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Unpacking the UK plastic tax – and how to beat it with smarter packaging

Will Burke
Will Burke | 5 min read

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The UK government announced another plastic tax in March to come into effect on 1 April 2022. This time they are targeting all non-recycled plastic packaging. Will it spell trouble for your business? Or could it be an opportunity to make your packaging leaner and greener? Let’s see. 

First, it was plastic carrier bags with the Plastic Bag Tax in 2015. Now, the UK government is waging war against all new plastic packaging with a £200 per tonne levy.

It comes as the EU, California and other governments are pursuing a similar course.

And it’s not just petroleum-based plastic. Even compostable and biodegradable plastic will be affected.

But let’s face it. This transition has been in the making for a long time. A quick look at the environmental impact of plastic packaging will tell you that:

Clear plastic bottle on sandy beach

No one likes taxes, levies or whatever you want to call it. There will be some pain at first. But there may also be a silver lining. 

By following the two Rs of sustainable packaging, your company can optimise your packaging supply while minimising costs, both on your budget and the environment.

In this explainer article, we’ll be looking at:

  • How and why the plastic tax came about

  • What is taxed and how?

  • Who will pay the plastic tax

  • Who/what will be exempt from the plastic tax?

  • What does it mean for your business?

  • How to beat the plastic tax by optimising your packaging

  • The plastic packaging tax in a nutshell

It all started with the Plastic Bag Tax

On 5 October 2015, the UK’s Plastic Bag Tax was implemented with a 5p charge on single-use plastic carrier bags. That levy was bumped up to 10p on 21 May 2021.

Since 2015, the use of plastic bags in England has dropped by a whopping 95%.

It helped to change both consumer behaviour and business practices. The plastic went out and in came multiple-use cotton bags and recyclable paper bags.

The Plastic Bag Tax paved the way for the upcoming plastic tax.

white and grey cotton tote bags

What exactly does this plastic tax entail? 

There are two key features of the Plastic Packaging Tax to keep in mind: the 30% threshold and weight as the main determinant.

The 30% recycled content test

factory emitting pollution

Firstly, at this stage, the tax is not designed to eradicate all plastic packaging. The UK government itself acknowledges the benefits of some forms of plastic packaging.

It’s a durable and lightweight packaging solution, which can equate to a relatively lower carbon footprint on the distribution chain.

It’s the production of new and single-use plastic that the plastic tax is targeting. 

Why?

For the simple fact that the production of new plastic has a greater impact on the environment than recycled plastic. The extraction and processing of raw materials require considerable energy, resulting in carbon emissions.

It is estimated that the plastic tax could increase the use of recycled plastic packaging by 40%.

That would equate to a reduction of 200,000 tonnes in carbon emissions from 2022 to 2023.

For this reason, the new plastic tax will apply to all new plastic packaging that contains less than 30% recycled plastic. 

This includes packaging that is produced locally and imported from abroad. It will affect both 100% plastic-based packaging (e.g., plastic mailer bags) and composite solutions, such as product boxes with plastic windows or casing.

What about bioplastic?

bioplastic packaging

 

Does the plastic tax also cover compostable and biodegradable alternatives?

Afraid so. The consultation paper issued by the HM Treasury explains:

“The objective of this tax is to shift demand towards the use of recycled material, and therefore the government’s initial proposal is that the tax will not distinguish between different types of plastic or different ways of design for disposal.”

But it might not be time to throw your bio poly mailers on the compost heap yet. The definition is still up for review.

The weight factor

cardboard and plastic food boxes

The other key element of the plastic tax is the use of weight as a defining measure of the “content test”. 

According to HM Treasury:

“Plastic packaging is packaging that is predominantly plastic by weight. It will not apply to any plastic packaging which contains at least 30% recycled plastic, or any packaging which is not predominantly plastic by weight.”

It’s a straightforward proposition for 100% plastic-based packaging, like plastic mailing bags, disposable food containers/wrappers and plastic retail packaging.

If the recycled content does not make up at least 30% of the total weight, then the £200 per tonne levy will apply. 

It’s a little trickier when it comes to composite packaging. 

chocolate box with plastic tray

In this case, you’ll need to check:

  • the composition of the plastic component. Does it contain recycled content and how much?
  • and whether the weight of the non-recycled component makes up more than 70% of the total weight.

So, a cardboard box with a small plastic window should be fine, but a plastic container with a cardboard pedestal tray will likely fail the test.

Things might get interesting with the good old jiffy bag.

But here’s the important part.

If an item of packaging fails the content test, the levy will apply to the weight of the whole packaging – and not just the plastic component.

Who will pay the plastic tax?

woman holding an iPhone next to laptop

In terms of settling the accounts with HM Revenue and Customs (HMRC), the responsibility for paying the plastic tax will fall upon UK producers of plastic packaging and importers selling on the packaged goods.

But it is implied that this tax will be passed on down the line to the business customers of packaging suppliers and in turn, the end consumer.

So, no matter where you fall in the chain, the price of your plastic packaging will increase.

To keep costs down, a shift in business practices and behaviour will no doubt be required.

Who/what will be exempt from the plastic tax?

Overhead view of a warehouse loading bay

The government is mainly focusing on the big end of town. 

They have therefore stipulated that companies using less than 10 tonnes of plastic packaging per year will be spared from paying the tax.

The tax will not apply to durable and multi-use plastic packaging, such as food delivery containers or catering platter trays. 

Plus, any plastic packaging used to transport imported goods will be exempt. 

What does the plastic tax mean for your business?

What does the plastic tax mean for your business?

In the short term, the overall price of plastic packaging will likely increase as the industry shifts to recycled plastics.

That’s due to the fact that recycled plastic is around £500 more expensive per tonne than virgin plastic. 

The plastic tax will also mean more paperwork, but only for companies processing more than 10 tonnes of plastic packaging a year.

Leading up to 1 April 2022, you will need to assess your tax liability and whether your packaging meets the 30% recycled content test.

From 1 April 2022, liable companies will need to register with HMRC, submit returns on a quarterly basis and make payments accordingly.

How to beat the plastic tax by optimising your packaging

In the long run, it will be much better to limit your exposure to the plastic tax in the first place. And the best way to do that is to look at your current packaging and apply the two Rs of sustainable packaging: Reduce and Replace.

Ordinarily, the other R of reusability would factor in the equation. But in this instance, it won’t help that much in minimising the effects of the plastic tax.  

Reduce through Value Engineering

It’s amazing what you can achieve by re-analysing your packaging needs with fresh (green) eyes. All of a sudden what you once took for granted can look unnecessary and sometimes, just plain wrong. By asking the fundamental “why” questions around price, performance, security and assembly, you can often reduce your packaging without too much pain.

In the packaging world, this process is known as value engineering where you redesign your packaging from the ground up with the aim of reducing your environmental footprint and costs

It’s kind of like the Marie Kondo method of decluttering the home.

Do you really need that bubble wrap? What value does that plastic divider bring? Does the packaging need to be that large to fit, protect and present your goods?

That would be one of your first steps to pass the 30% content test.

Chances are, your eco-conscious customer will most likely not miss the extra packaging and reward you for your efforts with their repeat business. 

And the best part is that a reduction in packaging normally means a reduction in your unit costs.

raylo - printed boxes for shipping - packhelp case study

Raylo, a London-based mobile phone startup, shows exactly how it can be done. They cut the weight of their delivery packaging by 25% and costs by 11% through value engineering. 

They didn’t reinvent the wheel. They achieved this reduction by:

  • Tailoring their packaging to the exact dimensions of their phones and accessories, which cut out any excess space and ensured greater security for the goods
  • Reducing the thickness of the cardboard from three layers to two without compromising on robustness

While the material was corrugated cardboard, the process is the same for any packaging, including plastic or composite packaging. 

Replace

If you can’t reduce the virgin plastic component of your packaging, then the next step is to look at replacing it. 

With bio-plastics also affected, the obvious substitutes are recycled plastic and paper-based packaging.

Material science has come a long way in the packaging industry and now corrugated cardboard solutions can provide similar amounts of strength and protection as plastic packaging. 

Cardboard can be also used as thermal insulation.

dog next to a thermo box for food delivery

Take Psi Bufet, a D2C pet food company. With the help of packaging engineers, they developed an insulated shipping box for frozen food deliveries, which was made entirely out of cardboard. 

Three-layer corrugated cardboard (B flute) provided the protection, while paper-based honeycomb inserts kept the temperature below zero during delivery. 

No plastic was used. The box is 100% recyclable and biodegradable, while the cardboard is made from 90% recycled content. 

Without the need for expensive insulation, their solution turned out to be 67% cheaper than other alternatives on the market.

Open custom shipping box

The next step is to ensure that the paper or cardboard in your packaging is either recycled or made from sustainable sources.

The Sustainable Packaging Coalition is a great resource. Here, you can see the certifications of certain brands and products. 

Likewise, the Forest Stewardship Council ensures that any wood-based products (like cardboard) are made from responsibly managed forests. 

The plastic tax in a nutshell:

  • From 1 April 2022, a £200 per tonne levy will apply to plastic packaging where the recycled content does not make up at least 30% of the total weight.
  • Composite packaging will also be affected if any plastic component makes up the majority of the total packaging weight and does not contain at least 30% recycled content.
  • If an item of packaging fails the content test, the levy will apply to the weight of the whole packaging – and not just the plastic component.
  • UK producers and importers of plastic packaging will foot the bill, but the price increase will likely be passed on to businesses and end consumers.
  • Companies using less than 10 tonnes of plastic packaging per year will be exempted, along with durable and multiple-use plastic packaging.
  • The overall cost of plastic packaging will likely increase in at least the short term.
  • From 1 April 2022, liable companies will need to register with HMRC, submit returns on a quarterly basis and make payments accordingly.
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