HMRC Publishes Illustrative Sector Rates and Methodology for UK CBAM

HM Revenue & Customs (HMRC) has published new transparency guidance detailing the methodology used to calculate sector-specific rates for the UK Carbon Border Adjustment Mechanism (CBAM). Because the UK CBAM does not feature a single headline tax rate in primary legislation, this document provides critical insight into how the final financial obligations will be determined.

The statutory methodology, established under the Finance Act 2026, calculates the rate for the five covered sectors (aluminium, cement, fertiliser, hydrogen, iron and steel) by combining three moving variables:

• Recent carbon pricing data.

• Sector-level emissions information.

• The extent to which domestic UK producers continue to receive free allowances under the UK Emissions Trading Scheme.

To assist importers with financial forecasting, the publication includes illustrative rates and a worked example representing the potential liabilities that would apply from January 1, 2027, based on preliminary data.

"The figures presented in this document are illustrative and represent the rates that would apply from 1 January 2027 based on current and preliminary data... They are intended solely to demonstrate the methodology and provide an indication of the potential scale of future CBAM rates."

HMRC confirmed that the first definitive UK CBAM rates will be officially published before the end of the year. Following this initial release, rates will be recalculated and published on a quarterly basis as market inputs evolve.