World Recycling Day 2021- Are you ready for the new Plastic Packaging Tax?

plastic packaging tax

On Recycling Day 2021, Finch look at an important proposed new area of legislation – the Plastic Packaging Tax – and what it will mean for business.

Recycling is an important part of resource and waste management, but it should only be the next step after the reduction and reuse of materials have been undertaken. Following these steps will help provide cost-savings to businesses and benefits to the environment.

Following public concern about plastic waste, the Government proposed a new tax on plastic packaging in the 2018 Budget and a new policy paper has been issued alongside the 2021 Budget.

Plastic Packaging Tax

The Plastic Packaging Tax is to be introduced from 1 April 2022 and will apply to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic.

The aim of the tax is to incentivise businesses to use a greater amount of recycled material in plastic packaging, to increase demand for this material, and in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.

It is estimated that the use of recycled plastic in packaging could increase by around 40%, which is equivalent to carbon savings of nearly 200,000 tonnes from 2022 to 2023, based on current carbon factors.

The tax should also lead to greater investment in the UK plastic reprocessing plants and enable the UK to provide a market in recycled plastic for products manufactured in the UK and elsewhere.

The key features of the tax include:

  • £200 per tonne tax rate for packaging with less than 30% recycled plastic,
  • a registration threshold of 10 tonnes of plastic packaging manufactured in or imported into the UK per year,
  • an exemption for manufacturers and importers of small quantities of plastic packaging.

The legislation to establish the tax will be introduced in the Finance Bill 2021, which is currently making its way through the House of Lords. The Bill will set out how the tax will be collected, recovered, and enforced, as well as the scope of the tax, who will be liable for payment, and the need to register with HMRC.

The impact on businesses is likely to be significant and is expected to affect an estimated 20,000 manufacturers and importers of plastic packaging. There will be one-off costs such as familiarisation with the new rules, staff training, registration with HMRC, and developing the required reporting framework to complete tax returns. Ongoing costs could include completing, filing and paying tax returns, keeping appropriate records (including those required to claim the export credit), and amending returns.

The Plastic Packaging tax is similar to other ‘green taxes’, such as the Landfill Tax, Aggregates Levy, and Climate Change Levy in that it aims to change the behaviour of businesses to be more environmentally sustainable. It also complements the Producer Responsibility Obligations (Packaging Waste) regulations that many businesses will be accustomed to.

Also, in line with these other taxes, there will be civil and criminal penalties for failing to comply with the tax, including penalties for failure to register, failure to file returns and failure to pay the tax.

2021 is an important year to ensure that your business understands the implications of the new Plastic Packaging Tax before its introduction in April 2022 and it provides some time to become prepared and to adjust behaviours where necessary.

The Plastic Packaging Tax is only one of a range of waste reforms expected in the next few years. The Waste Management Plan for England issued in January 2021 includes other commitments around packaging producer responsibility, recycling, and the circular economy.

For more information, please contact [email protected].

Related insights