| Energy Bills |
The Climate Change Levy (CCL) is a tax on energy used by businesses and public sector organisations in the UK. In 2026, rates are set per kWh for electricity, gas, and other fuels. Reliefs exist for energy-intensive sectors via Climate Change Agreements.
The Climate Change Levy is a tax on business energy use, with 2026 rates and reliefs for eligible sectors.
KEY FACTS
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LAST REVIEWED 2026-09-06
What is the Climate Change Levy?
The Climate Change Levy (CCL) is a tax on energy supplied to businesses and public sector organisations in the UK. It is designed to encourage energy efficiency and reduce carbon emissions. The levy applies to electricity, gas, and other fuels used for heating, lighting, and power.
CCL is charged on each unit of energy (kWh) used. The rates are set annually by the government and are typically adjusted in line with inflation. Businesses pay CCL as part of their energy bills, and suppliers collect it on behalf of HM Revenue & Customs (HMRC).
The levy does not apply to domestic energy use. It also does not apply to energy used by charities for non-business activities. Certain energy-intensive industries can claim relief through Climate Change Agreements (CCAs).
Understanding CCL is important for budgeting and compliance. Businesses should check their energy bills to see if CCL is included and whether they qualify for any reliefs or exemptions.
What are the 2026 rates for the Climate Change Levy?
For 2026, the Climate Change Levy rates are set per kilowatt-hour (kWh) of energy. The rates are published by HMRC and are typically updated each April. The main rates for electricity and gas are the most relevant for most businesses.
These rates are subject to change, so businesses should check the latest figures on the HMRC website.
There are also rates for other fuels such as coal, coke, and liquefied petroleum gas (LPG). These are measured in kilograms or litres, and the rates vary accordingly.
Businesses should note that the rates are not the same as VAT. CCL is a separate tax, and VAT is applied on top of the energy cost including CCL. The rates are designed to reflect the carbon content of each fuel.
| Rule | Detail | Source |
|---|---|---|
| Domestic price cap | does not apply to non-domestic contracts | Ofgem |
| Microbusiness test | fewer than 10 employees and under 2 million euros turnover, or under 100,000 kWh electricity or 293,000 kWh gas a year | Ofgem |
| VAT | 20% standard; 5% reduced rate below 33 kWh electricity or 145 kWh gas a day | HMRC |
| Complaints | Energy Ombudsman after 8 weeks or deadlock letter | Energy Ombudsman |
How is the Climate Change Levy calculated on a business energy bill?
To calculate the Climate Change Levy on a business energy bill, multiply the number of kWh used by the applicable rate.
These amounts are added to the energy charges and VAT is then applied to the total.
It is important to note that CCL is not subject to VAT. However, the energy supply itself is subject to VAT at the standard rate of 20% for most businesses. Some businesses may be eligible for a reduced rate of 5% if they use small amounts of energy.
Businesses should review their bills to ensure the correct rate is applied. If there are errors, they should contact their energy supplier to correct them.
Who is liable to pay the Climate Change Levy?
The Climate Change Levy is payable by businesses and public sector organisations that use energy for non-domestic purposes. This includes offices, factories, shops, and government buildings. The levy is charged on energy supplied to these premises.
There are some exemptions. For example, energy used by charities for non-business activities is exempt. Also, energy used for certain industrial processes, such as metal melting or mineralogical processes, may be exempt.
Small businesses that use very little energy may be below the de minimis threshold. This means they do not have to pay CCL. The threshold is based on the amount of energy used, not the size of the business.
Businesses that are not liable for CCL should ensure their supplier does not charge it. If they are charged incorrectly, they can claim a refund from HMRC.
What is the de minimis threshold and how does it relate to VAT?
The de minimis threshold is a limit below which businesses do not have to pay the Climate Change Levy. It is set at 1,000 kWh of electricity per month or 1,000 kWh of gas per month. If a business uses less than this, they are not liable for CCL.
This threshold is linked to VAT. Businesses that are below the de minimis threshold may also be eligible for the reduced rate of VAT on energy, which is 5% instead of the standard 20%. This is because they are considered to be using energy for domestic-like purposes.
To qualify for the reduced VAT rate, the business must use less than 33 kWh of electricity per day or 145 kWh of gas per day. This is a separate test from the de minimis threshold for CCL.
Businesses should check with their energy supplier to see if they qualify for these reductions. They may need to provide evidence of their energy usage.
What are Climate Change Agreements and how do they provide relief?
Climate Change Agreements (CCAs) are voluntary agreements between energy-intensive industries and the Environment Agency. In exchange for meeting energy efficiency targets, businesses receive a discount on the Climate Change Levy.
This can result in significant savings for eligible businesses. The exact discount depends on the sector and the targets set.
To participate, a business must be in an eligible sector, such as chemicals, steel, or food processing. They must also meet the targets set out in their CCA. Failure to meet targets can result in the loss of the discount.
Businesses interested in a CCA should contact the Environment Agency for more information. They will need to apply and agree to the terms before they can receive the relief.
| Date | Event | Source |
|---|---|---|
| January 2019 | Default tariff cap introduced | Ofgem |
| October 2022 | Cap moves to quarterly reviews | Ofgem |
| July 2026 | Typical consumption values reset to 2,500 kWh electricity and 9,500 kWh gas | Ofgem |
| 26 August 2026 | Q4 2026 cap announced at £1,723 | Ofgem |
| 1 October 2026 | Q4 cap in force; VAT on domestic electricity cut to 0% until 31 March 2027 | Ofgem |
How can a business claim Climate Change Levy relief?
To claim Climate Change Levy relief, a business must first ensure it is eligible. For the main relief, this means having a Climate Change Agreement (CCA). Once a CCA is in place, the supplier will automatically apply the discount to the energy bills.
For other reliefs, such as the de minimis exemption, the business may need to notify their supplier. The supplier will then adjust the bills accordingly. It is important to keep records of energy usage to support any claims.
If a business believes it has been overcharged for CCL, it can claim a refund from HMRC. This can be done by writing to HMRC with details of the overcharge. Claims must be made within a certain time limit, usually four years.
Businesses should also check if they are eligible for the reduced VAT rate. This is separate from CCL relief but can also reduce overall energy costs.
What are the exemptions and special cases for the Climate Change Levy?
There are several exemptions from the Climate Change Levy. These include energy used for non-business purposes by charities, energy used in certain industrial processes, and energy from renewable sources that is not supplied through the grid.
Also, energy used for transport is not subject to CCL. This includes fuel for vehicles and trains. Energy used for lighting in public places, such as street lighting, is also exempt.
Special cases include combined heat and power (CHP) plants. These may be eligible for a reduced rate of CCL if they meet certain efficiency criteria. Businesses should check with HMRC for the latest guidance.
It is important to note that exemptions are not automatic. Businesses must apply for them and provide evidence of eligibility. Failure to do so may result in paying CCL unnecessarily.
How does the Climate Change Levy affect energy bills in 2026?
The Climate Change Levy adds a cost to business energy bills. These are the main rates, but they can be reduced with reliefs.
These amounts are relatively small compared to the overall energy cost.
However, for energy-intensive businesses, the CCL can be significant. That is why CCAs are important.
Businesses should factor CCL into their budgeting. They should also consider energy efficiency measures to reduce their usage and therefore their CCL liability.
What should a business check on its energy bill regarding the Climate Change Levy?
Businesses should check their energy bills to ensure that the Climate Change Levy is correctly applied. Look for a line item that says 'Climate Change Levy' or 'CCL'. The rate should match the current published rates.
Check that the amount of energy used is correct. This is usually shown in kWh. If the usage is incorrect, the CCL will also be incorrect. Businesses should compare the usage with their own records.
Also, check if any reliefs or exemptions have been applied. If a business has a CCA, the discount should be shown. If not, they should contact their supplier to apply it.
If there are any discrepancies, businesses should contact their energy supplier first. If the issue is not resolved, they can escalate to HMRC or the Energy Ombudsman.
Glossary: the terms on an energy bill explained
Climate Change Levy (CCL): A tax on energy used by businesses and public sector organisations in the UK, designed to encourage energy efficiency and reduce carbon emissions.
Climate Change Agreement (CCA): A voluntary agreement between energy-intensive industries and the Environment Agency, offering a discount on CCL in exchange for meeting energy efficiency targets.
De minimis threshold: A limit below which businesses are not liable for CCL, set at 1,000 kWh of electricity or gas per month.
kWh (kilowatt-hour): A unit of energy equal to one kilowatt of power used for one hour. Used to measure electricity and gas consumption.
HMRC: HM Revenue & Customs, the UK government department responsible for collecting taxes, including the Climate Change Levy.
Energy Ombudsman: An independent body that resolves disputes between energy suppliers and consumers, including businesses, after a complaint has been made.
Disclaimer. This guide is editorial information drawn from primary sources. It is not financial, legal or tax advice and does not recommend any provider. Figures are those published by the named sources on the review date and may change. Kael Tripton Ltd receives no commission, referral fee or lead payment from any provider named on this page. |
Frequently asked questions
What is the Climate Change Levy?
The Climate Change Levy (CCL) is a tax on energy used by businesses and public sector organisations in the UK. It is charged on electricity, gas, and other fuels. The levy is designed to encourage energy efficiency and reduce carbon emissions. It is not applied to domestic energy use. Businesses pay CCL as part of their energy bills, and suppliers collect it on behalf of HMRC.
Who has to pay the Climate Change Levy?
Businesses and public sector organisations that use energy for non-domestic purposes must pay CCL. This includes offices, factories, and shops. There are exemptions for charities using energy for non-business activities and for certain industrial processes. Small businesses using below the de minimis threshold of 1,000 kWh per month are also exempt.
What are the Climate Change Levy rates for 2026?
These rates are set by HMRC and are subject to change. There are also rates for other fuels such as coal and LPG. Businesses should check the latest rates on the HMRC website.
How is the Climate Change Levy calculated?
To calculate CCL, multiply the number of kWh used by the applicable rate. This amount is added to the energy bill. VAT is then applied to the total energy cost, but not to the CCL itself.
What is a Climate Change Agreement?
A Climate Change Agreement (CCA) is a voluntary scheme for energy-intensive industries. To participate, a business must be in an eligible sector and meet the targets set by the Environment Agency.
How can I claim relief from the Climate Change Levy?
To claim relief, you must be eligible. For the main relief, you need a Climate Change Agreement. Once in place, your supplier will automatically apply the discount. For other exemptions, such as the de minimis threshold, you may need to notify your supplier. If you have been overcharged, you can claim a refund from HMRC.
