The Impact of the Plastic Packaging Tax

According to Gov.uk, “You will need to pay Plastic Packaging Tax if you have manufactured or imported plastic packaging components which contain less than 30% recycled plastic.”

The plastic packaging tax was introduced in April 2022 as a clear incentive for businesses to use recycled plastic in their packaging. It was estimated that the tax could lead to an increase in the use of recycled plastic in packaging by approximately 40%. This is the equivalent of carbon savings of nearly 200,000 tonnes from 2022 to 2023. So, one year on, what impact has the new tax had, and is it on target to achieve its goals?

Tax generation on target to exceed HRMC's first-year target of £235 million

A freedom of information request by packaging manufacturer Duo has revealed that from April 2022 to December 2022 (The first full three quarters since the plastic packaging tax was introduced), £200,125,000 was generated in tax revenue by the PPT. In an earlier policy paper, HMRC estimated it would generate £235 million in the first 12 months. If revenue generation proceeds at the same rate, the new tax is on target to generate £266 million in its first year; a significant £ 31 million over the target.

Interestingly, that's despite fewer than anticipated companies registering. HMRC originally estimated that approximately 20,000 businesses could be affected but in the first 11 months (as of 27th February 2023) only 3,559 companies had registered for the new levy.

Costs of plastic packaging tax/tonne

• When the plastic packaging tax was first introduced in April 2022, it was charged at a rate of £200 per tonne
• As of 1 April 2023, it is charged at a rate of £210.82 per tonne

Who needs to pay plastic packaging tax?

The plastic packaging tax applies to businesses that have imported or manufactured 10 tonnes or more of finished plastic packaging which contains less than 30% recycled plastic since 1 April 2022. You can learn more about the PPT in our Ultimate Guide to the Plastic Packaging Tax.

As of 31 March 2023, the retrospective test will apply. This means that businesses must register for plastic packaging tax if they have imported or manufactured 10 tonnes or more of finished plastic packaging that contains less than 30% of recycled plastic in the last 12 months.

How are the UK and EU countries paving the way for plastic packaging tax?

The UK and two other European countries (Spain and Italy) are currently leading the world in plastic packaging tax with the intent of achieving specific environmental outcomes.

The UK, Spain, and Italy have passed laws surrounding plastic packaging tax provisions and all three countries have the goal of preventing waste from non-reusable plastic packaging. They also want to encourage the recycling of plastic waste.

Due to the amount of plastic packaging that is exported, the new taxes will cause a ripple effect that will stretch far beyond the borders of the countries that have implemented them. Exporters will have to consider how they are going to send their products and what packaging options are available and this will encourage them to consider more sustainable, recyclable options.

Who benefits from the tax and what are the probable implications of it?

Before the plastic packaging tax was introduced, businesses had no drive or incentive to find alternative packaging options. Now they are being encouraged to explore different options, driven by the financial impact on them if they don’t. Whilst the benefits from the plastic packaging tax are not expected to be felt immediately, as businesses are gradually driven away from using plastic packaging, more sustainable options will become widely available and be in greater demand. This will then lead to increased levels of recycling plastic packaging waste, therefore meaning it won’t end up in landfills.

This all contributes to a circular economy and keeps plastic in circulation for longer.

One possible negative implication is the risk of it leading to an increase in the rate of inflation. Companies that are already struggling financially due to the current cost of living crisis may find that the tax is too much to pay. However, this will still lead to businesses looking for alternative packaging options. We have a broad range of sustainable packaging options as well as our polythene packaging which contrary to popular belief, is recyclable.

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