The landfill tax and local authorities

The landfill tax is an environmental tax designed to encourage waste reduction and is charged on waste disposed of at authorised landfill sites, as well as waste disposed of illegally or without a valid permit.

There are two rates: a lower rate for qualifying inert materials, and a standard rate for other waste. Exemptions and reliefs apply in limited circumstances.

In April 2025 the government launched a consultation on reform of landfill tax, which aimed to streamline the tax system to minimise errors and non-compliance, and increase efforts in tackling waste-related crime.

The proposed reforms

The government consultation proposed significant reforms to the landfill tax regime in England. These changes are touted to discourage landfill use and promote sustainable waste management.

Key proposals:

• Apply an escalator to the lower rate of landfill tax until it reaches standard rate by 2030.
• Remove the qualifying fines regime from April 2027.
• Remove the quarries exemption from April 2027.
• Restrict the exemption for dredgings to just dredged material from April 2027.
• Remove water discounts from April 2027.
• Increase the rate for illegal disposals to 200% of the standard rate and amend penalties and interest.

How might this impact councils?

The consultation notes reveal there has been a huge reduction in the amount of waste sent to landfill by 90% since 2000. However, the use of landfill very much remains part of the waste disposal landscape. The waste disposal infrastructure across England, such as energy from waste plants, is uneven across England and some councils have no alternative but to use landfill.

The proposals will have significant cost implications for councils. Waste disposal contracts can run for several years and often include minimum tonnage requirements.

Landfill may also be required on a short-term basis, as we have seen after major flood events and may also be used to provide capacity in planned maintenance for energy from waste facilities.

The proposed reforms to landfill tax come at a time where councils are facing other major financial pressures in relation to waste management, including:

• The extension of the UK Emissions Trading System to the energy from waste sector – the Local Government Association estimates that this will cost councils as much as £747 million in 2028, rising to £1.1 billion in 2036, with a total cost over this period as high as £6.5 billion.

• The introduction of the Deposit Return Scheme in 2027 – this could result in a net cost to councils of almost £70 million a year.

A further consideration for councils is the risk of increased fly-tipping by removing the lower rate of landfill tax, including the kind of inert materials found in builders rubble and other fly-tipped construction waste. The Local Government Association has commented that higher landfill tax is likely to make fly-tipping more attractive or encourage businesses to pass their waste into the household waste stream at Household Waste Recycling Centres, transferring the cost to council taxpayers.

Steps to prepare

Now is a good time to fully assess the potential financial impact of the proposed reforms to landfill tax. That should include a legal assessment of the extent to which the proposed reforms may trigger change in law provisions in waste contracts. That may result a significant increase in costs and require negotiating amendments to existing contracts and sourcing alternative suppliers and alternative waste management options. 

Taking proactive steps now can help manage risk and identify savings ahead of legislative changes.

For further help understanding the proposed changes or the impact on councils, please contact Paul Collins, senior associate in Ashfords' business risk and regulation team. For more information, visit Ashfords' public sector and government page.