The Treasury is reviewing plans to overhaul landfill tax after furious warnings from housebuilders, manufacturers and construction firms that the reforms would drive their annual bills up by tens of millions of pounds.
Officials blindsided industry leaders in April when they quietly announced proposals to abolish the lower landfill levy and strip back exemptions. While the measures were billed as a clampdown on tax avoidance, bosses only grasped the true financial impact in July — branding it a stealth corporate tax raid.
Under the current regime, landfill tax is charged at £126.15 per tonne, with a reduced rate of £4.05 per tonne for inert or less polluting materials such as soil, rocks and clay. Certain industries are eligible for exemptions and reliefs. The Treasury’s reforms envisage scrapping the reduced rate altogether, while significantly narrowing exemptions.
Bosses warn of soaring costs
Housebuilders and construction firms have sounded the alarm, warning that landfill tax bills of around £4 million could balloon to more than £100 million under the new rules. One of the most contentious proposals is the removal of relief for topsoil, a material routinely generated during large housing developments.
“This came as a huge shock,” one executive said. “If the reforms are implemented as drafted, it will push costs beyond what is viable for many projects.”
The changes have been justified by officials on the basis that landfill tax is subject to one of the highest levels of non-compliance across the tax system, with widespread avoidance schemes exploiting the reduced rate.
Last week more than 60 industry leaders joined a call with Treasury officials to press their case. Participants said civil servants appeared taken aback by the scale of the potential impact.
“They are still trying to get a grip on the implications,” said one source close to the talks. “They recognise the strength of feeling — it feels like they’ve uncorked something bigger than they expected.”
Executives now believe that ministers may delay the reforms by at least six months and possibly up to a year, to allow for fresh consultation. Officials have invited businesses to submit evidence of the economic impact of the proposals by September 19.
Policy clash with housing goals
The landfill tax controversy has also collided with the government’s ambition to accelerate housebuilding. Steve Reed, the new housing secretary, met with property executives last week in a separate session and reassured them that the sector’s concerns were being heard.
“Rayner [Angela Rayner, Reed’s predecessor] was not interested in housing policy,” said one developer. “Reed seems far more engaged, which gives us some hope these changes won’t derail the government’s ‘build, baby, build’ agenda.”
For now, senior Treasury figures are refusing to confirm a U-turn. A spokesman said: “The proposed landfill tax changes aim to strengthen sustainable alternatives to landfill, and the recent consultation sought views on the impact of the proposed changes on businesses and on reasonable implementation timelines.
No decisions have been made on changes to landfill tax and we remain committed to working with businesses to understand the impact of the proposals.”
But with warnings of housing projects being shelved and major manufacturers reassessing investment plans, pressure is mounting on Chancellor Rachel Reeves to soften or delay the reforms.
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Treasury wavers over landfill tax reforms as industry warns of £100m bills