UK Plastic Packaging Tax: Chemical Recycling Set to Gain Ground

From April 2027, chemically recycled plastic will be able to count towards the UK's 30% recycled-content requirement under the Plastic Packaging Tax (PPT). HMRC published its preparation guidance on 28 August, setting out how companies will need to use mass balance if they want chemically recycled material to qualify.

The change is relevant for the whole plastics value chain, but particularly for PE and PP producers. Chemical recycling can turn plastic waste into feedstock that can be used in conventional petrochemical processes, making it possible to produce polymers with properties close to virgin material.

The challenge is that once recycled and virgin feedstocks are mixed, it is not possible to physically identify the recycled molecules in the final polymer. This is where mass balance comes in. Companies will be able to allocate a defined amount of recycled content to products based on the amount of qualifying recycled feedstock entering the production system.

However, this will not simply be an accounting exercise. HMRC is putting significant emphasis on traceability and certification. Companies across the relevant supply chain will need to be certified, while recycled content will have to be supported by attribution declarations and detailed records. Businesses will also need to account for processing losses and maintain the relevant documentation for six years.

This could become an important consideration for petrochemical producers looking to expand their recycled polymer offering. A producer may have access to pyrolysis oil or another chemically recycled feedstock, but that alone will not be enough for the material to generate a PPT benefit. The recycled feedstock needs to be properly certified and traceable through the subsequent processing stages.

There is another change coming at the same time. From 1 April 2027, pre-consumer plastic waste will no longer qualify as recycled content for PPT. Post-consumer recycled material will continue to qualify.

Taken together, the two changes could support demand for chemically recycled plastics while increasing the importance of post-consumer waste as a feedstock. This is particularly relevant for PE and PP, where mechanically recycling certain waste streams can be difficult because of contamination, mixed materials or the quality requirements of the final application.

The commercial impact will depend on how quickly the market develops. The key questions are likely to be the availability and cost of suitable waste feedstock, the amount of chemical-recycling capacity that comes online, the cost of certification and mass-balance systems, and ultimately the price premium for certified recycled PE and PP.

For packaging producers, the calculation will be relatively straightforward: is buying certified recycled content more attractive than paying the PPT? For polymer producers, however, the implications are broader. The new rules could provide another incentive to secure access to chemical-recycling feedstock and develop mass-balance polymer portfolios.

HMRC is expected to publish further guidance in early 2027. Until then, companies across the value chain have a window to assess their suppliers, certification arrangements and internal tracking systems.

The UK is effectively creating a clearer link between plastic waste and conventional petrochemical production. Whether this translates into significant additional demand for recycled PE and PP will ultimately depend on the economics and on whether chemical recycling can scale fast enough to provide reliable volumes of certified material.

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