Compliance
How CBAM Will Shake Up UK Import Taxes from January 2027
The Carbon Border Adjustment Mechanism (CBAM) introduces a new regime for UK importers of carbon-intensive goods from January 1, 2027—this article explains obligations, sectors impacted, and how to prepare.
By NomadicTax Research Team • 5-8 min read • May 13, 2026
## What is CBAM?
The **Carbon Border Adjustment Mechanism (CBAM)** is a UK tax policy meant to ensure that imports of carbon-intensive goods are subject to a carbon price, matching the burden faced by UK producers under the UK Emissions Trading Scheme (UK ETS). CBAM becomes effective from **1 January 2027**. ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai))
## Which Goods and Sectors Are Affected
CBAM will apply to imported goods in the following sectors:
- Aluminium
- Cement
- Fertilisers
- Hydrogen
- Iron and Steel ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai))
Note: Some imports like **scrap products** within aluminium and iron & steel may be excluded depending on their commodity codes. ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai))
## Key Dates & Thresholds
| Phase | Effective from | What changes |
|---|---|---|
| CBAM primary legislation in place | Finance Act 2026 | Legal basis for CBAM created ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai)) |
| CBAM in operation | 1 January 2027 | Importers must register, submit returns, pay CBAM ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai)) |
| Indirect emissions inclusion | From 2029 at earliest | Offset by EII compensation scheme currently; design under review ([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/69bbd096f7b1c24d8e23ce06/uk-steel-strategy.pdf?utm_source=openai)) |
Minimum registration threshold is **£50,000** of qualifying CBAM goods imported over past or expected 30 days or past 12 months. ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai))
## Obligations for Importers
- **Register with HMRC** if threshold is met (backward- or forward-looking test) ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai))
- **Keep records** of goods imported, emissions embodied, supporting data or use default emissions values if data unavailable ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai))
- **Submit returns & payments annually** at first (Jan–Dec 2027) then quarterly from 2028 with deadlines following the end of each period (e.g. May for the first after Jan–Dec) ([gov.uk](https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary?utm_source=openai))
## Practical Example
Suppose **SteelCo Ltd** imports steel from abroad:
- Annual UK imports of steel are worth £200,000 and fall in the CBAM goods defined list.
- Threshold exceeded, so from **1 January 2027** they must register.
- They gather embodied emissions data, or use default values if unable to verify.
- After the calendar year ends, by **31 May 2028** they submit first CBAM return and pay tax accordingly.
- If the product uses indirect emissions (like in electricity consumed in manufacturing), those won’t be taxed until **2029 or later**.
## How To Prepare Now
- **Catalogue your imported goods** and see if they fall under sector/product codes listed for CBAM.
- **Assess emissions data availability**: actual vs default values. If using default, watch for sector-specific defaults published ahead of 2027. ([gov.uk](https://www.gov.uk/government/publications/factsheet-carbon-border-adjustment-mechanism-cbam/factsheet-carbon-border-adjustment-mechanism?_bhlid=636f2a344f26747f6ac2585d009acbb234a0b1f4&utm_source=openai))
- **Estimate financial impact**: using illustrative CBAM rates once published (usually quarterly from 2027), factor into cost of goods sold.
- **Upgrade record-keeping systems** so you can track inputs, emissions data, consignment details.
- **Include CBAM in budgeting**: not just compliance cost, but payments and potential cash-flow implications from deferred returns, especially in first year.
## Strategic Implications & Opportunities
- **Supply chain shifts**: sourcing from jurisdictions with lower carbon emissions—or from domestic suppliers—may result in savings.
- **Negotiation leverage**: use CBAM obligations as a reason to ask overseas suppliers for emissions data or cleaner production methods.
- **Public image & sustainability branding**: being CBAM-ready can enhance green credentials.
## Summary
CBAM represents a transformational tax obligation for UK importers of carbon-intensive goods. With primary legislation passed (Finance Act 2026), and draft secondary legislation under consultation as of **April 2026**, the system officially starts **1 January 2027**. Proper planning now—cataloguing imports, emissions tracking, software preparation—can help businesses avoid surprises and integrate into their strategic and financial planning.
**Category:** Compliance