UK Plastic Packaging Tax: Critical Warning as Revenue Falls

Revenue from the UK Plastic Packaging Tax fell for a second consecutive year in 2025-26, even though the tax rate increased. The figures suggest that less packaging is falling below the recycled-content threshold, but they also expose a more complicated challenge for Britain’s plastics economy.

HM Revenue and Customs recorded £250 million in accrued Plastic Packaging Tax revenue for 2025-26. That was approximately 4% below the £261 million collected in 2024-25.

The amount of packaging declared as taxable also declined. Businesses reported 1.107 million tonnes of taxable plastic packaging, compared with 1.194 million tonnes in the previous financial year.  UK Plastic Packaging Tax

UK Plastic Packaging Tax figures at a glance

The latest data show:

• £250 million in accrued tax revenue during 2025-26
• A 4% year-on-year reduction in revenue
• 1.107 million tonnes of packaging declared taxable
• 2.970 million tonnes of plastic packaging declared overall
• 37% of declared packaging subject to the tax
• 1.506 million tonnes containing at least 30% recycled plastic
• 5,142 businesses registered as of 13 August 2026

These results were reported on 1 September by EcoPlastics in Packaging and are drawn from HMRC’s latest official statistics.

The 2025-26 figures remain provisional. HMRC explains that late tax returns can affect the newest annual data, although revisions have historically tended to be minor.

Why is Plastic Packaging Tax revenue falling?

The UK Plastic Packaging Tax applies to plastic packaging manufactured in or imported into the country when it contains less than 30% recycled plastic. It came into force in April 2022 to encourage businesses to use more recycled material.

Taxable packaging represented 37% of the 2.970 million tonnes declared in 2025-26. That compares with 38% in 2024-25 and 41% when the tax was introduced in 2022-23.

The decline could therefore indicate that businesses have reduced their exposure to the tax by changing packaging materials, increasing recycled content or cutting the amount of plastic they place on the market.

However, the total quantity of packaging declared to HMRC has also fallen substantially. It decreased from 3.138 million tonnes in 2024-25 to 2.970 million tonnes in 2025-26. Compared with the 3.433 million tonnes declared in 2022-23, the reduction is approximately 13%.

This means lower revenue cannot be attributed solely to manufacturers adding more recycled material. Part of the change reflects a smaller overall volume of declared plastic packaging.

The result is especially notable because the tax rate rose from £217.85 per tonne in 2024-25 to £223.69 per tonne in 2025-26. Ordinarily, a higher rate would increase receipts if the taxable volume remained unchanged. Instead, the reduction in taxable tonnage outweighed the rate increase.  UK Plastic Packaging Tax

Recycled-content growth appears to be slowing

Packaging containing at least 30% recycled plastic remained the largest relieved category. HMRC recorded 1.506 million tonnes in 2025-26, representing about 51% of all plastic packaging declared.

That was lower than the 1.569 million tonnes recorded a year earlier, although it remained above the 1.290 million tonnes reported in 2022-23.

The figures therefore deliver a mixed message. The share of packaging meeting the recycled-content threshold has improved since the tax began, but year-on-year progress now appears limited.

David Gudgeon, head of external affairs at circular-economy specialist Reconomy, said the change from 38% to 37% in the taxable share suggested that progress was stalling. He identified the persistently low price of virgin plastic as an important obstacle because newly produced material can cost less than recycled alternatives.

Approximately 11% of declared packaging was exported, intended for export or converted into different packaging, while less than 1% was exempt because it was used for the immediate packaging of human medicines.  UK Plastic Packaging Tax

Falling receipts are not automatically a policy failure

A tax designed to change behaviour should not be judged on revenue alone. If businesses increase recycled content and move their products outside the taxable category, lower receipts can be evidence that the incentive is working.

But the accompanying tonnage data matter. The latest results do not show a decisive surge in recycled-content packaging during 2025-26. They instead reveal reductions in both taxable packaging and the overall amount declared.

It would consequently be premature to describe the revenue decline as either an unqualified success or a failure. The figures show less packaging being taxed, but they do not establish how much of the reduction resulted from redesign, material substitution, lower production, changing imports or improved recycled content.

Pressure on UK recycling capacity

The policy also depends on businesses having access to dependable supplies of suitable recycled polymers. Low-priced virgin plastic, high energy and labour costs, and uncertainty about future demand continue to put pressure on domestic recyclers.

If the UK collects more plastic without developing sufficient processing capacity, additional material may have to be exported. That can expose councils and businesses to volatile overseas markets while weakening investment in domestic recycling infrastructure.

Reconomy has called for government measures that create more predictable demand for recycled material. Its proposals include mandatory minimum recycled-content requirements that rise according to the type of plastic and packaging involved.

Such requirements would go further than the present tax threshold. The tax creates a financial reason to reach 30% recycled content, but it does not automatically encourage companies already meeting that threshold to move substantially higher.   UK Plastic Packaging Tax

What businesses should watch next

Manufacturers and importers should continue monitoring packaging weights, recycled-content evidence and tax classifications. Businesses manufacturing or importing more than 10 tonnes of plastic packaging within a 12-month period may have registration responsibilities.

HMRC has also confirmed that a mass-balance approach for qualifying chemically recycled plastic is due to become available from 1 April 2027. Updated government guidance says more detailed instructions will be published in early 2027.

The latest UK Plastic Packaging Tax results show that the taxable share of packaging is moving in the intended direction, but only gradually. The central question is no longer simply how much revenue the tax generates. It is whether the policy can stimulate lasting demand for recycled polymers while the UK develops enough infrastructure to process its own plastic waste.

Without stronger markets for recycled material, falling tax receipts could conceal fragile progress. With targeted investment, reliable standards and steadily increasing recycled-content requirements, the decline could instead become evidence of a more circular packaging system.

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