Landfill tax applies to all waste disposed at a licensed landfill site, unless the waste is specifically exempt. It was introduced on 1 October 1996.

The tax is charged by weight and there are two rates:

  • A lower rate for ‘inactive waste’ – such as rocks or soil, currently £2.80 per tonne.
  • A standard rate for all other waste, currently £88.95 per tonne.

Rates are updated by the Government annually and come into effect on 1 April each year. Landfill tax was devolved to the Scottish Government in April 2015, where it was replaced with ‘Scottish landfill tax’. Landfill tax was also devolved to the Welsh Government in April 2018, where it has been replaced with the ‘landfill disposals tax’. The Scottish and Welsh Governments have both announced rates that match those set by the UK Government.

As these taxes are all similar in design and the ONS combines them when recording them in the National Accounts, we have combined them in our latest forecast and on this page. For more information on devolved landfill taxes, please see our Devolved tax and spending forecasts publication.

In our latest forecast, we expect landfill tax to raise £0.8 billion in 2018-19. We expect 83.2 per cent of this total to come from UK Government landfill tax, with the remaining 13.5 and 3.3 per cent coming from the Scottish landfill tax and Welsh landfill disposals tax respectively. Together, the £0.8 billion total would represent 0.1 per cent of all receipts, and is equivalent to around £30 per household and 0.04 per cent of national income.

  • Latest forecast

    Our latest fiscal forecast was published in March 2018. Landfill tax receipts are set to fall by a third in cash terms between 2017-18 and 2022-23, thereby roughly halving as a share of GDP (from 0.04 to 0.02 per cent). This reflects a continuation of the trends for businesses and local authorities to reduce the amount of waste sent to landfill. RPI-linked duty rate rises only partially offset this downward trend in the tax base.

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  • Latest monthly data

    Landfill tax receipts tend to follow a downward trend across the tax year, reflecting the falling profile of tax receipts. The lumpy receipts profile in 2016-17 was predominantly due to HMRC adopting a new accounting system for monitoring and collecting receipts. This makes comparisons between years before and after this change difficult.

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  • Forecast methodology

    Forecast process

    The OBR commissions forecasts of UK Government landfill tax receipts from HM Revenue and Customs (HMRC) and the Department for Environment, Food and Rural Affairs (DEFRA) for each fiscal event. The forecasts start by generating an in-year estimate for receipts in the current year, then uses a model to forecast growth in receipts from that starting point. We provide HMRC and DEFRA with economic forecasts that are used to generate the tax forecasts. These are scrutinised in a challenge process that typically involves two rounds of meetings where HMRC and DEFRA analysts present forecasts to the Budget Responsibility Committee (BRC) and OBR staff. This process allows the BRC to refine the assumptions and judgements that underpin the forecasts before they are published in our Economic and fiscal outlooks.

    The OBR produces the Scottish landfill tax forecast in-house using a model developed by the Scottish Fiscal Commission. It uses a similar approach to that of the UK Government forecast. The Welsh landfill disposals tax forecast is currently estimated as a constant share of the UK Government forecast, but we will develop this model once outturn becomes available. Our devolved landfill forecasts are subject to a separate devolution specific challenge meeting which also includes the relevant officials for the devolved administrations.

    Forecasting models

    Landfill tax receipts are estimated by multiplying the total forecast taxable tonnage of waste sent to landfill by the corresponding duty rate.

    Standard and lower rate tonnages are modelled separately:

    • Standard rate tonnages are the main driver of the forecast. They are grown in line with adult population projections, with adjustments made for any waste forecast to be recycled, incinerated or exported instead of being sent to landfill.
    • Lower rate tonnages make up a small part of the forecast and are relatively stable. They are assumed to remain flat from the latest outturn tonnage for the duration of the forecast.

    Adjustments are made to the receipts forecast to account for any payments made into the Landfill Communities Fund (LCF) – a tax credit scheme that offsets some of the negative impacts of living near a landfill site for affected communities.

    Main forecast determinants

    The main economic determinants driving our forecasts are those related to:

    Main forecast judgements

    The most important judgments in our landfill tax forecasts are:

    • In-year estimates – Our estimates for landfill tax receipts in the current year are determined by year-to-date performance of receipts collected by HMRC and Revenue Scotland, and by indications from HMRC’s internal receipts monitoring. The in-year estimates determine the base year from which we use our models to forecast receipts growth.
    • The underlying trend in tonnages of landfilled waste – trends in the tonnages of waste sent to landfill have several different drivers; for instance, the extent to which waste is recycled, exported or incinerated will affect the residual tonnage of waste sent to landfill. The extent to which these trends will continue is a source of uncertainty for our forecast.

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  • Previous forecasts

    Landfill tax receipts have fallen short of many of our previous forecasts. This reflects several different issues, such as new waste incineration plants being opened earlier than expected, and lower-than-expected RPI inflation in some years, which is used to uprate duty rates each year.

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  • Policy measures

    Since our first forecast in June 2010, the Coalition and Conservative Governments have announced 8 policy measures affecting our forecast for UK landfill tax. The original costings for these measures are contained in our policy measures database and were described briefly in the Treasury’s relevant Policy costings document. For measures announced since December 2014, the uncertainty ranking that we assigned to each is set out in a separate database. For those deemed ‘high’ or ‘very high’ uncertainty, the rationale for that ranking was set out in Annex A of the relevant Economic and fiscal outlook.

    These UK Government policy costings include:

    • in Autumn Statement 2015, the value of the LCF was capped at £39.3 million for 2016-17;
    • in Budget 2016, additional funding was allocated to HMRC to increase compliance activity across the waste supply chain; and
    • in Autumn Budget 2017, additional funding was allocated to the Environment Agency and HMRC to help them tackle waste crime and reduce the harm caused to legitimate landfill operators. From April 2018, operators of illegal landfill waste sites will also become liable for landfill tax.

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  • Ready reckoners

    ‘Ready reckoners’ show how our fiscal forecasts could be affected by changes in selected economic determinants. They are stylised quantifications that reflect the typical impact of changes in economic variables on receipts and spending. These estimates are specific to our March 2018 forecast and we would expect them to become outdated over time, as the economy and public finances, and the policy setting, continue to evolve. They are subject to uncertainty because they are based on models that draw on historical relationships or simulations of policy settings. More information can be found in the ‘Tax and spending ready reckoners’ spreadsheet we published alongside our 2017 Fiscal risks report.

    The table below shows that:

    • higher population growth would increase landfill tax receipts by £10 million, as more waste would be sent to landfill; and
    • higher RPI inflation would also increase landfill tax receipts by £5 million, as duty rates would increase each year by a larger amount.

    Landfill tax ready reckoner (rUK)

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