The new plastic packaging tax and what it means for the UK


The UK is taking bold strides in tackling environmental issues. One such stride is a new tax that directly targets plastic waste, a policy that could have broad implications for manufacturers and consumers alike.

Here’s a rundown of the ins and outs of this new tax, which is set to come into force on 1st April 2022, as stipulated in the Finance Act 2021. Specifically, it targets plastic packaging manufactured or imported in the UK, which is composed of less than 30% recycled plastic. However, an exemption has been set for manufacturers and importers of less than 10 tonnes of plastic packaging per annum, to protect against disproportionate administrative burdens.

Why was the Plastic tax introduced?

Why introduce such a tax, you might ask? It’s simple. The government intends to incentivise businesses to utilise recycled plastic in packaging production, stimulating a greater demand for recycled plastic, which in turn boosts recycling rates and reduces plastic waste destined for landfill or incineration.

This initiative isn’t entirely new. In fact, it has its roots in the 2017 Budget, when the government announced an investigation into how the tax system could be leveraged to combat single-use plastic waste. Following an overwhelming response of 162,000 submissions, the 2018 Budget heralded the introduction of a new tax on plastic packaging containing less than 30% recycled plastic.

The policy has evolved over time, with feedback from various consultations and technical considerations being used to shape the legislation. The Plastic Packaging Tax (descriptions of products) Regulations 2021 have been introduced to further refine the tax’s application. The aim is to ensure the tax is well-targeted and doesn’t include categories of products that should not be subject to it.

So, what’s the likely impact of this tax?

As far as the government’s coffers are concerned, forecasts estimate a positive impact from 2022 to 2026. The Office for Budget Responsibility predicts increases of £235m for the first two years, with a slight reduction to £225m and £210m for the subsequent years.

As for the economy as a whole, significant macroeconomic effects aren’t expected. The most notable effect will be a behavioural shift as businesses opt to increase their use of recycled plastic, consequently driving demand for recycled materials and encouraging further recycling of plastic waste. It’s also likely that we’ll see a reduction in plastic packaging use by businesses, and potentially a decrease in purchases of products containing plastic packaging by consumers.

Interestingly, the measure is not anticipated to have a significant impact on individual consumers unless businesses pass on the charge. However, even if this does occur, the cost to consumers is expected to be minimal as plastic packaging typically constitutes a small proportion of total goods cost.

Business Implications

In terms of business impact, the tax is expected to affect an estimated 20,000 manufacturers and importers of plastic packaging. The new rules will necessitate one-off costs including staff training, HMRC registration, and the development of a reporting framework. Moreover, continuing costs related to tax returns, record-keeping, and due diligence on supply chains will arise, leading to an estimated annual net increase in administrative burden of around £0.4 million.

On the HMRC front, an estimated capital cost of between £10-20 million is expected in developing the system to collect the tax, alongside £22 million in staff and other resource costs.

From an environmental perspective, the tax aims to boost the use of recycled plastic in packaging by approximately 40%. This could equate to carbon savings of nearly 200,000 tonnes in 2022 to 2023. While estimates of behaviour change have a degree of uncertainty, the policy is hoped to divert plastic waste away from landfill and incineration, and stimulate recycling technologies within the UK.

As we move closer to the implementation date, the full implications of this new tax will become clearer. Regardless, it signals a positive step towards a more sustainable future for the UK, with potentially transformative effects on plastic recycling and waste management.


Matt Whiteman

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