Last updated: 16 October 2026
The Climate Change Levy (CCL) is a government tax on the electricity, gas and solid fuels that UK businesses use. From 1 April 2026 the main rate is £0.00801 per kWh for both electricity and gas, according to gov.uk. This guide explains who pays it, how it shows on your bill, how VAT treats it, which exemptions and reliefs exist, and how to check you are being charged correctly.
What is the Climate Change Levy?
The Climate Change Levy is an environmental tax charged on energy supplied to businesses. It was designed to encourage firms to use energy more efficiently and cut emissions, and your energy supplier collects it on the government’s behalf.
Northern Gas and Power (NGP) describes CCL as a tax applied to business energy use, and points out that, unlike most other non-commodity charges, its revenue goes straight to the government rather than into the energy system. NGP estimated its cost impact at around 3% to 5% of a bill in May 2025.
CCL sits alongside the other non-commodity costs on a business bill. SEFE Energy explains that bills cover the wholesale cost plus transportation charges, regulatory levies and other third party costs, and CCL is one of the government taxes in that mix. SmartestEnergy says non-commodity charges make up more than half of a typical business energy bill, so CCL is worth checking alongside network and policy costs.
The two parts of CCL
Gov.uk splits the levy into two parts. Businesses in the industrial, commercial, agricultural and public services sectors pay the main rates on electricity, gas and solid fuels. Owners of generating stations and combined heat and power (CHP) operators pay the separate carbon price support (CPS) rates.
Most businesses only ever see the main rates. The rest of this guide focuses on those.
Who pays the Climate Change Levy?
Most UK businesses pay CCL on the energy they use. This covers industry, commerce, agriculture and the public sector, as set out on gov.uk.
Some supplies are outside the levy. Gov.uk lists businesses using small amounts of energy, domestic energy users, and charities engaged in non-commercial activities among those that do not pay the main rates.
Domestic and charity use
Energy used in homes is not charged CCL. HMRC’s Excise Notice CCL1/3 bases these exclusions on the VAT qualifying use rules, so the same supplies that qualify as domestic or charity non-business use for VAT are excluded from CCL.
For mixed use premises, such as a shop with a flat above, the 60% rule applies. If domestic or charity use is at least 60% of total use, the whole supply can be treated as excluded; below 60%, the main rate applies to the non-qualifying share, according to CCL1/3. You need a VAT certificate stating the percentage of qualifying use for each premises.
Small users under the de minimis limits
Very small business supplies are excluded under de minimis limits. HMRC sets these in section 2.5 of CCL1/3:
- Metered electricity: not more than 1,000 kWh per month.
- Unmetered electricity: not more than 1,000 kWh per month.
- Piped gas: not more than 4,397 kWh per month, per customer, per premises.
- LPG in cylinders: each cylinder under 50kg net weight.
- LPG in bulk: a tank capacity at the premises of not more than 2 tonnes.
- Coal or coke: not more than one tonne, held out as domestic fuel.
If your usage regularly goes above these levels, the levy applies to your supply.
What are the CCL rates for 2026?
The main rate for 2026 to 2027 is £0.00801 per kWh for electricity and £0.00801 per kWh for gas, from 1 April 2026. In pence, that is 0.801p per kWh. All the figures below come from the gov.uk Climate Change Levy rates page.
Climate Change Levy main rates
| Taxable commodity | From 1 April 2025 | From 1 April 2026 | From 1 April 2027 | Source |
|---|---|---|---|---|
| Electricity (£ per kWh) | 0.00775 | 0.00801 | 0.00827 | gov.uk |
| Gas (£ per kWh) | 0.00775 | 0.00801 | 0.00827 | gov.uk |
| LPG (£ per kg) | 0.02175 | 0.02175 | 0.02175 | gov.uk |
| Any other taxable commodity (£ per kg) | 0.06064 | 0.06264 | 0.06468 | gov.uk |
The 2025 to 2026 column is shown for comparison only. The rate rose from £0.00775 to £0.00801 per kWh in April 2026, and the government has already published a rate of £0.00827 per kWh from 1 April 2027, according to gov.uk.
NGP’s Budget 2025 summary noted that CCL main rates for electricity, gas and solid fuels were set to rise in line with RPI from 1 April 2026, with LPG frozen. The table above confirms the LPG rate stayed at £0.02175 per kg.
What does CCL cost a typical business?
Multiply your annual usage by the rate. A site using 50,000 kWh of electricity a year would pay about £400.50 in CCL at the 2026 main rate of £0.00801 per kWh, before VAT.
The same calculation works for gas, because the 2026 gas rate is the same per kWh. Your actual charge depends on your metered usage and any relief you claim.
How does the Climate Change Levy appear on a business energy bill?
CCL usually shows as its own line on your bill. Gov.uk confirms that main rate CCL amounts are listed on your business energy bill, and the rates page makes energy suppliers responsible for charging the correct levy.
Look for a line labelled “Climate Change Levy” or “CCL”, with the number of kWh charged and the rate. On a quote, check whether the unit rate includes or excludes CCL, so you compare suppliers on the same basis. Our guide on what a utility bill is explains the other lines you will see.
Does a fixed price contract fix CCL?
No. CCL is set by government, not your supplier, so it can change during your contract. SEFE Energy notes that even on fully fixed deals, government levies and taxes can still change.
In practice, the CCL rate on your bill will normally move each 1 April when the new rate starts. Bear this in mind when you plan your business energy contract renewal.
Do you pay VAT on the Climate Change Levy?
Yes, CCL is included in the value that VAT is worked out on. HMRC’s VAT Notice 701/19 says the value of a supply for VAT purposes will include Climate Change Levy where appropriate.
So the VAT rate on your energy also applies to the CCL amount. Most business use is charged at the standard rate of 20%.
How CCL relates to reduced rate VAT
Some supplies qualify for reduced rate VAT, such as low usage under the VAT de minimis limit or premises with 60% or more qualifying use. For electricity, HMRC sets the VAT de minimis at an average of 33 kWh per day or 1,000 kWh per month; for piped gas, it is 145 kWh per day or 4,397 kWh per month.
The two schemes overlap. A supply that qualifies for reduced rate VAT on de minimis or qualifying use grounds is usually outside CCL too, because CCL1/3 builds its exclusions on the VAT rules. If you are charged reduced rate VAT but also see a CCL line, ask why.
HMRC also says a temporary zero rate applies to qualifying electricity supplies in Great Britain from 1 October 2026 to 31 March 2027, while Northern Ireland stays at 5%. Our guide to VAT on business electricity covers the 5% reduced rate, the zero rate and how to claim.
What CCL exemptions and reliefs are available?
Several uses are exempt from the main rates, and energy intensive businesses can get a discount. Gov.uk says electricity, gas and solid fuel are normally exempt from the main rates if they:
- will not be used in the UK
- are supplied to or from certain CHP schemes registered under the CHPQA programme
- were generated from renewable sources before 1 August 2015
- are used to produce electricity in a generating station with a capacity of 2MW or greater
- will not be used as fuel
- are used in certain forms of transport
Metallurgical and mineralogical processes
Energy used in qualifying metallurgical and mineralogical processes has been exempt since 1 April 2014. HMRC lists the qualifying processes in Annex A of CCL1/3. This exemption replaced an earlier lower rate for metal recycling.
Non-fuel uses and transport
Energy that is not used as fuel can be exempt, such as electricity used in electrolysis for listed purposes. CCL1/3 adds hydrogen production by electrolysis from 12 March 2026, and notes that only the specified process is exempt, not ancillary uses.
Transport exemptions cover energy used to power certain trains, freight railway vehicles, ships outside territorial waters and passenger vehicles built to carry at least 12 passengers. Entertainment and heritage transport does not qualify.
Climate Change Agreement discount
Energy intensive businesses with a Climate Change Agreement (CCA) get a large discount on the main rates. NGP explains that CCAs give discounts on the levy once savings targets are met, in return for cutting energy use.
The discounts for 2026 to 2027, from the gov.uk rates page:
| Taxable commodity | CCA discount from 1 April 2026 | Source |
|---|---|---|
| Electricity | 92% | gov.uk |
| Gas | 89% | gov.uk |
| LPG | 77% | gov.uk |
| Any other taxable commodity | 89% | gov.uk |
Eligibility is set out in section 4 of CCL1/3. It includes certain regulated installations and businesses whose predicted energy costs are 10% or more of production value, or 3% to 10% where import penetration is at least 50%.
How do you claim a relief?
Most reliefs are claimed through certificates. Under section 6 of CCL1/3, you complete a PP10 setting out the reliefs and estimated usage for HMRC, then give your supplier a PP11 with the relief percentage.
Suppliers must process a correct PP11 within 5 working days. Domestic and charity exclusions use a VAT certificate instead.
How do you check you are charged the right CCL?
Start by checking the rate and the kWh on the CCL line. From 1 April 2026 the main rate should be £0.00801 per kWh for electricity and gas, unless you have a relief.
Then work through these checks:
- Usage level: if your site stays under 1,000 kWh a month of electricity or 4,397 kWh a month of gas, ask whether the de minimis exclusion applies.
- Mixed use: if part of the premises is domestic or used for charity non-business activity, check your supplier holds a VAT certificate with the right percentage.
- Reliefs: if you hold a CCA or use energy in an exempt process, confirm your supplier has a current PP11 and applies the correct discount.
- Rate changes: make sure the new rate started on 1 April, not earlier or later.
- VAT: check that VAT is charged at the right rate on the total, including CCL.
If you have been overcharged because relief was missed, HMRC allows underclaimed relief to be claimed on form CCL200X, and retrospective PP11s can cover up to 4 years, according to CCL1/3. A free UMW Health Check reviews your bills for wrong CCL, wrong VAT and missing paperwork.
Our business electricity and business gas pages explain how we compare quotes, and we can break down CCL on each quote so you can see what you are paying.
Frequently asked questions
What is the Climate Change Levy rate for 2026?
From 1 April 2026 the main rate is £0.00801 per kWh for electricity and for gas, according to gov.uk. LPG is £0.02175 per kg.
What will CCL rates be in 2027?
Gov.uk has published main rates of £0.00827 per kWh for electricity and gas from 1 April 2027. The LPG rate stays at £0.02175 per kg.
Do homes pay the Climate Change Levy?
No. Gov.uk confirms the rates do not apply to supplies to domestic consumers or to charities for non-business use.
Do small businesses pay CCL?
Most do, unless their usage stays under the de minimis limits. HMRC sets these at 1,000 kWh a month for electricity and 4,397 kWh a month for piped gas in CCL1/3.
Is VAT charged on CCL?
Yes. HMRC says the value of a supply for VAT includes Climate Change Levy where appropriate, so VAT is worked out on the energy cost plus the levy.
How much is the CCA discount on CCL?
For 2026 to 2027, CCA holders get 92% off electricity and 89% off gas, with 77% off LPG. You must hold a certified agreement and give your supplier the right certificate.
Can my CCL change during a fixed contract?
Yes. CCL is a government tax, and SEFE Energy notes that levies and taxes can still change even on fully fixed deals. The rate normally changes each 1 April.
Can I reclaim CCL I was overcharged?
If you were entitled to relief but did not claim it, HMRC allows claims on form CCL200X, and retrospective PP11 certificates can cover up to 4 years under CCL1/3. Speak to your supplier first.
Get a quote
Utility Market Watch compares business electricity and gas from a panel of suppliers and can explain the CCL, VAT and other charges on each quote. Request a quote, call 03333 601010 (Monday to Friday, 9am to 5pm) or contact us. Our service is paid for by the supplier through a commission included in your unit rate, and as prices change daily we cannot guarantee any quote is the cheapest.