Plastic tax revenue fall could spark UK budget shift

New figures from the UK government showed a 3% fall in plastic packaging tax (PPT) receipts over the last year, continuing the ongoing downward trend.

It comes as the amount of plastic made or imported which contains more than 30% recycled plastic passed the 50% mark in the UK for the first time.

Revenues generated by the tax, which was introduced in April 2022, dropped to £259 million in 24-25, down from £268 million the previous financial year.

Abigail McGregor, tax expert at Pinsent Masons, said: "The downward trend in total PPT take could be considered an environmental success story - with packaging containing over 30% recycled plastic now representing the majority of such packaging. However, with the pressure on the government to raise revenues, we might expect to see PPT used in the Autumn Budget to seek to raise more funds.”

The tax applies to manufacturers and importers of plastic packaging components which contain less than 30% recycled plastic. Imported plastic levels increased by tonnage last year but remain static in comparison to the amount produced in the UK, which saw a dramatic spike in output during the final quarter of 2024-25.

McGregor added: “Options, beyond simply increasing the rate, could include increasing the threshold for exemption - so that packaging has to be more than 30% recycled to qualify. Alternatively, packaging hitting the 30% threshold could obtain only partial exemption, while that hitting 40% or more could obtain full exemption.”

The total number of registered businesses is also predicted to drop this financial year. McGregor commented that this was a surprising possibility given the compliance focus of HMRC has been on ensuring all those who should be are registered for the tax.

Sukhbir Binning, also of Pinsent Masons, said: “Businesses involved in manufacturing will want decent advance warning of any such changes and those who import will want to ensure that they can obtain the necessary certifications from their suppliers, which has been problematic in certain quarters and so will want time to adjust to changes in percentages.”

"The government, in October 2024, has already committed to introducing the ‘mass balance’ approach for chemical recycling, but this would be accompanied by a change so that pre-consumer plastic – i.e. plastic that is recycled from within the supply chain rather than after it has been used by a consumer – is no longer considered recycled for the purposes of PPT. We may see this introduced in the Autumn Budget."