Chancellor to cover Landfill Tax on illegal waste site clearances

The Treasury will fund the Landfill Tax liabilities that Defra incurs when it clears six illegal waste sites, Chancellor John Healey announced in his first Budget — a measure that removes a tax bill that until now would have landed on the department every time it moved illegally dumped material to landfill.

The decision follows Defra's commitment, made earlier this year, to fund the clearance of some of the country's most egregious illegal waste sites. Those sites include Bolton House Road in Wigan, where clearance work has already begun, alongside locations in West Yorkshire, Surrey and Kent.

Under the existing framework, public bodies that clear illegal dumps and send the material to landfill must pay Landfill Tax at the standard rate, the same liability a commercial operator would face. The Chancellor's announcement exempts Defra from that cost for the six planned clearances. No aggregate tonnage or value for the tax relief was disclosed in the Budget documents.

What does this change for councils?

A larger commitment sits behind the Defra measure. Healey committed to a three-year pilot scheme, starting in 2027, that will fund local authorities' Landfill Tax liabilities arising from the clearance of illegal waste sites in their own areas.

For councils, the question is practical: at present, a local authority that removes fly-tipped or illegally stockpiled waste pays the tax on disposal, a cost that can run to tens of pounds per tonne at the standard rate and that competes directly with statutory services. The pilot, if extended beyond its three-year term, would shift that burden to the Treasury.

The Budget confirmed an increase to the standard rate of Landfill Tax by RPI. The lower rate will rise by the cash amount of the standard-rate increase in England and Northern Ireland, a mechanism designed to prevent the gap between the two rates from widening.

Mike Maudsley, CEO of energy-from-waste operator enfinium, welcomed the adjustment. He said it "reinforces the importance of avoiding waste and using unrecyclable material as a resource".

"Maintaining a clear incentive to divert waste towards more sustainable solutions will help support the UK's energy security while making better use of the resources we have," Maudsley said.

Landfill Communities Fund cap rises

The Chancellor also restructured the Landfill Communities Fund (LCF), the scheme under which landfill operators receive tax credits for donating money to approved environmental bodies. The cap on tax credit claimable by landfill operators will rise from 5.3% to 8.3% of their Landfill Tax liability.

The change effectively increases the pool of money operators can redirect to environmental bodies at reduced cost to themselves. It arrives alongside the RPI-linked rise in the tax itself, which raises the absolute value of the credit ceiling even before the percentage increase is counted.

Plastic Packaging Tax certification from 2030

Further changes touch the Plastic Packaging Tax (PPT). Following consultation, the Chancellor confirmed that from April 2030, mechanically recycled plastic used in plastic packaging will require mandatory certification as part of the PPT regime.

The measure tightens the evidence base for the tax, which charges manufacturers and importers whose packaging contains less than the statutory minimum of recycled content. Mandatory certification for the mechanical stream follows HMRC's earlier work on mass balance requirements for chemically recycled plastic.

What to watch next

The milestones that decide the trajectory are fixed: the Defra-funded clearances of the six named sites proceed under the new tax exemption now; the three-year council pilot opens in 2027; and mandatory certification of mechanically recycled plastic under the PPT takes effect in April 2030. Each carries a deadline the industry can track against delivery.