BCIS welcomes government decision on landfill tax reform

Government shelves landfill tax convergence plans after industry pushback 

The government has confirmed it will not proceed ‘at this time’ with plans to converge the lower and standard rates of Landfill Tax in England, following strong objections from construction and wider industry stakeholders. The proposals, consulted on earlier this year, would have removed the lower rate for inert waste and triggered a sharp rise in disposal costs for many construction projects. Instead, from April 2026 the higher rate will increase by 3.6%, from £126.15 per tonne to £130.75 per tonne, in line with RPI, and the lower rate will more than double from £4.05 per tonne to £8.65 per tonne⁽¹⁾.

Announcing its decision in the Autumn Budget⁽²⁾, the Treasury said it had listened to stakeholders’ arguments and revised its approach to ensure any future reforms are proportionate, avoid unavoidable cost pressures for businesses, and do not undermine the government’s target of delivering 1.5 million new homes in England. Instead of merging the rates, the government said it will now prevent the gap between them from widening further in the coming years. The tax exemption for backfilling quarries will also be retained to ensure housebuilders and contractors continue to have access to a low-cost alternative to landfill.

Dr David Crosthwaite, chief economist at BCIS, said: ‘The aims of the consultation drew broad support across the sector. Tackling waste crime, improving the integrity of disposal routes and ensuring landfill tax operates as intended remain important goals. Industry bodies have consistently stressed that these issues still need a long-term solution; one that strengthens environmental protections while avoiding disproportionate cost burdens on legitimate construction activity.

‘However, narrowing the gap between the two landfill tax rates would have introduced a substantial uplift in disposal costs, particularly for projects generating large volumes of inert waste. With construction already managing sustained cost pressures, the impact on viability would have been hard to ignore. The decision not to proceed is a welcome step in terms of cost stability.’

Initial reactions to the government’s decision have been largely positive. UK Steel welcomed the move as a Budget policy win, saying that the previously proposed changes would have increased costs for steelmakers and added to the regulatory burden.

As the government considers next steps, attention will now shift back to how best to achieve the original policy objectives. The government has pointed to moves in Scotland and Wales, where landfill tax is a devolved issue. It said it believes that the current lower rate in England is too low and does not provide a sufficient price signal to support investment in alternative waste management options.

In its consultation response, the government said: ‘Tonnages of lower rated material have not fallen as significantly as standard rated material… The government notes that the Welsh Government increased the lower rate of its Landfill Disposal Tax above inflation this year to support the primary purpose of the tax – reducing and diverting waste away from landfill. And a conclusion from a review of the lower rate of the Scottish Landfill Tax suggested raising the lower rate to incentivise application of the waste hierarchy.’

Dr Crosthwaite added: ‘The underlying challenge remains unchanged: how to incentivise better waste management without placing disproportionate burdens on legitimate construction activity. The consultation response makes clear that ministers still believe the lower rate is not providing a strong enough price signal to support investment in alternative waste treatment. With devolved administrations already moving ahead with above-inflation increases, further reform in England feels inevitable.

‘As options are revisited, the sector will be looking for full transparency and sufficient lead-in time so businesses can plan for any future cost increases in a measured and manageable way.’

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^{(1) GOV.UK – Landfill Tax: increase in rates from 1 April 2026  - here}

^{(2) GOV.UK – Budget 2025 – here}