The Climate Change Levy

The Climate Change Levy (CCL) is a tax on electricity, gas, LPG and solid fuels supplied to businesses and public bodies. Your energy supplier adds it to your bill and pays it to HMRC, at main rates for 2026 to 2027 of £0.00801 per kWh for both electricity and gas. Domestic users and charities using energy for non business purposes are outside it, and energy intensive businesses with a climate change agreement pay a heavily discounted rate.

How is CCL charged on a business energy bill?

The levy is created by paragraph 1 of Schedule 6 to the Finance Act 2000. Paragraph 40 of that Schedule makes the person making the taxable supply liable to account for it, which in practice is the energy supplier. The exception is a supply by a non resident who is not a utility, where the customer must account. So most businesses never register for CCL. They see it as a line on their bill, and their job is to make sure the supplier charges the right amount.

HMRC’s rates guidance charges gas and electricity per kilowatt hour and other taxable commodities per kilogram. The main rates are:

Commodity	From 1 April 2025	From 1 April 2026	From 1 April 2027
Electricity (£ per kWh)	0.00775	0.00801	0.00827
Gas (£ per kWh)	0.00775	0.00801	0.00827
LPG (£ per kg)	0.02175	0.02175	0.02175
Other taxable commodities, such as coal (£ per kg)	0.06064	0.06264	0.06468

A separate carbon price support rate applies to fossil fuels used by electricity generators and combined heat and power (CHP) stations to make electricity. That is a matter for generators rather than ordinary energy users and is not covered further here.

Who is outside the levy altogether?

HMRC’s exemptions guidance treats supplies for domestic use and supplies to a charity for its non business activities as excluded. Domestic use includes homes, caravans, houseboats, care homes, hospices, children’s homes, school and university residential accommodation and self catering holiday accommodation. Excise Notice CCL1/3, paragraph 2.4, makes clear that hotels, hospitals and prisons are not domestic.

Small businesses can also fall outside through the de minimis limits, which treat a supply as domestic where it is below 1,000 kWh a month of electricity or 4,397 kWh a month of piped gas, LPG in cylinders under 50kg each, LPG in bulk tanks under two tonnes, or one tonne or less of domestic grade coal or coke. No certificate is needed within these limits, but the supplier must keep records.

Where premises are partly domestic or charitable non business, the 60% rule applies: if qualifying use is at least 60%, the whole supply is excluded; if it is less, only the qualifying portion is. The customer gives the supplier a VAT certificate showing the percentage. The same certificate supports the reduced VAT rate covered in our page on VAT on domestic fuel and power, and charities should note that selling donated goods, hiring out a village hall and providing membership benefits are business activities.

Which business uses are exempt?

Even within business use, several supplies are exempt from the main rates. HMRC’s list includes energy that will not be burned or consumed in the UK, LPG and solid fuel bought for resale, certain transport uses (electrifying railways, powering ferries and passenger vehicles, and lighting passenger carriages), energy used to produce other taxable commodities, supplies to certain CHP schemes and generating stations, energy not used as fuel, and, under paragraph 3.14 of CCL1/3 since 1 April 2014, energy used in the metallurgical and mineralogical processes listed in Annex A of that notice. A business that becomes wholly exempt this way may choose to leave its climate change agreement. Transport exemptions do not extend to rides at theme parks or trams within museums.

How do climate change agreements reduce the bill?

A climate change agreement (CCA) is a voluntary agreement between an energy intensive operator and the Environment Agency, which runs the scheme for the whole UK. The operator commits to energy or carbon efficiency targets set under its sector’s umbrella agreement, and in return each certified facility pays CCL at a reduced rate. CCL1/3 section 4 says HMRC’s role is limited to overseeing the reduced rate once the Environment Agency has certified a facility. Eligibility, targets and applications go through the sector association and the Environment Agency.

HMRC publishes the reduced rate as a percentage discount on the main rate:

Commodity	Discount from 1 April 2026	Discount from 1 April 2027
Electricity	92%	92%
Gas	89%	89%
LPG	77%	77%
Other taxable commodities	89%	89%

Performance is reviewed regularly. If a target unit misses its target, the Environment Agency may not recertify it, and the holder must then submit new forms to stop the reduced rate being applied.

How do you claim a relief or exemption?

Most reliefs, including the CCA reduced rate, are claimed through two forms described in section 6 of CCL1/3:

1. PP10, relief supporting analysis. You estimate how much of each commodity goes to each relief and work out an overall percentage. This form goes to HMRC.
2. PP11, supplier certificate. This carries the percentage to your supplier so it can bill correctly. Suppliers must accept paper PP11s and process a correct one within five working days.

You must review the certificate at least annually, by the earlier of the 60th day after the anniversary of delivery and the 60th day after you consume the last of the supply. A correct PP11 lasts up to five years. If you have claimed too much relief, the excess is a taxable self supply and you must notify HMRC of a liability to register, because, as CCL1/3 paragraph 6.5 says, unlike VAT there is no registration threshold. If you have claimed too little, you make a tax credit claim. A new owner of a business cannot inherit the old certificates and must file its own.

What does that look like in numbers?

Illustration only. A manufacturer uses 400,000 kWh of electricity in 2026 to 2027.

• Without any relief: 400,000 × £0.00801 = £3,204.
• With a CCA covering the whole site: the 92% discount leaves 8%, so £3,204 × 8% = £256.32.
• If only 70% of consumption is in the CCA facility, the PP10 apportionment gives relief on that share alone: 280,000 kWh at the reduced rate (£179.42) plus 120,000 kWh at the main rate (£961.20), £1,140.62 in total.

The supplier, not the customer, accounts to HMRC for the levy, so the customer’s only control over the figure is the certificate. If the PP11 is wrong, the bill is wrong, and errors on it that cause underpaid levy can leave the customer liable to a penalty.

Where do businesses go wrong?

• Not checking bills after a change. Moving supplier or changing ownership means submitting fresh PP10 and PP11 forms; relief does not follow automatically.
• Overstating relief. Using a generous estimate instead of sub metering data can create a self supply liability, and errors on certificates that cause underpaid levy can lead to penalties under CCL1/5.
• Missing the de minimis or 60% rules. Small premises and mixed use buildings are often charged CCL that need not apply.
• Confusing CCL with carbon reporting. Paying CCL is separate from streamlined energy and carbon reporting in company accounts.

For other environmental taxes see the Aggregates Levy and Plastic Packaging Tax.

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Related Accountapedia entries

• VAT on electric vehicle charging
• VAT rates: standard, reduced and zero
• Energy saving materials: the VAT zero rate
• VAT reliefs for charities
• Charitable and residential purpose buildings: zero rating

Sources

• legislation.gov.uk: Act 2000 c. 17, schedule 6
• legislation.gov.uk: Act 2000 c. 17, schedule 6
• GOV.UK: Climate change levy rates
• GOV.UK: Exemptions from climate change levy
• GOV.UK: Excise notice ccl13 climate change levy reliefs and special treatments
• GOV.UK: Climate change agreements 2

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.