Consultation on landfill tax

Landfill tax is an environmental tax designed to encourage waste reduction and is charged on waste disposed of at authorised landfill sites, as well as waste disposed of illegally or without a valid permit. It is devolved, with separate rules for England, Northern Ireland, Scotland, and Wales. There are two rates: a lower rate for qualifying inert materials, and a standard rate for other waste. Illegal disposal currently attracts the standard rate, or 150% if it is in Wales. Exemptions and reliefs apply in limited circumstances.

The UK Government has launched a consultation proposing significant reforms to the landfill tax regime in England and Northern Ireland. These changes aim to discourage landfill use, promote sustainable waste management and align with environmental objectives. The consultation seeks input from stakeholders and is open until 21 July 2025.

Key proposals are to:

1. Apply an escalator to the lower rate of landfill tax until it reaches standard rate by 2030
2. Remove the qualifying fines regime from April 2027
3. Remove the quarries exemption from April 2027
4. Restrict the exemption for dredgings to just dredged material from April 2027
5. Remove water discounts from April 2027
6. Increase the rate for illegal disposals to 200% of the standard rate and amend penalties and interest

It will have very significant cost implications particularly in the waste, construction and quarrying sectors. Even for waste that is not sent to landfill there will be consequential price increases because landfill tax effectively acts as a stimulus that sets market pricing for waste disposal.

The purpose of the changes is to incentivise the reuse and recovery of more material and reduce the amount of fraud that currently takes place.  Undoubtedly the additional price signal will mean that treatment processes that are not currently economically viable will become viable, but there are other challenges to the reuse and recycling of material connected with regulatory restrictions that need to be addressed for the shift to take place.  Otherwise, there is no alternative behaviour to adopt and this simply becomes a 3000% tax hike.

This is a consultation for England and Northern Ireland, but Scotland and Wales have tended to mirror the English rules very closely. So, it is likely that any changes that are adopted could have an impact in Scotland and Wales too.

Businesses should consider submitting a response to ensure their views are represented. It is also an opportune time to conduct a cost analysis across operations to understand the potential financial impact of the proposed reforms. In parallel, businesses should explore opportunities to reduce landfill reliance – such as increasing the use of recycled or secondary materials, to mitigate future tax exposure and align with broader environmental goals. Taking proactive steps now can help manage risk and identify savings ahead of legislative changes.