Landfill Tax is part of the UK’s environmental policy to reduce landfill waste and encourage recycling. However, rising rates are now affecting construction costs and housing affordability.
With another increase coming in April 2026 developers, contractors and policymakers need to consider these impacts.
Changes coming to Landfill Tax
From 1 April 2026, the UK Government will increase Landfill Tax rates as follows:
- Standard Rate: £130.75 per tonne (up from £126.15)
- Lower Rate: £8.65 per tonne (up from £4.05)
These changes are part of a broader policy to maintain the tax’s real value and strengthen incentives to divert waste from landfill toward recycling and recovery.
The impact of the construction sector
Construction projects generate significant volumes of inert waste, e.g. soil, rubble, and aggregates, which are often disposed of at the lower rate.
Doubling this rate means:
- Higher disposal costs for excavation and demolition projects.
- Budgetary pressure on housing developments and infrastructure builds.
- Tender pricing adjustments, as contractors factor in rising waste costs.
While the Government’s goal is environmental, pushing industry toward sustainable practices, the immediate effect is financial. For projects operating on tight margins, these increases can be substantial.
The knock-on effect on housing affordability
Landfill Tax affects contractors and extends across the entire supply chain:
- Developers may face higher build costs, which can translate into increased house prices.
- Local authorities delivering affordable housing could see budget constraints, limiting project scope.
- Infrastructure projects may experience delays or redesigns to manage waste more efficiently.
Together, these pressures risk pushing up housing costs and slowing the delivery of new homes.
What is the Government’s position on Landfill Tax?
The UK Government acknowledges these challenges. In its consultation response, it emphasised the need for circular economy solutions, reuse, recycling, and repurposing of construction materials to mitigate cost pressures.
The Government abandoned the plan to transition to a single rate of tax by 2030 and is also retaining the exemption for quarries with disposal permits.
However, until recycling infrastructure and alternative disposal routes are fully scaled and supported in practice, the construction sector remains exposed to rising costs.
The Environment Agency policy’s impact on costs
While landfill tax aims to encourage reuse, the Environment Agency’s interpretation of excavated materials as waste often works against this goal. Under current guidance:
- Excavated soil and rubble are classified as waste unless strict criteria for reuse are met.
- Proving “non-waste” status requires testing, documentation, and regulatory approval, adding time and cost.
- As a result, even clean, uncontaminated material frequently ends up in landfill, triggering tax liability.
This policy creates a disconnect between fiscal incentives and regulatory practice.
Instead of promoting circularity, it forces contractors into compliance-heavy processes that make landfill the default option.
With the lower rate doubling in April 2026, this interpretation amplifies cost pressures across construction and housing.
How CL:AIRE Schemes can help
The CL:AIRE Definition of Waste Code of Practice (DoW CoP) offers a practical solution to this challenge:
- Reuse without waste classification: DoW CoP provides a clear route for reusing excavated soils and aggregates without triggering waste status.
- Materials Management Plans (MMPs): Projects can implement MMPs verified by a CL:AIRE Qualified Person, ensuring compliance and environmental safety.
- Cost efficiency: Avoiding landfill tax and permitting processes reduces disposal costs and accelerates project timelines.
- Hub-and-Cluster model: Enables sharing of excavated materials between multiple sites, reducing transport and landfill demand.
- Environmental gains: Case studies show significant savings from landfill diversion, such as avoiding time-consuming activities like applying for a waste Recovery Permit.
By leveraging CL:AIRE schemes, construction firms can bridge the gap between regulatory interpretation and fiscal policy, reducing costs while supporting circular economy principles.
How the construction industry can strategically adjust
To stay ahead, construction firms should:
- Integrate waste minimisation into design and planning stages.
- Invest in recycling partnerships and on-site segregation to reduce landfill reliance.
- Review procurement strategies, ensuring contracts reflect new disposal realities.
Landfill Tax reflects the direction of UK waste policy. The 25-year strategy focuses on cutting biodegradable landfill waste and moving towards a circular economy.
Without scaled recycling infrastructure and regulatory alignment, construction faces a double challenge of rising disposal costs and limited reuse pathways.
For construction and housing, this means sustainability is a financial imperative.
Our specialist team can support you in managing compliance and responding to policy-driven cost changes. Contact John Dyne for further advice.