The government has announced changes to Landfill Tax in Budget 2026, including inflation-linked increases to tax rates, additional support for clearing illegal waste sites and a higher cap on tax credits for contributions to the Landfill Communities Fund.
The measures are intended to maintain the financial incentive to divert waste from landfill while helping fund the removal of illegally dumped waste.
Landfill Tax rates to rise with inflation
The standard rate of Landfill Tax in England will increase in line with the Retail Prices Index (RPI), while the lower rate will rise by the same cash amount as the increase in the standard rate.
RPI is a measure of inflation that tracks changes in the cost of a basket of goods and services. Linking the standard rate to RPI means the tax will rise with inflation rather than remaining fixed in cash terms.
The lower rate applies to qualifying inert or inactive waste, while the standard rate applies to most other taxable waste disposed of at landfill.
The current rates, which took effect on 1 April 2026, are £130.75 per tonne for standard-rated waste and £8.65 per tonne for lower-rated waste.
The standard rate rose from £126.15 per tonne in April 2025, while the lower rate increased from £4.05 per tonne. The lower rate therefore more than doubled in 2026, reflecting the government’s policy of increasing it by the cash value of the standard-rate increase, rather than applying inflation to the lower rate itself.
The latest Budget confirms that the same approach will continue. The new rates are intended to take effect from April 2027. The precise cash rates for that date should not be confused with today’s rates, as the final increase depends on the relevant RPI calculation and the rounding rules.
Government to fund Landfill Tax for illegal waste clearances
The Budget also sets out two measures intended to address the cost of clearing illegal waste sites.
The first will provide funding for Defra to meet Landfill Tax liabilities arising from the planned clearance of six illegal waste sites between 2026–27 and 2028–29.
This does not mean Defra owns the sites. The funding relates to the tax liability associated with disposing of waste removed during the clearances. Ownership of the land and legal responsibility for the waste are separate issues.
The second measure is a three-year pilot scheme, starting in 2027, to fund local authorities’ Landfill Tax liabilities when they clear illegal waste sites in their areas.
The pilot is intended to ease the financial burden on councils dealing with illegal dumping. However, the Budget wording refers specifically to Landfill Tax liabilities, rather than promising to cover the full cost of removing and treating the waste.
The government has not set out in the Budget extract the full eligibility criteria for the local authority scheme, or confirmed that every council clearance will qualify.
Landfill Communities Fund cap to increase
The government will also increase the Landfill Communities Fund tax-credit cap from 5.3% to 8.3% of a landfill operator’s Landfill Tax liability, from 1 April 2027.
The fund supports community and environmental projects in areas affected by landfill. The higher cap is intended to help sustain the fund and provide additional support for local communities.
Taken together, the measures combine continued inflation-linked tax increases with targeted funding for illegal waste clearances and a larger potential contribution to community projects.
What this means
The latest measures reinforce the government’s long-standing approach of using Landfill Tax to discourage disposal and encourage waste recovery. However, the practical impact will depend on how the increases feed through to waste management costs and whether they lead to further changes in the economics of treatment and disposal.
For landfill operators, the annual increase in the standard rate continues to raise the cost of disposing of taxable waste, maintaining pressure on the sector to divert suitable materials towards recycling and recovery. The decision to increase the lower rate by the same cash amount is also significant. It means the tax on qualifying inert waste will rise substantially in percentage terms, potentially affecting construction and demolition waste markets in particular.
The illegal waste site measures address a different problem. Clearing illegally dumped waste can be expensive, particularly when material must be sent to landfill and attracts a tax liability. Funding these liabilities could help remove a financial obstacle to clearances, although it remains to be seen how much of the overall cost will be covered and how the local authority pilot will operate in practice.
The increase in the Landfill Communities Fund cap could also provide additional scope for funding environmental and community projects. Its eventual impact will depend on how landfill operators and environmental bodies respond to the change.
Overall, the Budget maintains the financial pressure on landfill while offering targeted support for the consequences of illegal dumping. The key questions for the industry will be the scale of the final tax increases, the effect on disposal prices and whether the new funding arrangements translate into more illegal waste sites being cleared.