Climate Change Levy 2023
Climate change is one of the most talked about topics across the globe and tackling it as soon as possible is a must for every nation. The UK government has taken energy efficiency a step further by introducing a Climate Change Levy (CCL), with the intention of encouraging the uptake of cleaner energy sources. Most businesses within the UK will now pay this tax, which will charge businesses that use more energy than they should.
What is the climate change levy?
The climate change levy is an environmental tax which is based on commercial energy usage within the UK. The CCL was first introduced in 2001 alongside other taxes, reliefs and schemes that would reduce the impact of greenhouse gas emissions. The tax is collected alongside VAT, and whilst it is limited to businesses in certain sectors it applies to most UK businesses. The tax on energy usage includes the use of business gas and electricity, to encourage businesses to become more energy efficient and reduce their carbon footprint.
Who needs to pay the climate change levy tax?
The climate change levy is payable if your business operates in one of the following sectors:
✔ Public Service
The CCL is also paid by businesses that use more than a certain amount of energy, which is noted below. The threshold for paying the CCL is different for each business.
Can a company be exempt from paying the levy?
To be made exempt from paying the CCL you have to meet the following requirements:
✔ You are a charity involved with non-commercial activities
✔ Your company only uses small amounts of energy, less than 33kWh of electricity or 145kWh of gas a day
✔ You are a domestic energy user, which includes homes, caravans, self-catering accommodations and schools
How is the climate change levy charged?
The CCL is charged per kWh (kilowatt hour) of electricity used and per kilogram of gas or solid fuel. The government sets the rates of the CCL and it is reviewed every year.
The current climate change levy rates (as of June 2023):
✔ Electricity: £0.1875 per kWh
✔ Gas: £0.075 per kWh
✔ Solid fuels: £0.12 per kg
How do I know if we’ve been charged?
The CCL payment will appear as an additional charge on your energy bill, whoever your energy supplier is will collect the tax through your energy bill and pay this to HMRC on your behalf.
Is VAT charged on the climate change levy?
Yes, VAT is charged on the Climate Change Levy (CCL) in the UK. The standard rate of VAT (20%) is applied to CCL payments unless the supply is exempt or there is a reduced rate of VAT in place.
Can I reduce my climate change levy costs?
You can reduce the amount of CCL tax you pay by becoming more energy efficient within your workspace. There are loads of ways to reduce the amount you pay for CCL tax, but we’ve picked out the following to help get you started:
Enter into a Climate Change Agreement (CCA)
CCAs are voluntary agreements between the Environment Agency and businesses with energy usage. Under a CCA, businesses agree to reduce their carbon emissions by a certain amount over a period of time. In return, businesses receive a discount on their CCL payments.
Invest in energy efficiency measures
Energy efficiency measures can help you reduce your energy consumption, which in turn will reduce your CCL costs. Some examples include:
✔ Installing energy-efficient lighting & heating
✔ Improving insulation
✔ Upgrading to more efficient appliances
✔ Reducing energy waste through sustainable practices
Switch to renewable energy resources
Renewable energy like solar and wind power do not incur CCL. Switching to renewable energy sources can reduce your CCL and help you reduce your carbon emissions.
Look out for government incentives
There are a number of government incentives available to help businesses reduce their CCL costs. These include some of the following:
✔ A tax break for energy-efficient investments
✔ Grants for renewable energy projects
✔ Loan programs for energy efficiency improvements
We will help you every step of the way and manage your full business energy switch, so you don’t have to stress about changing providers.