The Climate Change Levy: what it is, what it costs and who pays less

What is the Climate Change Levy?

The Climate Change Levy, or CCL, is a government tax on the energy that businesses and the public sector use. The idea behind it is to encourage businesses to use less energy.

You don't pay it to HMRC yourself. Instead, your supplier adds it to your bill, usually as a separate line called "Climate Change Levy" or "CCL", and pays it to HMRC. It's charged on every kWh you use, and VAT is then charged on the total, so you pay VAT on the levy as well.

How much is the Climate Change Levy?

The government sets the rates, and they can change each April. You pay the same rate whichever supplier you use.

Climate Change Levy rates

Because it's charged on every kWh, the more energy you use, the more you pay. For most small businesses it's only a small part of the bill, but on energy-intensive sites it soon adds up, which is why the reliefs below matter.

The average prices on our business energy prices page include the levy, and you can switch them to show the figures without it.

Who doesn't pay it?

The levy follows the same rules as the lower rate of VAT on energy, so energy that qualifies for the lower VAT rate is usually free of the levy too.

The levy doesn't apply to energy used:

• in residential accommodation, including homes for the elderly and disabled, children's homes, hospices, self-catering holiday accommodation, caravans, houseboats, and student and armed forces accommodation;
• by a charity for activities it doesn't charge for;
• at sites that use very little: up to 1,000 kWh of electricity a month, or up to 4,397 kWh of gas a month.

HMRC says supplies to a hotel, inn or similar establishment aren't for domestic use, so hotels pay the levy like other businesses.

If a building has more than one use, the 60% rule applies, just as it does for VAT. When 60% or more of the energy goes on qualifying use, the whole supply is free of the levy. If it's less than that, you pay the levy on the part that doesn't qualify.

How to stop paying it if you qualify

Small sites don't need to do anything. For residential, charity or mixed use, you send your supplier a VAT declaration, and the same form that gets you the lower VAT rate also removes the levy.

If you're a charity, bear in mind that activities you charge for, such as selling donated goods or hiring out a hall, usually count as business use. The levy applies to those unless the site is small enough to fall under the limits above, or 60% or more of the building's energy goes on qualifying use.

Other exemptions

A few specialist uses are also exempt from the main rates, such as energy used in some metal and mineral processes, energy used as a raw material rather than a fuel, and fuel used to produce electricity. Fuel used to produce electricity usually pays the separate Carbon Price Support rates of the levy instead. You claim these exemptions by telling your supplier how the energy is used, and they're worth checking if your site runs heavy industrial processes.

Paying less through a Climate Change Agreement

If your site runs an energy-intensive process, you may be able to join a Climate Change Agreement, or CCA. Under the agreement you sign up to targets for using energy more efficiently, and in return you pay a reduced rate of the levy.

What you pay with a Climate Change Agreement

The scheme is run by the Environment Agency, through a sector association for each eligible sector. Each sector's agreement lists the energy-intensive activities it covers.

Who can join

• Your process must be eligible. Each sector's agreement covers specific energy-intensive activities, and the size of your business doesn't decide it.
• Most of the energy must go into it. At least 70% of the energy supplied to the facility covered by the agreement must be for the eligible process. If the process uses less than 70% of your whole site's energy, it has to be permanently sub-metered, so its energy can be measured separately from the rest of the site.
• Ask your sector association how to apply. New sites can apply between 1 January and 31 August each year, from 2026 to 2029.

The current scheme started in January 2026 and runs to 31 March 2033. If you miss your targets, you can pay a buy-out fee to keep the discount for the next period. If that fee isn't paid, the site is decertified and loses the discount.

Getting the reduced rate on your bill

Once you're in an agreement, your supplier needs a supplier certificate (form PP11) before it can charge the reduced rate. If you switch supplier, make sure the new one has the certificate before your first bill.

How to check you're paying the right amount

1. Find the levy on your bill. It's usually a line called "Climate Change Levy" or "CCL", shown per kWh.
2. Check the rate. From 1 April 2026 to 31 March 2027, the full rate is 0.801p per kWh for both electricity and gas.
3. Check whether you should pay it at all. If the energy is used in residential accommodation or for a charity's free activities, or the site is very small, the levy shouldn't be there.
4. Send a VAT declaration if you qualify and the levy is still on your bill. The same form covers both VAT and the levy.
5. If you're in a Climate Change Agreement, check that your bill shows the reduced rate, not the full one.
6. When you switch supplier, make sure the new one has your declaration or certificate before your first bill.

If you've been paying the levy when you shouldn't have, ask your supplier to correct your past bills.