The Climate Change Levy (CCL) is an environmental tax imposed by the government on taxable commodities as a cost signal to reduce carbon emissions.
Businesses that pay the standard rate of VAT (20%) are charged CCL on their energy bills, although there are exceptions.
Businesses that meet the minimal use requirements and are charged the reduced rate of VAT (5%) don’t pay CCL:
- For electricity, this means using an average of less than 33 kWh per day (1,000 kWh per month)
- For gas, this means using an average of less than 145 kWh per day (4,397 kWh per month)
If you pay 20% VAT on your energy bills, CCL rates changed from 1st April 2020, with gas CCL charges increasing slightly and electricity CCL charges decreasing. This is due to the Government rebalancing the rates to reflect the lowering carbon impact of electricity in comparison to gas consumption. This means that gas CCL rates will continue to increase, whereas electricity CCL rates will continue to decline, with the aim for the charges to be at a 1:1 ratio by 2025.
Please see further information here: Gov.uk CCL rates