United Kingdom: Evaluating the latest increases to plastic packaging taxation from April 2024 onward

published on 4 April 2024 | reading time approx. 4 minutes

From 1 April 2024 onwards, businesses will incur an increased Plastic Packaging Tax (PPT) rate, following an upward revision from £210.82 per tonne to £217.85 – a rise of 3.3 percent. While the increase has long been anticipated, in line with a staggered rise in the tax levy proposed in the original announcements made in 2018, there will undoubtedly be an impact.

The British government first levied PPT, paid by businesses manufacturing or importing plastic packaging directly to HMRC, two years ago in April 2022. The original tonne rate began at £200 and has increased annually since then.

Companies registered outside of the UK, but that import ten tonnes or more of taxable plastic packaging into the country are also obligated to register for PPT and to remit the tax obligations arising.

Budgeting for the latest round of plastic packaging tax increases

The general PPT rules have not changed. These apply to manufacturing and importing organisations bringing in or producing ten tonnes or more of plastic packaging within any twelve-month rolling period. For most, the higher PPT charge will create an additional tax liability, which businesses may need to incorporate into their budgeting when setting pricing or deciding whether to pass the higher tax levy onto their customers.

However, HMRC has published some updated procedures related to Temporary Admission, where an importer is transporting reusable plastic packaging to the UK that is not expected to be made available for sale.

Note that business owners are responsible for assessing their exposure to PPT and for registering with HMRC accordingly. The tax office may investigate where there is reason to think a company subject to PPT has not registered, but the onus is on the owner to conduct their own due diligence.

Companies must register via the gov.uk site regardless of whether the plastic packaging they produce, or import contains 30 percent recycled plastic or above. Following registration, returns are submitted four times a year, with period one covering 1 April until 30 June and so on.

Return submission and payment deadlines fall on the last working day of the month, after the end of the period being reported against.

Updates to temporary admission plastic packaging tax reliefs

In the latest revisions, published in December 2023, the government clarified that reusable plastic packaging is exempt from PPT provided it meets all of the following criteria:

The reusable plastic packaging is used to transport other goods.
The plastic packaging has import duty relief at the point of import.
The packaging is not intended to be sold.
The plastic packaging is used to transport other goods for at least one proportion of the inbound or outbound journey.

Cardboard boxes and plastic packaging similar to bubble wrap are not considered reusable packaging. To claim full import duty relief, the plastic packaging must have already been in circulation within the UK. Packaging originating from the EU must have been shipped to the EU before 1 January 2021 or have been in circulation in the UK before then.

Depending on the method of import, the importer may need to declare Temporary Admission at the time and place of import. Exempt packaging being exported will not normally be subject to a Border Force physical examination unless selected for inspection.

The impact of plastic packaging tax on UK manufacturing

Following the introduction of PPT in 2022, it appears to have had a limited effect both in terms of tax revenue collections and on industries that widely use plastic packaging. HMRC initially forecasted that 20,000 importers and manufacturers would meet the threshold for PPT registration. The most recent data released in August 2023 shows that 4,142 businesses have registered thus far.

However, revenues collected have exceeded those anticipated. HMRC expected to raise £235 million in PPT revenues during the 2022/23 financial year, whereas actual receipts amounted to £276 million – more than 17 percent above target.

Analysts have indicated that the lack of registrations reflects a need for greater enforcement and awareness of PPT. There may be 15,000+ businesses that are obligated to register and pay PPT but who may not know that they are in breach of the relatively new regulations.

HMRC data also indicates that PPT revenues have been steadily declining from one quarter to the next, albeit by a shifting margin. This trend may indicate a transition in some sectors, where businesses are working proactively to reduce their usage of plastic, both to lower their tax obligations and to meet consumer demand for more sustainable materials. The data shows tonnes of plastic packaging declared amounted to:

437 in April to June 2022
579 from July to September 2022
392 between October and December 2022
404 from January to March 2023

Comparing packaging exemption applications shows a closer correlation with original targets, demonstrating that the proportion of tonnage declared as taxable has stayed relatively stable. The government has stated that the PPT rate will continue to rise in line with the Consumer Price Index (CPI), thereby acting as a deterrent against wide scale plastic packaging usage.

Future changes to the UK’s plastic packaging tax

There is no suggestion that PPT will be abolished or removed. Still, many critics have stated that the tax regime should be escalated progressively over time, increasing the minimum proportion of recycled plastic used within packaging, alongside an increasing tax rate.

The UK Carbon Border Adjustment Mechanism, or CBAM, is expected to be introduced in 2027, creating a new framework against which businesses will be subject to taxation based on their carbon emissions. A consultation ran from March until June 2023 to collate views about the mechanism, which is designed to calculate a tax charge at the point of import linked to the carbon produced by the product or materials in question.

Although the finer policy standards have yet to be clarified, the objective is to use carbon pricing across all industries, work toward net zero decarbonisation benchmarks, and address concerns around carbon leakage caused by product and material movements between jurisdictions with varying carbon control approaches.

With a further consultation scheduled for 2024, the expectation is that CBAM will apply simultaneously with PPT, where relevant. The importer will be responsible for filing declarations and paying CBAM obligations, although they will not be expected to purchase emissions certificates.

Initially, CBAM will focus on industries that conventionally rely the most on emissions-heavy materials and processes, including the production and import of cement, fertiliser, hydrogen, iron, steel, glass and aluminium.