The Ultimate Business Energy Guide to the Climate Change Levy
What is the Climate Change Levy?
The Climate Change Levy (CCL) is an environmental tax designed to encourage businesses to become more environmentally friendly. It was formally introduced in April 2001, as part of the UK's Climate Change Programme.
The tax seeks to deter businesses from relying too heavily on fossil fuels (electricity, gas and solid fuels) and switch to renewable sources of energy such as solar, wind and hydro power.
Who is affected by the Climate Change Levy?
Those who work in industrial, commercial, agricultural or public service sectors are all eligible for the main rates of the Climate Change Levy.
However, not all businesses are required to pay CCL. A business may be exempt or eligible for reduced rates if they are:
- A small business using very little energy (less than 33 kWh (electricity) and/or 145 kWh (gas) a day)
- A domestic energy user
- A charity engaged in non-commercial activities
In addition to the above, energy is also exempt from the CCL if:
- It won’t be used in the UK
- It won't be used as a fuel
- It will be used to generate electricity
- It has been supplied from certain combined heat and power schemes
If the business is one which is particularly energy-intensive, or horticultural, it may be eligible to pay a reduced rate. This would require an agreement to be made with the Environment Agency by entering into a climate change agreement (CCA).
This allows heavy energy usage businesses to receive up to 90% reduction on charges for electricity and a 65% reduction for gas, liquefied petroleum gas (LPG), coal and other solid fuels.
Tax reductions may also be granted if you can demonstrate that you are operating more efficiently and producing less waste. There are various schemes that you can apply to in order to be eligible for these reductions, they usually require businesses to agree to specific targets.
These reductions are just one of the benefits of increasing your business energy efficiency. You can also lower your bills and help the environment when you make energy-efficient improvements to your business.
Check out our guide on how you can increase your business’ energy efficiency.
How is the CCL paid?
Each individual business must register for the CCL and would be liable to pay a penalty if they fail to do so. Your energy supplier is responsible for calculating your Climate Change Levy charges, which will be itemised on your business energy bill.
Once collected, the fees is passed on to HM Revenue Customs. For more information on all the charges included in your business energy bill, visit our Understanding Your Business Energy Bill guide.
The rates for CCL are fixed from all energy companies and they are typically altered at the beginning of each financial year.
The current CCL rate is:
- Electricity – 0.00811 pence per kWh
- Gas – 0.00406 pence per kWh
In the next financial year, rates are set to increase for gas but will go down for electricity. The 2021-2022 financial year rates will be:
- Electricity – 0.00775 pence per kWh
- Gas – 0.00465 pence per kWh
How will the CCL affect my business?
As previously mentioned, the CCL will have already been added to your business electricity and gas bills by your supplier, who then collects it and pays it to HMRC.
If you are not eligible for a deduction or exemption there are alternative ways to reduce your business energy bills through energy efficiency measures. The easiest way to reduce the cost of your energy bills is by making sure you are on the cheapest tariff available.
Why not see how much you can save by using our business energy comparison engine?
Our comparison engine will assess your business energy needs to find the best possible energy tariffs for your business.
Alternatively, one of our energy consultants would be more than happy to talk you through the options available, just call 0800 9888 375.
Climate Change Levy FAQs
As well as the Climate Change Levy, what other charges may be applied to my business’ energy bill?
If you take a look at your business’ energy bill, you’re likely to also find charges for the following:
- Unit rate – This will depend on your tariff and will be applied to your usage.
- Standing charge – This is made up of the Transmission Use of System charge (TNUoS) and the Distribution Use of System (DUoS) charge. It is a fee you pay for your energy being supplied.
- VAT – This is typically 20% for businesses but certain companies can be eligible for a reduction (such as charities and non-profit organisations).
What kind of tariffs are available for my business energy?
There are two main types of tariffs available for you to choose from. Namely:
- Fixed rate – With this type of contract your rates will stay the same for the duration of your contract, so you will be making the same payment to your business energy supplier every month. Charges can vary, however, if you use more energy than expected.
- Variable rate – If you choose this kind of tariff, your rates can change depending on market activity. Therefore, your payments can vary every month.
Is switching suppliers easy to do?
Yes, switching energy suppliers is simple – especially when you get help from a specialist comparison service such as Love Energy Savings. We’ll compare a range of affordable energy tariffs that are suitable for your business’ needs and provide you with quotes to make your choice.
Once you’ve made a decision, we’ll manage your switching process and keep you updated every step of the way. From there, you’ll be able to benefit from cheaper rates and huge savings.
Try our free comparison tool today to kickstart your switch.