Henry Eastick Written by Henry Eastick

The new plastic packaging tax: what does this mean for UK industry?

At the tail end of 2020, the UK government issued a Policy Paper on the new plastic packaging tax, and businesses across the UK are now preparing for when the tax comes into force in 2022. This blog explains the terms of the tax and explores how it could impact UK industry.

What is the new plastic packaging tax?

The new plastic packaging tax (NPPT) is a tax that aims to reduce the use of fossil fuel derived plastic feedstock which is associated with a high carbon footprint, announced as part of the 2018 Resources and Waste Strategy. It was reaffirmed last year after consultation and will take effect from 1 April 2022.

The introduction of this new tax has been on the government’s agenda since 2017 when a study discovered that 44% of the UK’s plastic use was in packaging alone. As packaging forms such a large proportion of the UK’s total plastic use, introducing recycled packaging with a significantly reduced carbon footprint into UK industry should act as an important means of reducing the nation’s carbon footprint and building a more sustainable economy.

What are the terms of the NPPT and how will it be regulated?

The tax stipulates that all plastic packaging manufactured in or imported into the UK containing less than 30% recycled plastic will be taxable at £200 per tonne.

There are some conditions and exemptions, though. For example, companies that use less than 10 tonnes of plastic packaging per annum will be exempt from the tax to ensure they are not unfairly impacted commercially, while plastic packaging intended for long-term use, such as plastic food containers, will also be exempt. Crucially, there is also an exemption on plastic packaging that is used as transport packaging to import products into the UK.

HMRC Her Majesty Revenue and Customs sign in London, UK in black and white

Her Majesty’s Revenue and Customs will govern the tax.

The NPPT will be enforced by HMRC, who are currently investing in staff training and the development of a new IT system to regulate it. You can find more information about the introduction of the new plastic packaging tax – which complements the reformed Packaging Producer Responsibility Regulations – in the government’s Policy Paper here.

How could it impact UK industry in the short-term?

The immediate impacts concern cost. Indeed, while the tax has been known about in industry for some time now, many businesses are yet to see past the increase to costs in the short-term. As virgin plastics are significantly cheaper than recycled plastics – with some estimates of up to a £500 per tonne price difference – the concerns are understandable.

However, from April 2022, many businesses will no longer have much of a choice – either invest in recycled plastics or pay the tax. We hope that most businesses choose the former, but this is not a cost that they will absorb themselves. Inevitably, then, the tax will be transferred down the supply chain to consumers, with Imperial College London estimating that this initial added cost will total 16p per UK household per week.

Many businesses are now facing practical challenges as well. The tax is causing industries that depend on hygienic and durable packaging, such as food and beverages, to search for suitable replacements that do not jeopardise the integrity of products within. This is an issue that we are currently investigating at Ragus, for example.

Furthermore, there are also question marks surrounding whether the UK’s waste reprocessing infrastructure, in its current capacity, can handle the significant growth of plastic waste it will need to process to meet demand in just over a year. Indeed, research conducted in 2020 highlighted that the UK would need to increase its reprocessing capacity by 100% to meet the demand caused by the NPPT.

closeup escalator with a pile of plastic bottles at the factory for processing and recycling. PET recycling plant

The UK needs to increase its waste reprocessing capacity to cope with the expected demand. 

These types of challenges cannot be solved overnight, though. It takes time to find the right answers and phase them in gradually. At Ragus, we are aiming to comply – where possible – with the 30% recycled plastics target by the end of the year, and we are aspiring to surpass the target over the coming years.

How could it impact UK industry in the long-term?

While the NPPT will cause business costs to increase in the short-term, the introduction of the tax is a highly positive development for UK industry in the long-term. This will mark a vital milestone in the UK’s bid to phase-out use of virgin plastics in business operations and stimulate investment into innovative renewable packaging solutions. And it is simply the first step, with the government unequivocal in its position that the 30% required content and £200 per tonne tax rate will increase in the future as the strategy develops.

It seems that by creating a financial incentive, the government is stimulating demand for recycled plastics. This will in turn lead to an increase in the production and supply and, over time, should drive down the cost of recycled plastics and make them more financially viable. In theory, then, the objective of the NPPT is to create a strengthened circular economy, which can handle increased recycled content packaging and reprocessing at a commercially viable level. Surely, this is a sustainability objective that we can all get behind.

Ragus actively engages with new legislation and market developments to understand how it can improve its business operations. To find out more about our corporate commitments, visit our responsibility page. To learn more about our pure sugar products, contact a member of our customer services team on (0)1753 575353 or sales@ragus.co.uk. today. For more sugar news and Ragus updates, follow Ragus on LinkedIn.