Published date: 27 May 2022
The new Plastic Packaging Tax outlines the UK government's regulations around commercial plastic packaging usage, increasing the amount that is taxable. What does this new policy mean for businesses, the environment, and our plastic consumption?
That is certainly the question business owners are asking. Online searches for ‘Plastic Packaging Tax 2022’ are up 850% year on year. Other breakout topics include queries around UK plastic packaging tax guidance and how to register to declare plastic usage. It is clear that businesses are confused about the policy, what packaging is taxable and how to accommodate these new provisions.
To demystify the regulations, we researched the 2022 Plastic Packaging Tax provisions and goals… and the reality of whether these will be met.
2022 Plastic Packaging Tax: what are the new regulations and why have they been introduced?
The UK's 2022 Plastic Packaging Tax came into force on 1st April 2022.
The fundamental provision of the policy is that businesses manufacturing or importing 10 or more tonnes of finished plastic packaging in any 12 month period must register for the tax of £200 per tonne of plastic.
What plastic packaging is taxable?
There are two types of plastic packaging subject to the tax:
1. Plastic packaging for use in the supply chain
2. Plastic packaging for single use by the consumer
Finished plastic packaging is defined as:
• any plastic that has undergone its final stage of manufacture, and
• is made of less than 30% recycled plastic (if a packaging item is made from multiple components, each component should be calculated separately.)
2022 Plastic Packaging Tax Exemptions
Certain plastic packaging types are exempt from the Plastic Packaging Tax:
• Plastic packaging for medicinal use (e.g. prescription medication strips)
• Plastic packaging for export within a 12-month period
• Plastic packaging that will be given a non-packaging use
• Plastic packaging for long-term use (e.g. first aid boxes, glasses cases)
• Packaging integral to the goods (i.e. the goods can’t be used without the component)
What are the policy goals of the 2022 Plastic Packaging Tax?
By administering the above, the government aims to achieve the following:
1. Over 2022-2023, around £235 million in total will be taxed from an estimated 20,000 manufacturers and importers of plastic packaging expected to be liable for the tax. This will have a gradual decline to £210 million by 2025 – 2026 as single-use plastic packaging is phased out.
2. Use of recycled plastic in packaging could increase by up to 40%, equivalent to half a megatonne of recycled plastic and saving as much as 200,000 tonnes of carbon per year.
The reality of the 2022 Plastic Packaging Tax: legal loopholes and limited environmental impact
Already, the 2022 Plastic Packaging Tax has been subject to a plethora of critiques from environmental activists sceptical of the policy’s impact. Meanwhile, business leaders and operation managers remain confused by the legislation’s many grey areas and the implications this has for their operations and finances.
The criteria of what qualifies as ‘plastic packaging’ for taxation is unclear
From the offset, manufacturers and retailers have been raising questions over what qualifies under the act, which is strewn with nuances over what qualifies as plastic packaging and what doesn’t.
One example is lipstick: the government has recently clarified that while lipstick’s mechanism and case is exempt from the tax, the lid isn’t. The same goes for mascara wands, which aren’t taxable, while the mascara lid is.
Another puzzling example is toothpaste. When toothpaste comes in a plastic pump, it’s exempt from the tax, whereas toothpaste tubes are taxable.
Additionally, it’s unclear how certain items should be accounted for under the tax, such as plastic foam which distorts in size and weight throughout its manufacturing lifespan.
Overall, a lack of clarity over the act’s measures is likely to lead to businesses not registering and taxing their packaging properly, limiting the legislations’ impact and/or increasing the likeliness of business fines.
The Plastic Packaging Tax will exacerbate the recycled plastic shortage
Companies are competing to source recycled plastics to avoid the tax. As a result, the UK is heading towards a national shortage. Demand for ‘recycled plastic’ has shot up 82% over the past 5 years and the cost of recycled plastic has increased 70% since 2021. Evidently, businesses wishing to avoid the tax and switch to recycled materials will be limited in their ability to do so.
As much as 3.4 million metric tonnes of virgin plastic goes unaddressed
Companies can still produce or import plastics of up to 70% virgin plastic without consequences. Based on our current plastic usage, this means as much as 3.4 million metric tonnes of plastic will go untaxed in the UK per year.
Additionally, packaging components containing plastic but are predominantly made of a different material are not subject to taxation. For example, a drinks carton may comprise single-use plastic, but as it’s main component is cardboard it bypasses the tax.
The result is a large amount of ‘covert single-use plastic’ still entering our shops, homes and landfills, with no consequence to manufacturers or retailers.
Consumers may be the ones who end up paying for the Plastic Packaging Tax
For businesses liable for the tax, it’s very possible they will offset their losses by increasing product prices for consumers — just as we are currently seeing unfold with energy prices.
The government website itself says, ‘It is expected that even if all the tax is passed on to individual consumers, the cost to consumers will be small as plastic packaging usually makes up a very small amount of the total cost of goods,’ suggesting that a small increase in costs at the consumer end is all it would take for companies to cover their losses under the new rules.
How should UK businesses adapt to the 2022 Plastic Packaging Tax? By cutting out single-use plastics altogether
Among confusion over the new Plastic Packaging Tax, the environmental costs of single-use plastics, and an impending national shortage in recycled materials, one thing is certain: it’s time to make the switch to sustainable packaging. Organisations utilising paper, cardboard and other eco-friendly materials will reap the rewards of business operations which are both good for the planet and are logistically and financially beneficial – free of the Plastic Packaging Tax’s bureaucracy and costs.
‘Challenge Packaging helps businesses operate in an environmentally-conscious way, whether the goods in transit are for the consumer, warehouse, internal use or otherwise. Alongside your cardboard packaging essentials, like BDC boxes and letter box boxes, we offer paper-based alternatives to traditionally plastic products. For example, hexcel wrap is a sustainable bubble wrap alternative that effectively keeps valuables safe in transit, and all our padded mailing envelopes use paper padding rather than the single-use plastic padding that’s commonly used. Switching to these packaging materials has never been more important, or more easy to do by simply ordering online.’
- Tom Wood, General Manager, Challenge Packaging
Discover Challenge Packaging full range of eco-friendly packaging solutions today.
More information on the 2022 Plastic Packaging Tax can be found on the UK government website via the links below: