What UK Importers Need to Know About the New Plastic Packaging Tax

Many businesses have started adopting a more sustainable way of running their businesses. However, we’re still far from reaching a fully circular and green economy.

Global governments are encouraging businesses to cut waste and carbon emissions by implementing new taxes and regulations. The new plastic packaging tax is one of those measures.

So, how will this new tax reform affect your importing or exporting business?

This article at a glance

The UK’s new plastic packaging tax applies a tax on any plastic packaging produced in or imported into the UK, applying to plastic packaging containing less than 30% recycled plastic. Importers of plastic packaging must register with HMRC for the plastic packaging tax and consider more sustainable packaging options.

What is the Plastic Packaging Tax?

The Plastic Packaging Tax came in April 2022, applying to any plastic packaging produced in or imported into the UK. Importers pay tax if they have manufactured or imported plastic packaging components that contain less than 30 per cent recycled plastic.

The tax won’t apply if you solely use paper packaging or styrofoam. Plastic packaging is different. You will pay tax if your products contain less than 30% recycled plastic.

Importers must rethink how they design, produce and package their products.

How does the Plastic Packaging Tax work?

The tax came into force on 1 April 2022, charging importers £200 per metric tonne.

You must register for the Plastic Packaging Tax if you meet either of these requirements:

• You expect to import into the UK or manufacture in the UK more than 10 tonnes of finished plastic packaging components in the next 30 days
• You imported into the UK or manufactured in the UK more than 10 tonnes of finished plastic packaging components since 1 April 2022

Who is liable to pay the Plastic Packaging Tax?

The plastic tax is chargeable on finished plastic packaging components.

Under the new rules, “packaging components” includes all imported plastic packaging filled with products. In short, you will be liable to pay plastic tax.

Manufacturers of plastic packaging and importers of unfilled plastic packaging must work out when the packaging components are “finished”. These components are “finished” after their last substantial modification. So, the businesses that make the “last substantial modification” will be liable for the tax.

For more details on substantial modification, read here.

Example

Johnny is a manufacturer of plastic packaging. He supplies to Christopher, an exporter of mobile accessories. Who will be liable for the plastic tax? Christopher is liable because he is the party who packed and filled the plastic packaging with mobile accessories to export them.

How do you register for the Plastic Packaging Tax?

You must register for the Plastic Packaging Tax within 30 days of becoming liable for it. Simply put, you must register before you plan to manufacture or import. Failing to register may result in a penalty issued against you.

To register, you’ll need to provide the following:

• Estimated weight of finished plastic packaging components
• Your business type
• The contact and address of the person/business you’re registering for
• Customer reference number — a company registration number, your National Insurance number and Self Assessment Unique Taxpayer Reference, or a charity registration number
• Government Gateway user ID and password of the person/organisation you’re registering for

You can register at this link. Sign up for an account if you haven’t already done so.

Types of packaging subjected to the Plastic Packaging Tax

Plastic is a polymer material which could contain added additives or substances.

Non-chemically modified cellulose-based polymers are not considered “plastic” under the Plastic Packaging Tax.

Other cellulose-based materials that are chemically modified are considered plastic. These materials are subject to tax:

• Biodegradable, compostable and oxo-degradable plastics
• Part of multiple materials but contains more plastic by weight

For more details, use this guide.

A simple calculation to use when determining if you’re liable for the plastic tax

If you have a 50-gram carton comprised of:

• 30 grams of plastic
• 10 grams of aluminium
• 10 grams of cardboard

Your carton is thus counted as a plastic packaging component, as plastic is the heaviest material.

If you have a 50-gram carton that is comprised of:

• 10 grams of plastic
• 25 grams of aluminium
• 15 grams of cardboard

Your carton is not counted as a plastic packaging component, as plastic is not the heaviest material.

If you have a 50-gram carton comprised of:

• 25 grams of plastic
• 25 grams of aluminium

Your carton is not counted as a plastic packaging component, as plastic is not the heaviest material.

For a more in-depth calculation, here’s how to calculate the proportion of plastic.

How will the Plastic Packaging Tax affect your business?

Keep an eye on government updates. Your business could face additional costs if you import a lot of plastic in packaging — the costs could significantly add up.

Your supply chain will be negatively affected. You should always plan and change your packaging types if needs be.

Ultimately, ensure your business is always compliant. Simultaneously save costs and be more eco-conscious by considering recyclable and biodegradable packaging.

What further options can you take to avoid the Plastic Packaging Tax?

Firstly, look at your processes and determine whether there’s a packaging-free option. Secondly, consider offering high-end reusable packaging and paper packaging to cut on plastic. This is fast becoming the rule, not the exception. Take the USA — young people are increasingly buying from businesses with eco-packaging options.

Tax is complicated, so simplify your payments process

Are you often making and receiving payments from your overseas business partners? High exchange rates can creep up behind you and give you a shock when you receive the bill. Apart from making a conscious effort to stay ahead of your tax payments, avoiding high forex rates can also help you save a significant amount of money.

At Silverbird, we enable you to hold, transfer and exchange foreign currencies online simply by using a single multi-currency account. Make and receive payments in over 30 currencies without the fuss.

Start onboarding today.