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  • Hannah Marsh

PPT: The New Tax on Plastic Packaging in the UK

From April 2022, the UK is bringing into effect a new plastic packaging tax (PPT) to provide economic incentives for business to utilise recycled plastic. This new tax will apply to plastic packaging manufactured in or, imported into, the UK which contains less than 30% recycled plastic.

What’s the rationale behind this PPT?

This plastic packaging tax is part of the UK government’s effort to help reduce our plastic usage and increase plastic recycling, starting with the manufacturers and importers. The rationale behind the tax is to increase the use of, and demand for, recycled plastics by creating an economic incentive for manufacturers. In turn, it is hoped that the PPT will also increase the collection of plastic waste, preventing materials from entering landfill.

The cost of PPT will be £200 per tonne of taxable plastic. The business liable for this tax is either the manufacturer of the packaging component in the UK, or the businesses importing it into the UK. When it comes to potential price hikes, it is ultimately a business’ decision whether the PPT cost will be passed on to consumers or absorbed by the company. However, businesses are encouraged to make PPT visible to business customers in order to increase the amount of recycled plastic used.

Forecasts suggest that as a result of the tax, the use of recycled plastic in packaging could increase by 40%. This is equivalent to carbon savings of nearly 200,000 tonnes in 2022-2023.

So, which products will be affected?

  • Packaging where plastic makes up the largest proportion by weight and contains less than 30% recycled plastic

  • Biodegradable and compostable plastics will still incur PPT

What are the exemptions?

  • Exported goods will be exempt from PPT, provided that they are exported within 12 months

  • Companies producing less than 10 tonnes of taxable plastic annually will not be required to pay PPT

  • Plastic packaging used for licensed human medicines, transit packaging to secure imported goods and in aircraft, ship or railway stores for international journeys not released into the UK

Businesses that meet either the 30% recycled content threshold or the 10 tonne de-minimis (minimum) will still be required to register for PPT. This means that all businesses need to increase record-keeping and supply chain communication, in order to make them more transparent.

What if a business fails to comply with the PPT?

Failure to register with HMRC for the PPT, to complete the required filings or to pay the PPT will incur a penalty. Depending on the nature and severity of the offence, various civil and criminal sanctions/penalties can apply.

Are any other countries introducing a tax on plastic packaging?

In January 2021, the EU introduced a plastic packaging levy on Member States at a rate of €800 per tonne based on the plastic packaging in their own markets. The EU tax is expected to encourage other Member States to introduce their own PPT and prompt non-EU territories to do the same to avoid distortion of trade.

Italy is introducing a €450 per tonne tax on virgin single use plastic which will come into place in January 2022.

Spain has also proposed a tax of €450 per tonne on non-reusable plastic packaging to start in early 2022.

Will the money be reinvested?

Figures released by the UK government indicate that the PPT is expected to generate £235 million in revenue in its first year. After covering one-off expenses and staffing costs, this could leave approximately £193 million remaining.

There is currently no information to detail how this money will be spent. To help achieve the Government’s 2042 target of eliminating ‘avoidable’ plastic waste, it’s hoped that these taxes will be used to fund research into closed loop recycling systems and to support businesses in reducing their plastic use.

What are the limitations of a PPT?

Possible limitations to the PPT include the inability for certain companies to use recycled plastics due to food safety laws, current regulations and supply and technical constraints. Taxing companies in these cases would be unfair and is likely to result in extra costs for consumers. Some of these products would need to be made thicker or multi-material which would be a backwards step that introduces recycling problems and uses more plastic.

Additionally, recycled content cannot be measured at packaging item level. This makes the PPT difficult to enforce and will require a transparent worldwide certification system.

Lastly, there is a current lack of recycled material available in the UK and Europe. This will disadvantage the smaller businesses that may not be able to compete on price with larger companies.

We’ve seen the plastic bag tax make a big dent in usage of plastic bags. How effective do you think the PPT will be?

Edited by Michael Anderson

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