From 1 April 2027, pre-consumer plastic waste will no longer count towards the UK’s 30% recycled-content threshold, while new mass balance rules will govern how chemically recycled plastic qualifies for tax purposes.
HM Revenue & Customs (HMRC) has published draft regulations setting out how packaging businesses can account for chemically recycled plastic under the UK Plastic Packaging Tax (PPT), ahead of changes taking effect on 1 April 2027.
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The technical consultation, launched on 6 October 2026, covers certification, material attribution, auditing and record keeping under a mass balance approach.
A separate change will remove pre-consumer plastic waste from the definition of qualifying recycled content for tax purposes. Manufacturers and importers can continue using this material, but it will no longer count towards the 30% threshold for avoiding the tax.
Businesses that rely on pre-consumer recyclate to meet the threshold may face additional tax costs unless they adjust their material sourcing.
Pre-consumer plastic loses qualifying status
The PPT applies to qualifying plastic packaging components manufactured in or imported into the UK that contain less than 30% recycled plastic, subject to applicable exemptions and other conditions.
Under the current rules, reprocessed pre-consumer waste can count towards the threshold. This includes plastic recovered from manufacturing waste and processed into raw material for reuse.
The definition excludes production scrap routinely returned to the manufacturing process after minimal treatment, such as shredding or grinding. Such material already falls outside the qualifying definition of recycled plastic.
From 1 April 2027, only qualifying post-consumer recycled plastic will count towards the threshold. This is plastic recovered from products discarded after use by households, businesses and other end users.
HMRC says the change will address a loophole in the tax rules and encourage greater use of post-consumer recycled plastic, which can be more difficult and costly to process.
Packaging containing at least 30% qualifying recycled plastic will remain outside the tax charge, although registration and record-keeping obligations may still apply.
Mass balance rules for chemical recycling
The parallel reform introduces mass balance accounting for chemically recycled plastic. This method allows recycled feedstock to be attributed to packaging outputs when recycled and virgin materials are mixed during production.
Chemical recycling uses processes that change the chemical structure of plastic waste. The resulting material can be used to manufacture new plastics, but tracking recycled inputs through production can be difficult when they are mixed with virgin feedstock.
HMRC says these accounting challenges have limited businesses’ ability to benefit from the existing tax treatment of chemically recycled plastic.
From 1 April 2027, businesses wishing to count chemically recycled plastic towards the PPT threshold using this route must follow the mass balance rules. The approach is optional, but without it, the material will be treated as virgin plastic for tax purposes.
The relevant supply chain must be covered by third-party certification that meets HMRC’s minimum requirements.
UK manufacturers using the approach must be certified. Importers of finished packaging do not need certification themselves, but must verify that the relevant supply chain is certified and retain supporting evidence from suppliers.
Required documentation includes valid certificates and attribution declarations recording the recycled material assigned to each transfer. Businesses must also conduct due diligence checks and retain the required records for six years.
The consultation seeks feedback on the draft regulations and their technical application. HMRC plans to publish more detailed guidance in early 2027.
Preparing for the 2027 changes
Packaging manufacturers and importers should review their material sourcing and tax calculations before the new rules take effect.
The first step is to identify packaging components that rely on pre-consumer recyclate to meet the 30% threshold. Businesses can then recalculate their qualifying recycled content, assess alternative sources of post-consumer plastic and estimate any potential increase in tax liability.
Companies using chemically recycled material should check whether their suppliers can meet the certification requirements and provide the necessary attribution declarations.
Importers should pay particular attention to evidence covering the supply chain, as incomplete documentation could undermine their ability to demonstrate compliance.
The reforms will affect both material sourcing and tax administration. Reviewing packaging specifications, supplier arrangements and supporting records ahead of April 2027 will help businesses assess their exposure and prepare for the revised rules.
