Introduction of Mass Balance Approach

The rules around the plastic packaging tax (PPT) in the UK are set to change from April 2027, with a shift in how recycled plastic content can be measured for the purposes of the tax. The introduction of the mass balance approach (MBA) will offer businesses a more effective way to track and report their use of recycled plastics, which could have significant implications for companies impacted by the tax.

Challenges with Chemical Recycling

The PPT, which was introduced in 2022, currently exempts plastic packaging components that contain more than 30% recycled plastic. However, it has been challenging for businesses to determine the exact amount of chemically recycled plastic in a product. This is where the new mass balance model comes in, offering a solution to measure and allocate recycled content more accurately, even when recycled materials are mixed with new materials during the production process.

What is the Mass Balance Approach?

Mass balance is already used in other industries to track materials through the value chain and provide transparency on the flow of recycled inputs. For the plastic packaging tax, this new approach will allow businesses to take better advantage of chemical recycling advancements, making it easier to use previously difficult-to-recycle plastics in packaging.

Government Response and Business Impact

Abigail McGregor, a tax expert at Pinsent Masons, commented that the introduction of MBA had been anticipated since the 2023 consultation and the government’s Budget 2024 response. According to McGregor, this move is expected to be welcomed by businesses who will now be able to claim the PPT exemption using the new method, provided they meet the appropriate standards.

New Certification and Exemption Criteria

To qualify for tax relief under the new rules, UK manufacturers and importers of plastic packaging will need to prove that the supply chain for the recycled material meets the appropriate MBA certification. The government has committed to publishing a consultation on the mandatory certification in early 2026.

Exclusion of Pre-Consumer Waste

In addition to the introduction of MBA, the UK government has announced that pre-consumer waste, which includes defective products and leftover scraps, will no longer be eligible for the recycled content required for the PPT exemption. While pre-consumer waste can still be included in the recycling process, its exclusion from the tax exemption will incentivize businesses to adopt more effective recycling practices.

Challenges for Certain Businesses

McGregor also highlighted that the exclusion of pre-consumer waste might affect certain businesses that had been able to use plastic from their own manufacturing lines to qualify for the exemption. However, she noted that the overall impact on tax take is not expected to change significantly, but it may shift the tax burden from one group of taxpayers to another.

Changes to Tax Rates

Finally, the government confirmed that the rate of the PPT will increase in line with CPI inflation from 1 April 2026, as part of the UK Budget 2025.