In this section: Every tax
Climate Change Levy
Last updated . Figures refresh every night. How each figure is worked out.
A tax on the energy that businesses and the public sector use, charged per unit supplied. Businesses, public bodies and charities on their energy bills. Households do not pay it. It raised £1.8bn in 2025–26, which is 0.2% of everything HMRC collects and 0.06% of the economy. That is down £2m (0.1%) on the year before.
Figures for the 2025–26 financial year. Source: HM Revenue and Customs.
Key figures
- £1.8bnRaised in 2025–26 down on a year earlier: −£2m (−0.1%) vs 2024–25
- 0.06%Of the whole economy (GDP) unchanged on a year earlier: no change vs 2024–25
- -30.2%In real terms, against the 2019–20 peak Adjusted for inflation with the GDP deflator
Sources: HM Revenue and Customs, HM Treasury.
What is the short version?
- How big: £1.8bn in 2025–26, 0.2% of everything HMRC collects; after inflation, 27% less than in 2015–16.
- Latest change, 2019: Rates are rebalanced between electricity and gas to reflect the decarbonisation of the grid.
- Where it goes: Nowhere in particular, like almost every tax: it is not earmarked.
- The argument: It prices energy use where the user can act on efficiency; against that, it taxes energy rather than carbon, so clean electricity is taxed like dirty.
How much does it raise?
The numbers behind this chart
| Financial year | Cash | Real, 2025-26 prices |
|---|---|---|
2006–07Details for 2006–07 | £712m | £1,166m |
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2007–08Details for 2007–08 | £688m | £1,105m |
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2008–09Details for 2008–09 | £716m | £1,108m |
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2009–10Details for 2009–10 | £695m | £1,062m |
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2010–11Details for 2010–11 | £674m | £1,013m |
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2011–12Details for 2011–12 | £676m | £994m |
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2012–13Details for 2012–13 | £635m | £918m |
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2013–14Details for 2013–14 | £1,068m | £1,513m |
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2014–15Details for 2014–15 | £1,491m | £2,083m |
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2015–16Details for 2015–16 | £1,763m | £2,446m |
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2016–17Details for 2016–17 | £1,864m | £2,535m |
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2017–18Details for 2017–18 | £1,861m | £2,499m |
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2018–19Details for 2018–19 | £1,922m | £2,524m |
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2019–20Details for 2019–20 | £2,004m | £2,564m |
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2020–21Details for 2020–21 | £1,778m | £2,162m |
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2021–22Details for 2021–22 | £1,930m | £2,341m |
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2022–23Details for 2022–23 | £2,094m | £2,373m |
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2023–24Details for 2023–24 | £1,827m | £1,967m |
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2024–25Details for 2024–25 | £1,792m | £1,854m |
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2025–26Details for 2025–26 | £1,790m | £1,790m |
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Figures for the 2025–26 financial year. Source: HM Revenue and Customs, HM Treasury.
How "real terms" is worked out
Real terms use HM Treasury's GDP deflator, rebased to 2025-26 prices. That is the measure the Treasury and the OBR use for public finances; the consumer price index is the right one for a shopping basket, not for the size of the state.
How does it work?
The Climate Change Levy is charged on electricity, gas and solid fuel supplied to business and the public sector, at a rate per kilowatt hour. Households are outside it entirely and pay reduced-rate VAT on energy instead.
Energy-intensive industries can sign Climate Change Agreements, committing to efficiency targets in exchange for a large discount, which is how the levy tries to avoid simply driving production abroad.
It sits alongside the UK Emissions Trading Scheme and Carbon Price Support, which tax the carbon content of generation. Those costs reach households through electricity prices even though the levy itself does not.
How has it changed?
How it got here, and why each change was made:
- 2001Introduced to cut business energy use and help meet the Kyoto targets, with Climate Change Agreements from the start to protect heavy industry.
- 2015The exemption for renewable electricity is removed, on the grounds that other subsidies had taken over the job.
- 2019Rates are rebalanced between electricity and gas to reflect the decarbonisation of the grid.
Where does the money go?
Nowhere in particular. The Climate Change Levy is not earmarked. It goes into the Consolidated Fund and is spent on whatever the government of the day decides.
Because it is not earmarked, the only honest way to show what it pays for is by proportion. If climate change levy receipts of £1.8bn were spent in the same proportions as all public spending in 2025-26, they would break down like this. It is an illustration of scale, not a statement about where those particular pounds went.
See for every £100 of tax for the full picture.
Does it change what people do?
Evaluations have found the levy did cut business energy use, with the largest effects among firms that faced the full rate rather than a Climate Change Agreement discount. The discounts protect competitiveness and blunt the incentive at the same time, which is the standard trade-off for this kind of tax.
When a tax rise stops raising money looks at the cases where the effect has been large enough to move the revenue.
What are the arguments?
The case for it
- It prices energy use where the user can act on efficiency.
- Climate Change Agreements protect industries genuinely exposed to foreign competition.
- It applies to gas as well as electricity, so it does not favour fossil heat.
- Evidence suggests it did reduce consumption.
The case against
- It taxes energy rather than carbon, so clean electricity is taxed like dirty.
- It overlaps with emissions trading and carbon price support, so the effective carbon price is opaque.
- The discounts mean the biggest emitters face the weakest signal.
- It adds to business costs that reach households through prices anyway.
Both columns are set out as their strongest case, not as a preferred answer and a strawman. See how this site handles contested questions.
Common questions
- What is the Climate Change Levy?
- A tax on the energy that businesses and the public sector use, charged per unit supplied. Businesses, public bodies and charities on their energy bills. Households do not pay it.
- How much does climate change levy raise?
- £1.8bn in 2025–26, which is 0.2% of everything HMRC collects.
- Where does climate change levy go?
- Nowhere in particular. The Climate Change Levy is not earmarked. It goes into the Consolidated Fund and is spent on whatever the government of the day decides.
Use this data
The figures belong to the bodies that published them and are used under their terms, listed in Sources for this page; most are Crown copyright under the Open Government Licence. Only our own words, analysis, charts and derived calculations are ours, published under CC BY 4.0: reuse them, including commercially, if you credit Tekstak Ltd and link back to this page.
Download
- Climate Change Levy receipts by financial year (CSV) JSON HM Revenue and Customs: Open Government Licence v3.0
- Total HMRC receipts by financial year (CSV) JSON HM Revenue and Customs: Open Government Licence v3.0
- All data, field definitions and licences
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Sources for this page
| Source | Publisher | Figures as of | Updated | Licence |
|---|---|---|---|---|
| HMRC tax receipts and National Insurance contributions for the UK | HM Revenue and Customs | the 2025–26 financial year | annual | Open Government Licence v3.0 |
| GDP deflators at market prices, and money GDP | HM Treasury | the 2025–26 financial year | annual | Open Government Licence v3.0 |
Each source's figures are used under the licence shown. Our own words, analysis, charts and derived calculations are ours, under CC BY 4.0.