Policy paper

Plastic Packaging Tax: mass balance approach and removal of pre-consumer plastic

Published 26 November 2025

Who is likely to be affected 

UK manufacturers of plastic packaging, importers of plastic packaging, business customers of manufacturers and importers of plastic packaging, recyclers and reprocessors of plastic waste, petrochemical companies involved in chemical recycling processes, and consumers who buy goods in plastic packaging or single use packaging products for their own use, in the UK. 

General description of the measure 

This measure introduces a mass balance approach (MBA) to account for chemically recycled plastic used to make plastic packaging for the purposes of the Plastic Packaging Tax (PPT) from 1 April 2027. It also removes pre-consumer waste as a source of recycled content for the purposes of PPT from the same date.   

Policy Objective 

The introduction of an MBA to account for chemically recycled plastic will help to create the right fiscal conditions for investment in the emerging chemical recycling sector and support innovation in the UK plastics sector. It is intended to increase demand for chemically recycled plastic by enabling businesses to claim an exemption from PPT when their plastic packaging contains 30% or more recycled plastic. This will support the circular economy by incentivising the increased use of recycled plastics, particularly in sectors where mechanically recycled plastic is not viable due to regulatory or quality constraints.  

Chemically recycled plastic is already a recognised source of recycled plastic for PPT purposes, but in practice businesses have been unable to benefit from using it due to the difficulty in tracking recycled inputs to outputs.  An MBA will provide a transparent and robust method for allocating recycled feedstock to specific outputs, which is necessary when recycled and virgin materials are physically mixed during production. 

In addition, the removal of pre-consumer waste from the definition of recycled plastic for PPT purposes will address a tax loophole which undermines the environmental objectives of the tax. It will also level the playing field for businesses where interpretations of pre-consumer waste can vary significantly, and many businesses regard the use of pre-consumer waste as good practice rather than recycling.  

Background to the measure 

PPT was introduced in April 2022, with the aim of encouraging the use of recycled plastic in plastic packaging and to provide a clear economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, stimulating increased levels of recycling and collection of plastic waste. PPT is due on plastic packaging components manufactured and imported into the UK that contain less than 30% recycled plastic. 

Since the tax was introduced there have been advancements in chemical recycling technology, which enable hard to recycle plastics to be recycled. On 18 July 2023, a 12-week consultation was held seeking views on introducing an MBA for calculating the recycled content in packaging made from chemically recycled plastic waste, for the purposes of the PPT. Mass balance is a chain of custody model used successfully in other sectors such as wood and cocoa to track sustainable materials through complex supply chains.  

The consultation closed on 10 October 2023, and explored the case for allowing an MBA, the different mass balance models, and the use of certification schemes to track recycled content through the plastics value chain. It also considered the treatment of pre-consumer waste as recycled material for the purpose of the tax. 

Detailed proposal 

Operative date 

The measures will take effect from 1 April 2027. 

Current law  

Current law is in sections 42 to 85, Part 2 Finance Act 2021 and schedules 9 to 15 Finance Act 2021.  

The Plastic Packaging Tax (Descriptions of Products) Regulations 2021 and the Plastic Packaging Tax (General) Regulations 2022 have been made under the relevant powers in the Finance Act 2021. 

Proposed revisions 

Changes will be made to the primary legislation in the Finance Act 2021 (FA21) and secondary legislation to allow an MBA for calculating the recycled content in packaging made from chemically recycled plastic waste, for the purposes of PPT.  

The definition of recycled plastic in section 49 of FA21 will be amended to include chemically recycled plastic assured under a certification scheme which meets minimum requirements that will be set out in legislation.  

To claim relief from PPT, UK manufacturers and importers of plastic packaging that incorporates chemically recycled plastic will be required to demonstrate that the supply chain for the recycled material from waste to the finished plastic packaging component is covered by a commercial certification scheme that is compliant with the PPT MBA standards.  

These standards may include: 

• material and allocation process requirements, including the types of waste materials permitted, and how chemically recycled content is calculated and allocated 

• requirements for certification schemes and the accreditation of certification bodies 

• compliance and enforcement procedures 

• record keeping and audit requirements 

Section 49 of FA21 will also be amended to remove references to pre-consumer waste. 

Summary of impacts 

Exchequer impact (£ million) 

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
Negligible	Negligible	Negligible	Negligible	Negligible	Negligible

 This measure is expected to have a negligible impact on the Exchequer.

Macroeconomic impact 

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families 

There is no direct impact on individuals as this measure only affects businesses, but consumers may see changes in the make-up of packaging. Over time, the increased availability of chemically recycled plastic may lead to greater use of recycled plastic in packaging across consumer goods. This may influence the cost of goods as more recycled plastic becomes available. 

Equalities impacts 

This measure only directly affects businesses. Therefore, it is not anticipated that there will be disproportionate impacts on those in groups sharing protected characteristics. 

Administrative impact on business including civil society organisations 

This measure will have a negligible impact on some businesses by enabling them to reduce their liability for PPT through the use of an MBA for chemically recycled plastic. No business will be obliged to make use of the new provisions, but they will have to be followed to claim exemption from PPT as a result of using chemically recycled plastic accounted for with an MBA. 

Businesses wanting to use an MBA will need to become certified and provide evidence of the recycled content of plastic packaging. One-off costs could include familiarisation with the new requirements, updating internal systems, and obtaining and maintaining certification. Ongoing costs may include maintaining certification and continuing to provide evidence of recycled content in packaging.  

Businesses using pre-consumer waste as a source of recycled plastic will be able to continue to use this material but it will no longer contribute to the 30% recycled content required for an exemption from PPT. 

The acceptance of an MBA will provide an economic incentive to invest in this method of recycling. The removal of pre-consumer waste will also provide an incentive to recycle more post-consumer waste. 

This measure is not expected to disproportionately impact civil society organisations.  

This measure is expected to impact businesses’ experience of dealing with HMRC, since demonstrating compliance will be simpler. 

Operational impact (£ miilion) (HMRC or other) 

It is not anticipated that HMRC will incur any costs from implementing these changes. Businesses using an MBA for chemically recycled plastic must obtain certification from an independent scheme that meets legislative standards. HMRC will not manage certification directly. Instead, businesses must retain valid third-party certification and supporting evidence for compliance purposes.  

Other impacts 

Justice Impact Test: The changes made by this measure do not change the Justice Impact Test previously completed and published in the Introduction of Plastic Packaging Tax from April 2022.  

Environmental impact assessment:  The Plastic Waste Hierarchy report, produced by Waste and Resources Action Programme (WRAP) and endorsed by the Department for Environment, Food and Rural Affairs (Defra), acknowledges that chemical recycling is preferable to sending waste to landfill or energy from waste. The acceptance of an MBA for chemically recycled plastic will incentivise the use of these emerging technologies to recycle material which is otherwise hard to recycle and to provide high quality recycled material for a range of uses where mechanically recycled plastic is unsuitable. Without the acceptance of an MBA, there is less of an incentive to use chemically recycling as the sustainable inputs cannot be matched to specific outputs to reach the 30% recycled threshold for exemption from PPT. This measure is therefore expected to incentivise positive environmental outcomes. By removing pre-consumer waste as a source of recycled plastic, the intention is to create incentives for greater use of recycled material derived from post-consumer waste, which can be typically more challenging and costly to recycle. 

Other impacts have been considered and none have been identified. 

Monitoring and evaluation 

Consideration will be given to evaluating the MBA aspects of PPT as part of existing evaluation plans. 

Further advice 

If you have any questions about this change, contact the Plastic Packaging Tax Design Team by email: indirecttaxdesign.team@hmrc.gov.uk.