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Small Businesses

What is the Climate Change Levy (CCL)?

The Climate Change Levy (CCL) is an environmental tax charged on the energy used by businesses in the UK. It was introduced in 2001 as part of the UK’s Climate Change Program to encourage businesses to become more environmentally friendly.

The CCL is charged on ‘taxable commodities’ for heating, lighting, and power purposes and seeks to deter businesses form relying on too heavily on fossil fuels.

Why was the Climate Change Levy introduced?

The CCL was introduced as part of the government’s broader efforts to address the impacts of climate change. The current UK government has ambitious targets to make the UK economy carbon neutral by 2030. The CCL is part of a broader effort to encourage UK businesses to switch to renewable energy sources and commit to making their operations less harmful for the environment.

How does it affect business?

The Climate Change Levy means that businesses will pay the CCL on their electricity and gas bills. The rate is set by the government and varies every year, they rose considerably in 2019, rose slightly for gas prices and lowered somewhat for electricity prices in 2020 and are likely to follow the same pattern in 2021. This means that electricity and gas prices for applicable businesses are more expensive than they would otherwise be.

The CCL aims to encourage businesses to increase their energy efficiency and therefore reduce carbon emissions in the UK by deterring excessive use of fossil fuels.

How is the CCL charged?

The CCL is a charge on the usage of electricity, gas and some solid fuels supplied for lighting, heating and power purposes to business customers in the following sectors: industrial, commercial, agricultural and public service.

Your business may be exempt from the Climate Change Levy if any of the following applies:

  • If your energy is supplied via a domestic energy contract;
  • If you are a charitable organisation you can apply for CCL exemption;
  • If your business uses less than 1,000 kWh electricity or 4,397 kWh gas in an average month;
  • If your business has registered a Climate Change Agreements (CCA);
  • If your business is involved in specific construction, manufacturing or metal production, you may also be exempt.

The rate for how much you will pay is calculated based on your business’ energy usage, and the CCL amount is set by the government each year.

Fuel Type

Rate From April 2018

Rate From April 2019

Rate From April 2020

Rate From April 2021

Electricity (per kWh)

0.583p

0.847p

0.811p

0.775p

Gas (per kWh)

0.203p

0.339p

0.406p

0.465p

Data source: https://www.gov.uk/guidance/climate-change-levy-rates

How is the Climate Change Levy paid?

The Climate Change Levy is usually paid via energy suppliers. Business energy customers will see the levy listed as a specific line item on your business energy bill. After receiving payment from customers, energy providers pay the levy directly to HM Revenue & Customs.

Can you reduce the price of the Climate Change Levy?

The best way to reduce payments on the Climate Change Levy is to become more energy efficient as it is charged in line with each kilowatt-hour of usage. This will not only help your business reduce its costs, but this can also provide strong marketing messaging around Corporate Social Responsibility.

Here are some helpful tips on what your business can today to become more energy-efficient:

  • Switch off lights in unused areas or install light sensors
  • Encourage your team to turn their computers off at the end of the day
  • Do not heat empty rooms or spaces
  • Switch your business energy supplier

Our interactive electricity cost calculator can help you perform an energy audit so you can see how simple behaviour changes can help save your business hundreds of pounds every year.

Allowances on energy-efficient items

Companies can claim capital allowances when you buy energy-efficient or low or zero-carbon technology for your business. This reduces the amount of tax you pay on the applicable equipment.

This might include LED or energy-efficient lighting, solar panels, energy-efficient appliances or electric vehicles.

It is best to consult your accountant or financial and accounts team to explore this option.

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