Sustainability tax breaks for small businesses in 2025

For your small business to succeed you need to make every penny count—and that includes making sure you’re being as tax efficient as possible.

Fortunately, there are a number of initiatives you can take advantage of, and one particularly important area is sustainability.

Let’s take a closer look at the tax breaks you could benefit from in 2025.

Climate Change Levy reduced rate

The Climate Change Levy (CCL) is paid on electricity and gas usage, as well as solid fuels like coal, lignite, coke and petroleum coke, and is payable by any business in the industrial, commercial, agricultural and public services sectors. The CCL main rates will be listed on your business’ energy bill.

However, small businesses can enjoy a reduced rate if you’re an energy intensive business that has entered into a climate change agreement (CCA) with the Environment Agency. These are voluntary agreements that commit the business to reduce energy usage and CO2 emissions.

The reductions available include:

• 92% off your electricity bill
• 86% off your gas bill
• 77% reduction for liquefied petroleum gas (LPG)
• 86% reduction for coal and other solid fossil fuels

You can check if your small business is eligible for a CCA by reading the summary in Appendix A of the CCA operations manual.

Capital allowances on energy efficient items

When you invest in energy efficient, low or zero-carbon technology for your business you can claim 100% first-year capital allowances that reduce the amount of tax you pay. A 100% first-year allowance allows you to deduct the whole cost of that asset from your profits before tax.

Examples of energy efficient investments that qualify for ‘enhanced capital allowance’ (a form of 100% first-year allowance) include:

• Electric vehicles
• Vehicles with zero CO2 emissions, including goods vehicles
• Equipment for EV charging points

Relief on Plastic Packaging Tax

If your business expects to manufacture or import 10 tonnes or more of finished plastic packaging in the next 30 days, or has done so in the last 12 months, you need to register with HMRC for Plastic Packaging Tax. After registering for the first time, you need to tell HMRC the total weight of imported or manufactured finished plastic packaging every quarter.

You’ll pay tax of £217.85 per tonne that contains less than 30% recycled plastic, but you can get tax relief if you:

• Export it within the same accounting period
• Intend to export them in the next 12 months
• Can prove that a third-party company has exported or converted them
• have already paid tax on them but subsequently export or convert it into different chargeable plastic packaging components

This relief might be relevant to your small business if you manufacture consumer products.

Relief on the Aggregates Levy

The Aggregates Levy is a tax paid on sand, gravel and rock that’s been dug from the ground, dredged from the sea (in UK waters) or imported. This levy is charged at £2.03 per full tonne and £1.015 per half tonne. Note that soil, vegetables and other organic matter are exempt.

You can get tax relief on the Aggregates Levy if you export them or use them in some industrial or agricultural processes, while you may also be eligible for relief if you do not use the material as aggregate.

This levy, and the associated relief, might be relevant to you if your business offers landscaping services or operates in the construction industry.

How Warr & Co can help small businesses improve tax efficiency

It’s not always an easy economic landscape for small businesses, and they often need all the help they can get to become profitable and grow.

Here at Warr & Co, our team boasts specialist small business accounting experts, with decades of experience in helping companies just like yours survive and thrive.

We offer a wide range of accounting services perfectly designed explicitly for small businesses, including: 

• Help with start-ups and company formation
• Advising on the best legal structure for your business
• Introduce you to banks, solicitors, IFAs and other professionals
• Tax planning and accounts preparation
• Support with VAT and PAYE filing

To find out more about why small businesses across the UK rely on Warr & Co for their accounting and tax planning, book your free Small Business Consultation today.