April 22, 2025
A new tax on non-recyclable plastic is now in play in the UK. The new tax came into effect from the 1st of April 2022 and businesses must make their returns for the first quarter.
The intention behind the new tax is to encourage companies to use more recyclable products, and divert waste from landfill. The government has had previous success in respect of taxes on plastic waste. The plastic bag tax we all feel at the supermarket has prompted the use of “bags for life” and has directly changed consumer behaviour to reduce plastic waste.
What is the new tax?
If a package contains less than 30% of recyclable material, there will be a £200 per tonne tax added to the price of the product. Products which are except from the new packaging tax include, among other things, packaging for medical products.
As per the HMRC guidelines you need to register for the Plastic Packaging Tax if you or your organisation:
- expect to import into the UK or manufacture in the UK 10 tonnes or more of finished plastic packaging components in the next 30 days; or
- have imported into the UK or manufactured in the UK 10 tonnes or more of finished plastic packaging components since 1 April 2022 — this will change on 31 March 2023, when you will need to look back over the last 12 months on the last day of the month.
Businesses must submit their quarterly submission if they fall within the above criteria.
The next quarter for accounting for the new tax is the 1st of August – 29th December. Businesses must evidence product specifications from manufacturers, or evidence chain of custody to show it is a genuinely recyclable product which complied with the 30% rule. In addition, businesses now have to categorically state which products are exempt, and which products fall below the 30% rule, and evidence that they have paid the new tax for the products which fall below said 30% rule.
In a country where ethical consumerism and ethical investing is increasingly on the rise, the new tax is a substantial indicator for customers and investors. The indicator now shows how environmentally friendly the packaging being used by the businesses consumers are buying from is, and how ethical their investments are against ESG factors. Some argue the administrative burden is not welcome in a country where businesses are still reeling from the costs of the pandemic. Others welcome the new tax as an indicator of ethical and environmentally friendly compliant companies, and hope to see a reduction in the use of so called “virgin packaging”.
Potential increase in costs for products
The new tax may consequently give rise to an increase in cost for products where companies attempt to reduce their non-recyclable packaging to become compliant. Synthetic plastics tend to be very cheap to produce, especially given the economics of scale in play. However, over time we may see the costs of recyclable material fall more into line with non-recyclable if the demand is greater, and if they can be produced at a larger scale on the production line.
What will happen?
In the short term, the increase in demand may spike the price for environmentally friendly packaging. In the long term, it may have a significant impact on reducing non-recyclable packaging which is harming the environment.
At present, is unclear where the money from the new tax will be spent by the government. In an ideal world it would go to investment in businesses who produce environmentally friendly packaging to help reduce with the cost of producing such packaging.
The commercial question for businesses now will be: get rid of the virgin plastic packaging and soak up the cost in the short term? Or keep the environmentally harmful packaging and take the hit on the new tax to keep costs in line, while potentially taking on reputation damage in the eyes of some consumers?
For more information please contact Daniel Sinclair our Trainee Solicitor by email: dsinclair@gilsongray.co.uk
