Climate Change Levy: how will your small business be impacted?

Are you unsure if the Climate Change Levy (CCL) change will affect your business? This blog will cover all the key points you need to know. What is the CCL? Is the rate increasing and how will this impact your energy bills? We’ll explain all of this and more to make managing your business’ energy bills straight forward.

What is the Climate Change Levy?

CCL is a tax imposed by the government to encourage energy efficiency and reduce carbon emissions. Since 2010, the revenue from the CCL has gone directly into the Treasury's general funds to support public services. While the tax no longer directly funds specific green initiatives (as it did prior to 2010), the tax is designed to incentivise green technology investment. 

The charge only relates to your units of energy usage, so your daily standing charge isn’t included. The government set separate rates for electricity and gas which are likely to increase every year on 1^st April, so a price change is right around the corner. 

How are rates changing? 

On 1^st April, the CCL rate will be increasing for businesses. Currently both electric and gas rates are £0.00775 per Kilowatt hour (kWh) of usage. This is increasing to 
£0.00801 per kWh. For more information, please read the government’s guidance on the levy rates here.

How will this change the amount your business is paying? 

Of course, the exact amount that you’ll pay is dependent on your business’ energy usage and this can vary across industries. We have a guide on how much energy we would expect small businesses to use depending on their industry here which could help you manage your situation. 

Let’s apply the CCL to an average business in the hospitality industry to see how much you could be paying. Across EDF customers the average electricity usage for hotels, holiday lets, restaurants, event catering, pubs etc. is 12,977 kWh per year. At the new rates of £0.00801 this would mean and average business customer in the hospitality industry will pay £1041.12 towards the CCL on top of their ongoing usage.

To apply this to your business all you need to do is:

• Find your latest energy invoice.
• Locate your estimated yearly usage (this will be a separate figure for electricity and gas)
• Multiply this figure by 0.00801.
• This will show in £ roughly how much you will pay on top of your regular usage (please be aware that this is only an estimate based on how much energy you have used over the last 12 months)

How does CCL show on your bill?

Every month you can check exactly how much you’ve been charged for the CCL. 

All the information you need is on the 2^nd page of your EDF Small Business invoice.
You will see a table titled “Your charges in detail”. 
Here you can see your meter readings, energy usage, daily standing charges and then CCL. 
If you are still unsure, we have a full breakdown on how to read your invoices here or watch our video break down. 

Are there any exemptions on CCL?

There are exemptions from the main rate of Climate Change Levy which could apply to your business: 

Domestic Users

This includes any business used for housing and accommodation. For example, care homes or hospices, school or university accommodation and community heating schemes. 

Charities

In some cases, charities can be exempt from paying CCL, however, this is not true 100% of the time. When a charity uses energy for purely non-business activities, the usage is completely off the hook! 
However, please be aware that the levy does apply when a charity steps into business territory. A few classic examples include:

• Selling donated items in charity shops
• Renting out charity‑run spaces like village halls.
• Offering membership perks through clubs or associations

Business premises used partly for domestic or non-business charities.

Your location may be used for a mix of domestic, charitable or business purposes. In cases like this there are possible exemptions, if the domestic or charity use is:

• at least 60% of the total use, then the whole supply can be treated as such and is excluded from the levy.
• less than 60% of the total use, then the levy must be applied to that portion that does not qualify for relief.

If you’re unsure whether your organisation fits into any of the categories the full list is available here.

Do I pay CCL if I’m on a Green Tariff?

While Green and Renewable Backed tariffs are a great way to strengthen your sustainability story and show customers you’re committed to doing the right thing, unfortunately you will still need to pay CCL. 

Do I pay if I generate my own energy?

If your business generates electricity from a renewable source such as solar or wind, then you may be exempt from CCL. However, this may not be true in all cases so we’d recommend checking out the full guidance from HMRC here.