Environmental taxes, reliefs and schemes for businesses
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1. Overview
Environmental taxes encourage your business to operate in a more environmentally friendly way. There are taxes and schemes for different types and size of business.
You may get reliefs or be exempt from some taxes, for example if:
- you use a lot of energy because of the nature of your business
- you’re a small business that does not use much energy
- you buy energy-efficient technology for your business
You can pay less tax by applying for schemes to help you demonstrate that you’re operating more efficiently and producing waste that’s less damaging.
2. Climate Change Levy
Climate Change Levy (CCL) is paid at either the:
- main rates
- carbon price support (CPS) rates
Main rates
You pay CCL at the main rate on:
- electricity
- gas
- solid fuels - like coal, lignite, coke and petroleum coke
The CCL main rates are listed on your business’s energy bill.
There’s more detailed information on Climate Change Levy rates and allowances.
Who it applies to
You pay the main rates of CCL if your business is in one of the following sectors:
- industrial
- commercial
- agricultural
- public services
You do not pay the main rate of CCL on certain supplies, for example if you’re a:
- business that uses small amounts of energy
- domestic energy user
- charity engaged in non-commercial activities
Fuels that are exempt
Electricity, gas and solid fuel are normally exempt from the main rates of CCL if any of the following apply:
- they will not be used in the UK
- they’re supplied to or from certain combined heat and power (CHP) schemes registered under the CHP quality assurance (CHPQA) programme - there’s more guidance on what schemes need to do to qualify
- the electricity was generated from renewable sources before 1 August 2015
- they’re used to produce electricity in a generating station which has a capacity of 2MW or greater
- they will not be used as fuel
- they’re used in certain forms of transport
There are other exemptions and reliefs.
Pay a reduced rate
You can get a reduction on the main rates of CCL if you’re an energy intensive business and have entered into a climate change agreement with the Environment Agency.
Energy intensive businesses can get the following reductions:
Energy intensive businesses can get a:
- 92% reduction for electricity
- 86% reduction for gas
- 77% reduction for liquefied petroleum gas (LPG)
- 86% reduction for coal and other solid fossil fuels
Check if your business is eligible. Your industry trade association can also give advice.
Carbon price support rates
The CPS rates of CCL encourage industry to use low carbon technology for producing electricity.
You pay CPS rates for:
- gas
- LPG
- coal and other solid fossil fuels
Who pays CPS rates
The CPS rates of CCL are paid by owners of electricity generating stations and operators of combined heat and power (CHP) stations.
Certain suppliers do not have to pay CPS rates. These include small generators, stand-by generators and generating stations in Northern Ireland.
3. Emissions trading
The EU Emissions Trading System (EU ETS) affects businesses from energy-intensive sectors - like the energy industry and certain manufacturers.
It lets you buy and sell greenhouse gas emission allowances to reduce your organisation’s environmental impact.
How it works
If your business is covered by the EU ETS you must meet targets by:
- cutting your business emissions
- trading emissions allowances
You’ll need to open an EU Registry account so you can trade allowances. You can then trade allowances by:
- trading directly with other businesses
- buying or selling from intermediaries, for example banks and specialist traders
- using the services of a broker
- joining one of the several exchanges that list carbon allowance products
- bidding at UK government or other EU member state auctions
Calculate your greenhouse gas emissions
Work out your greenhouse gas emissions by multiplying the amount of energy you use by the emissions they produce. You need to do this for each type of energy you use.
To do this, you need to know:
- how much non-renewable energy you’ve used - this information can be found on your gas, electricity and water bills, invoices and receipts
- the greenhouse gases produced by each type of energy (the ‘emission factor’) - these are updated every year
4. Capital allowances on energy-efficient items
You 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.
5. Landfill Tax
You pay tax on top of your normal landfill fees if your business gets rid of waste using landfill sites.
If you get rid of waste at sites not authorised for landfill, you’ll be charged Landfill Tax. You may also have to pay a penalty or be taken to court.
Landfill operators - what you must do
You need to:
- get a permit
- register within 30 days of setting up - if you do not you can be fined
What to pay
The tax is charged by weight. There are 2 rates. You pay the lower rate on ‘inactive waste’ - for example rocks or soil.
| Rate | Amount you pay |
|---|---|
| Lower rate | £3.30 per tonne |
| Standard rate | £103.70 per tonne |
Loss on Ignition (LOI) testing regime
If your landfill site accepts waste fines, you may need to carry out a loss on ignition test to help determine the rate of tax to pay.
Exemptions
You do not have to pay Landfill Tax on:
- dredging activities
- quarrying and mining
- pet cemeteries
- inactive waste used for filling quarries
You can get tax credits if you send waste from landfill to be recycled, incinerated or reused.
6. Aggregates Levy
This is a tax on sand, gravel and rock that’s either been:
- dug from the ground
- dredged from the sea in UK waters
- imported
What you need to do
You must register with HM Revenue and Customs (HMRC) if your business exploits aggregate in the UK, for example if you’re a quarry operator.
Every quarter, you must tell HMRC how much aggregate you’ve produced or sold.
How much you pay
You pay tax of £2.03 per tonne of sand, gravel or rock. You pay less on smaller amounts, for example £1.015 on half a tonne. You still pay tax if you import the materials.
Reliefs
You can get tax relief if you export aggregates or use them in some industrial or agricultural processes. If you do not use the material as aggregate it may be eligible for relief.
Exemptions
Certain materials are excluded from the tax, for example soil, vegetable or other organic matter.
If you need more help
There’s more detailed guidance on Aggregates Levy or you can contact the helpline.
7. Plastic Packaging Tax
This is a tax on finished plastic packaging components that contain less than 30% recycled plastic. The components must also be either:
- suitable for moving goods from the manufacturer to the end user or consumer
- used only once by the consumer (single use)
What you need to do
You must register with HM Revenue and Customs (HMRC) for Plastic Packaging Tax if you either:
- expect to import or manufacture 10 tonnes or more of finished plastic packaging components in the next 30 days
- have imported or manufactured 10 tonnes or more of finished plastic packaging components in the last 12 months
Every quarter, you must tell HMRC the total weight of finished plastic packaging components you’ve manufactured or imported.
How much you pay
You pay tax of £217.85 per tonne of finished plastic packaging components that contain less than 30% recycled plastic.
Reliefs
You can get tax relief if you export finished plastic packaging components.
Exemptions and exclusions
Certain types of packaging are exempt or excluded from the tax.
If you need more help
There’s more detailed guidance on Plastic Packaging Tax.