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Landfill tax for businesses

Businesses often become overwhelmed upon hearing about the landfill tax, fearing the addition of another tax or levy they must pay.

However, this couldn’t be further from the truth. The landfill tax is paid as part of your commercial waste collection costs, meaning you will pay less if you can prevent, reduce and recycle your business waste.

In this guide, we clarify why the landfill tax exists in the first place and how it affects your business.

💡 Key takeaways:

• 2023-24 rates: The standard rate is currently £102.10 per tonne. This will increase to £103.70 per tonne from April 2024.
• Landfill operators pay it: The landfill tax is paid directly to the government by landfill operators. These costs trickle down to businesses through service fees.
• Less waste, less tax: Businesses can reduce their indirect landfill tax payments by preventing, reducing and recycling their waste.

What is the landfill tax?

The Landfill Tax is an environmental tax levied on the disposal of both residential and commercial waste in UK landfills.

It was introduced in 1996 to encourage waste reduction, recycling, and environmentally friendly waste management practices.

The tax is charged per tonne of waste and has two rates:

• A lower rate for less polluting, inert waste.
• A standard rate for most waste types.

The rates are subject to annual review and adjustment. The government uses revenue generated from this tax for its public spending and to fund environmental and community projects.

Why was the landfill tax introduced?

Besides the obvious advantages of introducing this tax, the UK’s early adoption was spurred by the growing environmental challenges of the 1990s.

During this time, the UK faced increasing waste volumes due to changes in consumption habits, and landfill sites were quickly reaching capacity. Additionally, there was limited suitability for new landfill sites, especially in densely populated locations like London and the Midlands.

At the same time. The EU was shifting towards more sustainable waste management practices, particularly influenced by the policies of Northern European and Scandinavian member states.

Coupled with the rising environmental awareness of the 90s, the UK became one of the first nations in the world to implement fiscal measures to curb the growing environmental impacts of waste.

Who pays for landfill tax?

While landfill operators settle the tax directly with the UK government, its economic burden trickles down the waste management chain onto businesses and even public organisations like schools and hospitals.

Therefore, businesses in the UK pay for their landfill tax indirectly as part of their waste management costs. The exact form of payment depends on who is in charge of your commercial waste collection:

Private contractor: If your business waste is collected by a private contractor, the landfill tax is paid as part of the collection fees, which are a good indication of the tonnage of waste collected as its determined by:

• The size of your business’s commercial waste bins.
• The frequency of your waste collection.

Local council collection: If the council collects your business’s waste, the landfill tax is paid by your council and passed on to your company as part of a paid-for business waste collection service.

💡 Who are landfill operators? Any entity with an official license to dispose of waste in a UK landfill qualifies as an operator. This role is typically assumed by waste management companies, both small and large, as well as some local councils. See here for a list of landfill site operators.

Landfill tax rates

The UK has a two-tier tax rate system designed to accommodate both large amounts of relatively harmless, unavoidable waste, and avoidable or recyclable waste with more significant environmental impacts.

Here are details on each of the rates:

Standard rate: This rate applies to most types of waste disposed of in landfills. It’s typically higher and is intended for materials with a greater environmental impact when landfilled, such as residential and commercial waste that includes organics, electronics, batteries and some hazardous waste.

Lower rate: This reduced rate is for less polluting materials, which are typically inert and less harmful to the environment when landfilled, such as construction and demolition waste, including concrete, bricks and soil.

These rates are reviewed and adjusted annually for each tax year to reflect inflation, continue incentivising waste reduction measures, and reduce the environmental impact of waste. The adjustments for 2024 were made in line with the Retail Price Index (RPI) as part of the government’s environmental and fiscal policy.

What are the current landfill tax rates?

The rates for the fiscal year 2023 to 2024 (April 1st 2023 to April 1st 2024) are as follows:

Standard rate: £102.10 per tonne.
Lower rate: £3.25 per tonne.

These will increase to £103.70 per tonne and £3.30 per tonne for the next fiscal year on April 1st 2024. This increase is normal and is due to the government’s yearly budget review. See here to see how much these have increased over time.

💡 Devolved landfill tax: Scotland and Wales can technically set their own rates because of devolved waste policy, although they currently remain aligned with the UK’s.

Source: Gov.uk Landfill tax rates

How much have landfill tax rates increased over time?

Since its introduction in 1996, the landfill tax has become considerably more expensive. This increase is partly due to the inflation of the pound but also reflects the government’s strategy to utilise fiscal measures to minimise the environmental impact of waste.

The table below highlights this increase since 2013, and shows the RPI index for comparison with UK inflation rates.

💡 Blast from the past: When the landfill tax was introduced in 1996, the standard and lower rates were £7 and £2 per tonne, or 15 and 1.7 times cheaper, respectively.

How much landfill tax does my business need to pay?

The amount of landfill tax your business must pay (indirectly) ultimately depends on the weight of the waste disposed of by the operator handling your commercial waste disposal.

As a result, the less waste you generate, the less they receive for disposal, and the less they have to pay the government. In terms of actual transactions, your business will pay for this as part of its waste collection costs, which means you first need to understand how these are calculated.

How are commercial waste collection costs calculated?

Your commercial waste collection provider will adjust its fees depending on two things:

• The size of the bin that is rented to your business property.
• The frequency of waste collection.

These factors are assessed together at the start of a contract based on the estimated amount of waste your business generates. This approach allows them to charge fees proportional to what they will incur in landfill tax payments to the operator.

See our commercial waste collection costs article for in-depth information.

How can a business pay less landfill tax?

To indirectly pay less in landfill tax, a business can reduce the size of its waste bin and the frequency of waste collection. Following the waste hierarchy, here are some practical ways to achieve this:

Waste prevention and avoidance

Your first priority as a business is to prevent waste generation. Examples include avoiding products with excessive packaging, banning single-use plastics, reusing cardboard boxes, and repairing your electronics instead of discarding them.

Find out more ways by reading our commercial waste prevention explainer.

Waste minimisation and reduction.

Your second priority is to minimise unavoidable waste. A significant step towards this goal is arranging for the separate collection of commercial food waste, which often makes up a significant portion of waste due to its prevalence and weight.

Otherwise, any commercial recycling will significantly help. This includes:

• Commercial glass recycling
• Commercial cardboard recycling
• Commercial electronic waste recycling
• Dry-mixed recycling
• Disposable coffee cup recycling

Read our detailed commercial waste minimisation and reduction explainer to learn more.

Where does the landfill tax money go?

A large portion of the landfill tax revenues goes into funding the government’s general public spending, and a smaller portion goes to fund environmental and community programs related to landfilling issues as per below:

Public spending: A significant portion of the landfill tax revenue goes into the general government revenue pool, which funds public services, infrastructure projects, healthcare, education, and other government initiatives.

Landfill Communities Fund (LCF): This tax credit scheme enables landfill site operators to contribute money to organizations that carry out projects that benefit the communities and environments around landfill sites. The scheme is designed to offset some of the negative impacts of landfill operations by supporting various environmental and community projects and is funded from the revenue generated from the landfill tax.

The exact distribution and use of the revenues can vary and are ultimately a government decision.

Landfill Tax – FAQs

Our business waste experts answer commonly asked questions on the landfill tax for UK businesses.

Is landfill tax direct or indirect?

It’s both. The landfill tax is paid directly by landfill site operators and indirectly by residents and business owners, so the answer depends on who you ask.

Landfill operators will cover the tax costs by charging higher waste disposal fees to councils and waste collection companies, who in turn charge higher council tax rates or waste collection fees to organisations, businesses and homes.

Who is exempt from landfill tax?

Only waste disposed of in landfills must pay the tax, so any waste taken elsewhere or re-used within a landfill is exempt. Here are some examples:

1. Waste from mining and quarrying: This waste does not need to pay landfill tax when disposed of at the site of extraction. The exemption is aimed at reducing the regulatory burden on these industries.
2. Inert waste used for landfill restoration: Inert waste, such as soil and stones, can be exempt when used for restoration or engineering purposes in the landfill site.

Is the landfill tax successful?

The continuity of the landfill tax for nearly 30 years shows that the measure is primarily seen as a success. It has achieved its primary goals of reducing landfill waste, encouraging recycling, and influencing more sustainable waste management practices.

However, criticisms include a reported increase in illegal dumping and fly-tipping due to the increased waste disposal costs, and an increase in administrative overheads and compliance costs for businesses and waste management operators.

When was the landfill tax introduced?

The landfill tax was introduced on October 1, 1996. It became the first environmental tax in the UK aimed at encouraging more sustainable waste management practices and reducing the amount of waste sent to landfills. See here for the reasons it was introduced.

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