Plans to overhaul the UK’s landfill tax are under review after businesses warned that the proposed reforms could have devastating financial consequences.
The Treasury has reopened its call for evidence, giving stakeholders until 19 September 2025 to outline the potential economic impacts. The move comes on the back of a consultation launched in April 2025, which raised the prospect of scrapping exemptions and doing away with the lower landfill tax rate altogether.
At the heart of the reforms is the government’s proposal to abolish the lower rate of landfill tax and significantly restrict exemptions. The Environment Agency (EA) has argued that loopholes in the current system are being exploited, with some operators allegedly misclassifying waste to qualify for the reduced rate.
A particular concern is poor compliance with Loss on Ignition (LOI) testing—the process used to determine whether waste is inert. The EA has claimed that this has enabled businesses to avoid paying the full tax. Under the suggested changes, all waste would be taxed at the standard rate, removing the long-standing distinction between inert and non-inert materials.
“By optimising resources, recirculating materials back into use, minimising waste and diverting it away from landfill, businesses can not only cut costs but also reduce their carbon footprint.”
The construction sector has sounded the alarm, warning that costs could skyrocket—potentially rising by as much as 3,000%.
David Gudgeon, Head of External Affairs at Reconomy Connect, said: “This latest move by Government to change the lower rate of landfill tax was always going to be difficult for the construction sector to absorb, especially at a time when businesses are facing well-documented cost headwinds and are under pressure to protect margins and the bottom line.”
Waste firm FCC Environment cautioned in August 2025 that the reforms could have unintended and harmful consequences, while industry group UROC has dismissed the EA’s claims of widespread waste fraud as “anecdotal” and unrepresentative. UROC also noted that companies have spent the past decade investing heavily in LOI testing technology, which risks being rendered obsolete.
Introduced in 1996, the landfill tax was designed to curb reliance on landfill and promote recycling and recovery. Initially set at £7 per tonne—with a £2 per tonne rate for inert waste such as soil and stone—the tax escalated steadily from 1999. Today, the standard rate stands at £126.15 per tonne, while the lower rate remains at £4.05 per tonne.
Reflecting on its legacy, Gudgeon said the landfill tax has been “an effective lever for successive governments” in steering the UK towards a circular economy. He added that businesses should respond to the cost challenge by intensifying efforts on resource efficiency.
He said: “By optimising resources, recirculating materials back into use, minimising waste and diverting it away from landfill, businesses can not only cut costs but also reduce their carbon footprint.”