, bar, tube and sections for resale.
- Construction product distributors importing cement, rebar or steel fixings.
- Manufacturers using fertiliser or hydrogen as inputs to their own processes.
If you buy these materials from a UK distributor who imports them, the distributor is the importer and pays the charge. Expect that cost to appear in your prices from 2027.
How the CBAM Charge Is Calculated
The calculation itself is simple. The hard part is the data behind it.
Charge = embodied emissions × sector CBAM rate − carbon price already paid abroad
Embodied emissions are measured in tonnes of CO2 equivalent per tonne of product. You can use one of two sources:
- Actual emissions data from the overseas producer, independently verified by an accredited verifier.
- Default values published by the government. These apply in 2027 and 2028, and whenever verified data is not available. They are usually less favourable than verified data.
The example below shows why supplier data matters. The figures are made up to show the effect, not real rates or default values.
| Illustrative example: 500 tonnes of imported steel | Using a default value | Using verified supplier data |
|---|---|---|
| Emissions per tonne | 2.4 tCO2e | 1.6 tCO2e |
| Total embodied emissions | 1,200 tCO2e | 800 tCO2e |
| CBAM rate (illustrative) | £30 per tCO2e | £30 per tCO2e |
| CBAM charge | £36,000 | £24,000 |
In this example, verified data saves a third of the bill. Across a year of imports, the difference can be significant. That is why the first job is to talk to your suppliers.
The Challenges for UK Importers
CBAM touches purchasing, finance, inventory and compliance at the same time. These are the problems we expect most businesses to hit.
Knowing What Is in Scope
CBAM is defined by commodity code. If your item records do not hold accurate commodity codes, you cannot tell which purchases count.
Tracking the Threshold
The £50,000 threshold is tested on a rolling 12 months and on expected imports over the next 30 days. A single large order can tip you over.
Getting Emissions Data from Suppliers
Verified data has to come from the producing installation, not the trader you buy from. Many overseas suppliers have never been asked for it.
Linking Emissions to Each Shipment
Emissions vary by producer and by installation. You need to know which mill made each consignment, not just which supplier invoiced it.
A Year of Liability in One Bill
Every in-scope import in 2027 is paid for in one go in May 2028. Without an accrual, that bill will hit your cash flow and your margins without warning.
Pricing and Margins
CBAM is a real cost of buying the goods. If it is not included in your landed cost, your product margins and quotes will be wrong.
How Business Central Helps You Prepare for CBAM
Business Central already holds most of the data CBAM depends on. With the right setup, and a focused extension where needed, it can become the single source for your CBAM records. The table below maps each challenge to the Business Central answer.
| Challenge | How Business Central handles it |
|---|---|
| Identifying in-scope goods | Hold the commodity code in the Tariff No. field and the country of origin on every item. Flag CBAM items with an item category or attribute, so they can be filtered and reported. |
| Monitoring the threshold | Report on the value of CBAM items received over a rolling 12 months, and on open purchase orders due in the next 30 days. |
| Calculating emissions | Use the net weight on each item to convert received quantities into tonnes. Store emissions per tonne by supplier and producer, with a flag for actual or default data. |
| Recording carbon data | The Sustainability module records emissions against purchase lines and posts them to a sustainability ledger, alongside your financial data. |
| Tracing each consignment | Use lot tracking to link each receipt to the producing installation and its emissions data, for a clear audit trail. |
| Keeping evidence | Attach verified emissions reports and supplier declarations to vendor cards and purchase documents, so they are easy to find when HMRC asks. |
| Accruing the liability | Post a monthly accrual for the estimated CBAM charge to a dedicated G/L account, so the May 2028 bill is already in your accounts. |
| Accurate landed costs | Assign the CBAM cost to inventory with item charges, so product costs, margins and quotes reflect the real price of the goods. |
Standard Business Central does not produce a UK CBAM return out of the box. Most of the requirement can be met with configuration, reporting and a focused extension for emissions calculation, built around how your purchasing and stock actually work. Our page on ERP software for manufacturing and engineering shows how Business Central supports production, stock and traceability.
What to Do Before 1 January 2027
There is not long left. Use this checklist to get the basics in place before the first in-scope imports arrive.
| Step | Action | What it involves |
|---|---|---|
| 1 | Check your commodity codes | Make sure every imported item has an accurate commodity code and country of origin in Business Central. |
| 2 | Measure your exposure | Run a report of in-scope imports over the last 12 months to see whether you will pass the £50,000 threshold. |
| 3 | Contact your suppliers | Ask which installations produce your goods and whether they can provide verified emissions data. |
| 4 | Talk to your customs agent | Confirm who is named as the importer on your declarations, and whether the agent will help with returns. |
| 5 | Set up your accruals | Create a G/L account for CBAM and agree how the monthly estimate will be calculated. |
| 6 | Review your pricing | Build the expected CBAM cost into landed costs, quotes and customer price lists for 2027. |
UK CBAM and EU CBAM: Not the Same
If you also export to the EU, or import through EU entities, you may already know the EU CBAM. Its definitive charging phase began on 1 January 2026. The UK scheme is similar in principle, but the details differ. The EU covers electricity and the UK does not. Thresholds, rates, registration and deadlines are all different. The UK has designed its monitoring and verification rules to work alongside the EU’s, which should reduce some duplicate work for overseas producers.
If you trade in both markets, treat them as two separate obligations. Business Central can hold the data for both, but your reports and processes need to reflect each set of rules.
What This Means for Your Business
CBAM starts in less than two months, but the first bill does not arrive until May 2028. That gap is the risk. Businesses that wait for the return will spend early 2028 rebuilding a year of purchase data under pressure.
Start with the data you already have. Check your commodity codes, measure your exposure and contact your suppliers now. Then set up the accruals and reporting in Business Central, so CBAM becomes a routine part of month-end rather than a surprise. Our guide to speeding up month-end close in Business Central covers how to keep accruals like this under control.
Get CBAM-Ready with Tecvia
Tecvia is a Manchester-based Microsoft Partner that helps UK manufacturers and distributors get more from Business Central. We can review your item and supplier data, map your CBAM exposure and build the reporting and extension you need to stay compliant. Contact Tecvia to book a chat with our experts.
You can also explore our manufacturing and engineering and distribution and wholesale solutions.
This post is for general information only. Check the details against HMRC guidance or with your tax adviser before acting.
FAQs
The UK Carbon Border Adjustment Mechanism is a charge on the embodied emissions of certain imported goods. It starts on 1 January 2027 and covers aluminium, cement, fertiliser, hydrogen, and iron and steel. It puts a carbon price on imports that is comparable to the one UK producers pay.
The importer pays, usually the person named on the customs declaration. You need to register once your in-scope imports reach £50,000 over a rolling 12 months, or are expected to within the next 30 days. Customs agents can file returns for you, but the liability stays with the importer.
Registration opens on 1 January 2028, and importers who crossed the threshold in 2027 must register by 31 January 2028. The first return and payment, covering all of 2027, are due by 31 May 2028. Reporting moves to quarterly periods from 2028.
Default values are emissions figures published by the government for each type of good. They are used in 2027 and 2028, and whenever verified data from the producer is not available. They are usually less favourable than verified data, so collecting supplier data can reduce your bill.
Not completely. Business Central already holds commodity codes, country of origin, weights, suppliers and purchase values, and the Sustainability module can record emissions on purchases. Most businesses will need configuration, reporting and a focused extension to calculate the charge and prepare returns.
No. The principle is the same, but the EU scheme also covers electricity and has different thresholds, rates and deadlines. Its charging phase began on 1 January 2026. If you trade in both markets, treat them as two separate obligations.
