(3 min read)
The Government has paused major Landfill Tax reforms, retaining the current two-rate system and key exemptions, which is positive news for the construction, recycling, and waste management sectors. Stakeholders should note that the lower rate of Landfill Tax will rise significantly, but abrupt changes—such as removing the qualifying fine regime or quarry filling exemption—have been avoided. It is important to review compliance processes, especially regarding fines and stabilisers, and monitor for future updates, as further targeted reforms and stricter penalties for unauthorised disposals remain possible.
The Government’s response to the consultation on Landfill Tax reform demonstrates a pragmatic approach, balancing environmental objectives with the operational and economic realities faced by the waste and recycling sectors. This outcome is particularly positive for the construction and recycling industries, which can continue to operate under the current framework.
The consultation addressed several proposals, including moving to a single rate of Landfill Tax, removing the qualifying fines regime, altering exemptions for quarry filling and dredging stabilisers, reforming the water discounting scheme, and increasing rates for unauthorised waste sites. While these proposals appeared on the surface to support waste reduction, many in the industry, and related sectors, voiced concerns that such reforms could ultimately be counterproductive.
A central issue raised by respondents was the potential impact on the recycling industry, which generates significant volumes of fines and other lower-rated materials that cannot be reused or recycled. Many argued that steep increases in landfill costs for these materials could have unintended negative environmental consequences, such as incentivising illegal dumping and undermining legitimate recycling operations. The Government acknowledged these risks and, after reviewing the evidence, chose a more measured approach to reform.
Key Outcomes of the Consultation
- The Government will not proceed with transitioning to a single rate of Landfill Tax by 2030. Instead, the lower rate will be increased in line with the standard rate to prevent the gap between the two rates from widening, with rates for 2026-27 to be legislated in Finance Bill 25-26. While this means the increases will be less dramatic in absolute terms, the percentage rise for the lower rate will be more notable. For example, in 2025/26 it will more than double to £8.65 from £4.05.
- The qualifying fines regime will not be removed from April 2027. Instead, HMRC will work with the landfill sector to reform the regime, recognising that fines are a natural by-product of recycling and that abrupt removal would have significant negative impacts on the sector.
- The exemption for filling quarries with a disposal permit will remain, acknowledging its importance for the disposal of construction and demolition material.
- The exemption for stabilisers used in dredged material will be removed from April 2027, encouraging minimal use of stabilisers and promoting alternative de-watering techniques. HMRC acknowledges that this will not prevent the use of stabilisers, and it remains to be seen whether HMRC will legislate specifically or rely on the existing framework, which may require adjustments to HMRC’s Excise Notice LFT1.
- The water discounting scheme will not be removed, but HMRC will engage with industry to tighten compliance.
- The proposed increase to the rate of Landfill Tax at unauthorised waste sites is not being pursued at this time, though the Government will continue to work with agencies to tackle waste crime. HMRC’s rationale is that it would not make sense to introduce this change when other major reforms are not being implemented, even though many local authorities are facing record costs in remedying unauthorised disposals.
The Government’s response to the consultation will be welcomed by most in the industry and those who work closely with it, including the construction and recycling sectors. From the government’s perspective, they should also get more for their money from the funding provision for Land Remediation Grants. However, Landfill Tax is likely to remain on the Government’s agenda, as there are relatively simple changes—such as updating the list of Qualifying Materials and imposing harsher penalties for unauthorised disposals—that could have a positive environmental impact and would be supported by many stakeholders.
