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'CBAM goods� within the following sectors will be taxable:

• Aluminium;
• Cement
• Fertiliser;
• Hydrogen; and
• Iron and steel.

Commodity codes will be used to define relevant CBAM goods and the CBAM rate will be based upon:

• Direct emissions related to the production of the CBAM goods;
• Indirect emissions related to the generation of electricity consumed during the production process; and
• Emissions embedded in relevant precursor goods used in the production of complex CBAM goods.

The draft legislation requires the liable person to obtain verified emissions data or use defined default emissions data, and this is clearly an area that will require careful planning and a clear data audit trail.

Unlike the UK ETS, the UK CBAM will not be a cap and trade scheme. It will operate as an indirect tax with calendar quarter returns based upon the commodity code data at importation, the emissions data and the prevailing tax rate.

There will be two registration tests � one forward looking and the other backward looking. The de minimis limit will be £50,000 in CBAM goods value.

There will also be certain exemptions and reliefs, including for goods imported into the UK which have been subject to a carbon tax in their country of origin.

The countdown to this new tax has begun. The draft legislation was published on 24 April 2025 for , along with a policy update note and other material, and the Government welcomes comments from interested stakeholders.

From a business planning perspective, especially for those in the affected sectors, now is the time to review import data and future plans for importation. It will be key to understand both supply chains and emissions data, and to develop processes for obtaining, recording, reporting and accounting for this tax.

For further information please contact:

• Barbara Bell
• Sufyan Bhatti