The Carbon Border Adjustment Mechanism (CBAM) is a carbon tax on imported goods. It applies a carbon price to the emissions created when certain imported products were manufactured, so that goods made in countries with weaker carbon pricing don’t undercut those made under the UK and EU emissions trading schemes.
CBAM is unfamiliar territory for most finance teams: a new tax, a new registration, a new return, and a calculation that depends on information you may never have asked a supplier for, which makes it as much a finance issue as a customs or sustainability one.
At Kreston Reeves, our ESG advisory specialists are well placed to help, utilising our firm’s wider tax and carbon accounting expertise to support your CBAM needs. We tailor our solutions to your specific circumstances and level of exposure, helping you to gather what you need from your supply chain and to manage costs and compliance in good time.
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Read all our latest newsFor UK businesses, CBAM now arrives from two directions. The UK's own CBAM starts on 1 January 2027. It is administered by HMRC and applies to imports of aluminium, cement, fertiliser, hydrogen, and iron and steel goods where you import £50,000 or more over a rolling 12-month period. The EU's CBAM has been in its definitive, chargeable period since 1 January 2026, which means UK exporters sending these goods into the EU are already generating a carbon cost for their customers.
That £50,000 threshold is lower than many businesses expect. It captures far more than heavy industry: builders' merchants, fabricators, engineering firms, construction businesses, manufacturers and distributors are all likely to find themselves in scope, often for the first time. And because CBAM liability is calculated from the emissions embedded in your goods, much of the data you need sits with your suppliers, not in your own accounts.
Our CBAM experts can work with you to provide a range of benefits, including:
Our support scales with your level of exposure, whether you need an initial screening exercise or a fuller implementation plan.
The benefits will depend on your circumstances, but broadly speaking, addressing CBAM properly and early, with the right advice, delivers a range of tangible advantages:
Below are some of the most frequently asked questions we receive about the Carbon Border Adjustment Mechanism (CBAM) and our CBAM advisory services.
CBAM is a carbon tax applied to imported goods based on the greenhouse gas emissions created during their production. It is designed to prevent “carbon leakage”, the risk that manufacturing moves to countries with weaker carbon pricing. Both the EU and the UK have their own CBAM regimes.
The UK CBAM takes effect on 1 January 2027. The first accounting period runs from 1 January to 31 December 2027, with registration opening by 1 January 2028 and the first return and payment due by 31 May 2028. From 2028 onwards, reporting moves to a quarterly cycle.
The UK CBAM applies to specified imported goods in five sectors: aluminium, cement, fertiliser, hydrogen, and iron and steel. Not every product within those sectors is in scope. Coverage is determined by commodity code, and scrap in the aluminium and iron and steel sectors is excluded. Glass and ceramics are not in scope from 2027.
You must register with HMRC once the value of CBAM goods you import meets or exceeds £50,000. The threshold is assessed on a rolling 12-month backward-looking basis and on a forward-looking basis for the next 30 days.
The liable person is the importer of the goods, usually the person named on the customs declaration, or the person on whose behalf the declaration is made. A tax agent can be appointed to submit CBAM returns on your behalf, but cannot register on your behalf, and the liability remains with the importer.
Yes. The EU CBAM entered its definitive, chargeable phase on 1 January 2026, and UK goods are not currently exempt. UK exporters of CBAM goods to the EU are increasingly asked by their customers to provide verified embedded emissions data. A mutual exemption is expected to follow if and when the UK and EU emissions trading schemes are formally linked, but that has not yet been agreed.
Embedded emissions are the greenhouse gas emissions released during the production of the imported goods. Where accurate supplier data is available, that data is used. Where it isn’t, default values apply and these are generally set at a level that produces a higher liability, so obtaining reliable supplier data usually reduces the cost.
It depends on the goods you import, the emissions embedded in them and the quality of your data. Default values generally produce a higher liability than accurate supplier data, and carbon price relief may reduce the amount due where a carbon price has already been paid overseas. Modelling these scenarios gives you a clearer basis for pricing, budgets and contracts.
Failing to register, or registering late, is treated as a failure to notify and HMRC may charge a penalty. Under the EU regime, penalties mirror the EU ETS excess emissions penalty and importing above the threshold without authorisation attracts a substantially higher charge.
A CBAM readiness assessment starts by screening your imports by commodity code, assessing whether the rolling £50,000 threshold could be met, and mapping your importing legal entities, including group structures and centralised procurement. Depending on your exposure, it can extend to reviewing supplier data, modelling costs, allocating internal ownership, and identifying changes to systems, contracts, customs broker instructions and evidence retention processes.
As a full-service accountancy firm, we can bring in additional experts as needed to provide further value to your organisation. Businesses we support with CBAM often benefit from input from specialists elsewhere across the firm, including:
This list is not exhaustive, so you’re always best to contact us and speak with a member of our team, who can provide further advice.
Contact Kreston Reeves today and speak to a member of our ESG advisory services team to discuss your CBAM needs in more detail.
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Dan Firmager ACA
ESG Advisor
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