Climate Change Levy on business energy bills: 2026/27 rates, exemptions, CCAs and what brokers should check

What the levy is and who pays it

The Climate Change Levy (CCL) is a tax on energy supplied to businesses and the public sector in the UK. Suppliers collect it, show it as a separate line on the invoice, and pass it to HMRC. The customer carries the cost. VAT is then charged on top of the levy, so an error in the CCL line quietly inflates the VAT line as well.

CCL is charged on units consumed, not on the standing charge. It applies to electricity, natural gas, LPG and solid fuels used for heating, lighting and power across industry, commerce, agriculture and the public sector. Domestic supplies sit outside it, as does the non-business use of charities. HMRC's general guide, Excise Notice CCL1, sets out the scope in full.

One point worth settling early with clients: buying a renewable or "green" tariff does not remove CCL. The exemption for renewable source electricity, delivered through Levy Exemption Certificates, was withdrawn for supplies made from 1 August 2015 and has not returned.

The rates in force now, and the one coming in April 2027

From 1 April 2026 the main rates are:

• Electricity: 0.801p per kWh (£8.01 per MWh)
• Gas: 0.801p per kWh (£8.01 per MWh)
• LPG: 2.175p per kg, still frozen
• Other taxable commodities such as coal, lignite, coke and petroleum coke: 6.264p per kg

Electricity and gas have been charged at the same main rate since April 2024, when gas finished catching up with electricity. Both were then held at 0.775p per kWh until 31 March 2026, when RPI uprating lifted them to 0.801p. The rate table in DESNZ and HMRC's consultation on electrolytic hydrogen and CCL shows the same step from 7.75 to 8.01 £/MWh, and HMRC's Climate Change Levy rates guidance carries the current figures.

A further RPI uprating is already announced for 1 April 2027, taking electricity and gas to 0.827p per kWh. LPG is frozen again, and the reduced rates stay at fixed percentages of the main rates. If you are placing a two or three year fixed contract this autumn, that increase falls inside the term. Check whether the supplier has quoted CCL inclusive or exclusive, because inclusive quotes normally carry a clause allowing the levy element to be adjusted when statutory rates move.

Carbon Price Support rates are a separate matter. They apply to fuels used to generate electricity rather than to ordinary consumption, and remain at a level equivalent to £18 per tonne of CO2 in Great Britain. Most SME clients will never see them on a bill.

Exclusions and reliefs worth checking

Several supplies sit outside the main rates altogether:

• Domestic use, including dwellings, care homes, children's homes, hospices and residential accommodation for students. These attract 5% VAT and no CCL.
• Charity non-business use, which follows the same VAT qualifying use tests.
• De minimis supplies, treated as domestic even when the customer is a business: an average of 33 kWh a day or less of electricity, or 145 kWh a day or less of piped gas, measured over the billing period. No certificate is needed for the de minimis treatment itself, and multiple meters at one set of premises are aggregated.
• Mixed use sites, where at least 60% of the supply is for qualifying use, in which case the whole supply is treated as qualifying.

Beyond those sit the specific reliefs and exemptions: fuel used as a raw material rather than as fuel, mineralogical and metallurgical processes, certain transport uses, supplies to electricity generators, and good quality combined heat and power output. HMRC's notice on reliefs and special treatments sets out the conditions.

Relief is not automatic. The customer completes form PP11, the supplier certificate, and sends it to each supplier, with the supporting analysis on form PP10 going to HMRC. Certificates go stale. A change of supplier, a change of occupier, a new meter or a shift in the proportion of relieved use all call for a fresh certificate, and the percentages should be reviewed at least annually.

Climate Change Agreements

A Climate Change Agreement is a voluntary agreement between an eligible energy intensive facility and the Environment Agency, which administers the scheme across the UK on behalf of DESNZ. In return for meeting energy efficiency or carbon targets, the participant pays a reduced rate of CCL.

Maximum discounts are 92% on electricity, 89% on gas and 77% on LPG, with a discount also available on other taxable commodities. In cash terms at the 2026/27 main rates, a CCA holder pays about 0.064p per kWh on electricity and about 0.088p per kWh on gas. For a manufacturer taking 5 GWh of electricity and 8 GWh of gas, that is the difference between roughly £104,000 and about £10,300 a year.

The current phase of the scheme began on 1 January 2026 and is a new scheme rather than an extension of the old one. Targets run to the end of 2030, with reduced rates available to compliant participants until 31 March 2033. Entry is through a sector association, and eligibility depends on the processes carried out at the facility rather than on company size. Full guidance sits on the Environment Agency's Climate Change Agreements page.

Two traps recur. First, the discount attaches to a certified facility, so meters serving offices, warehouses or other non-eligible parts of a site may not qualify, and the split has to be evidenced. Second, the certificate must reach the supplier and be reflected on the account; plenty of holders discover months later that the full rate has been billed throughout.

Broker checks to run this quarter

Work through client accounts in this order and the recoveries usually appear quickly.

• Pull the latest invoice for every meter and confirm the CCL line reads 0.801p per kWh for electricity and gas, applied to consumption only. Anything showing 0.775p after April 2026 is out of date; anything materially higher deserves a query.
• List sites averaging under 33 kWh a day of electricity or 145 kWh a day of gas across the billing period. These should show no CCL and 5% VAT. Small retail units, lock-ups, kiosks and seasonal premises are the usual finds.
• Flag any residential or welfare property in the portfolio: care homes, student blocks, houses in multiple occupation, park homes. Get a VAT declaration in place if none exists.
• For CCA holders, reconcile the discount percentage on each meter against the certified facility boundary, and diarise the target period reporting dates with the sector association.
• Re-date PP11 certificates at every supplier switch, change of tenant and change of process. A relief that lapses at contract renewal is the single most common cause of overpayment.
• Where an overcharge is confirmed, ask the supplier for a corrected invoice covering the affected periods and check that the VAT has been adjusted alongside it. Claims are generally limited to four years.
• When presenting renewal quotes that run past 31 March 2027, model the 0.827p rate for the later months so the client is not surprised by a mid-term increase.

Keep a short note on file for each client recording the CCL treatment applied and the reason for it. If HMRC or a supplier queries a relief later, that note is what supports it.