What is the Climate Change Levy?
The Climate Change Levy is a tax on the gas and electricity that businesses use. It shows up as its own line on a business energy bill, and most owners only notice it when someone asks what it is.
Your energy supplier charges it on your bill and applies the rate. Where relief applies, HMRC’s system runs on certificates: you give your supplier a supplier certificate, the PP11, so it can apply the correct rate to your bill. Everything below comes from HMRC’s own pages, which we read on 5 November 2026.
The levy does not apply to domestic customers, or to charities using energy for non-business purposes. That is why a household bill never has a Climate Change Levy line, and a business bill usually does.
What are the Climate Change Levy rates?
The rate is set per kilowatt hour (kWh) and rises each April. HMRC publishes the figures, so these are regulator numbers rather than our estimates.
- Electricity: £0.00775 per kWh from April 2025, £0.00801 from April 2026 and £0.00827 from April 2027.
- Gas: £0.00775 per kWh from April 2025, £0.00801 from April 2026 and £0.00827 from April 2027.
The two are the same because the gas rate was raised to match electricity from April 2024. Before that, gas was charged at a lower rate, so an older guide may still show a gap that no longer exists.
In everyday terms, the April 2026 rate is about 0.8p per kWh. As a simple illustration, 10,000 kWh of electricity at that rate would attract roughly £80 of levy. Your own total depends on how much energy you use.
HMRC lists other rates for LPG and other taxable fuels. Those matter less for most small businesses, so we have left them out. The full table is on the HMRC rates page linked at the foot of this guide.
Who is exempt from the Climate Change Levy?
HMRC says a supply is excluded from the Climate Change Levy if it is for domestic use or used by a charity for its non-business activities. Domestic use covers houses and flats, and also some less obvious places.
HMRC’s list of domestic use includes caravans, children’s homes, homes for the elderly and disabled, hospices, houseboats, religious houses, school and university residential accommodation, armed forces residential accommodation and self-catering holiday accommodation. It also includes supplies to community heating schemes, such as a block of flats with a shared boiler.
Charities are only excluded for non-business activities. HMRC gives examples of charity business activities that do pay the levy, including selling donated goods, hiring out charity run buildings such as village halls, and providing membership benefits through clubs and associations.
If a building is used partly for domestic or charity non-business use, there is a 60% rule. HMRC says that if that use is at least 60% of the total, the whole supply is excluded. Below 60%, the levy applies to the part that does not qualify.
Does a small business pay the Climate Change Levy?
Often it does not, if it uses very little energy. HMRC says small amounts of fuel and power may be treated as domestic use, even when they go to a business. These are called de minimis limits.
For electricity, the limit is a supply below 1,000 kWh per month. For piped gas it is below 4,397 kWh per month. A tiny office or a small unit with low use may come in under these. A business that uses more than the limit will pay the levy.
HMRC also publishes a reduced rate for businesses in the Climate Change Agreement scheme. For 2026 to 2027 the published discount is 92% on electricity and 89% on gas. Whether you qualify is set by the scheme, not by your supplier.
Key takeaways
- The Climate Change Levy is charged by your supplier on business gas and electricity.
- HMRC sets the rate per kWh, and it rose again from April 2026.
- Gas and electricity are charged at the same rate.
- Domestic use and charity non-business use are excluded.
- Very low use can fall under the small supply limits.
How can you check the Climate Change Levy on your business energy bill?
Most of us never read the small lines on a bill. That is the Do-Nothing Default, and it is how a charge you might not owe stays on the bill for years.
Start by finding the Climate Change Levy line, and check the rate against HMRC’s table for the date of your bill. Then look at your monthly use. If you are under the electricity or gas limits above, it is worth asking your supplier whether the levy should apply.
If part of your premises is used as a home or by a charity for non-business work, ask your supplier what it needs from you. HMRC’s relief runs on a PP11 supplier certificate, worked out from a PP10 analysis form, so ask your supplier how it wants that submitted.
The levy is one of several charges that sit on top of your unit rate. Our guide to hidden business energy charges shows where the others sit, and our business energy VAT guide covers the tax that applies to the whole bill. Standing charges are separate again, and we explain them in our business electricity standing charges guide.
The levy is set by government, so you cannot negotiate it. What you can do is compare the energy rates and contract terms that make up the rest of the bill, and that is where a comparison helps.
Frequently asked questions about the Climate Change Levy
- What is the Climate Change Levy rate for electricity in 2026?
- HMRC publishes £0.00801 per kWh for electricity from 1 April 2026. It rises to £0.00827 per kWh from 1 April 2027. Gas is charged at the same rate.
- Do charities pay the Climate Change Levy?
- HMRC says charities are excluded when they use energy for non-business activities. They pay it on business activities, such as selling donated goods, unless the small supply limits apply.
- Is there a minimum amount of energy before the Climate Change Levy applies?
- HMRC says small supplies can be treated as domestic. The limits are below 1,000 kWh a month for electricity and below 4,397 kWh a month for piped gas.
- Who charges the Climate Change Levy?
- Your energy supplier charges it on your bill. Where relief applies, you give the supplier a PP11 supplier certificate so it can apply the correct rate.
Sources
- HMRC, Climate Change Levy rates, last updated 27 November 2025. Supports the main rates per kWh for electricity and gas from April 2025, April 2026 and April 2027, the gas rate matching electricity from April 2024, and the Climate Change Agreement discounts of 92% on electricity and 89% on gas for 2026 to 2027.
- HMRC, Exemptions from Climate Change Levy, last updated 4 August 2022. Supports the exclusion for domestic use and charity non-business use, the list of what counts as domestic use including community heating schemes, the examples of charity business activities that pay the levy, the 60% rule for mixed use, and the de minimis limits of 1,000 kWh a month for electricity and 4,397 kWh a month for piped gas.
- HMRC, Force of law guidance for Climate Change Levy. Supports the PP11 supplier certificate being given to the supplier so it can apply the correct rate to your bill, worked out from the PP10 analysis form.
Checked 5 November 2026. Rates and rules are as HMRC publishes them and change each April.
