Are you ready for pEPR?

As pEPR enters its most consequential phase, consultant Richard Harrow highlights the importance of preparation for its consequences – and how understanding exposure around new modulated fees is crucial for affected businesses. 

MODULATED FEES
In April last year, I examined the introduction of Extended Producer Responsibility for packaging (pEPR), the most significant reform of the UK sector in in a generation. Introduced in 2025, the legislation fundamentally reshaped the funding model for household waste by transferring the full net cost of collection, recycling and disposal away from local and central government and directly onto producers.

That shift alone was material. However, 2026 marks a far more consequential stage in the regime, with the introduction of modulated fees – designed to financially reward recyclable packaging and penalise materials that local authority systems struggle to manage.

From 2026, PackUK, the scheme administrator and part of Defra, will apply differential fees across all obligated packaging. Materials will be classified into three bands – Green, Amber and Red – with Amber acting as the base fee, Green attracting a discount and Red carrying a substantial tax premium.

The fees announced in December 2025 illustrate the scale of change:

PackUK has confirmed that Amber fees across the eight main material categories will rise by an average of 12.6% per tonne in 2026, well ahead of inflation. The real exposure, however, lies in the Red classification, where fees rise by close to 20% on average compared with 2025, and significantly more for certain materials.

THE RAM RULEBOOK
Classification under Green, Amber or Red is determined by the Recycling Assessment Methodology (RAM) – a technical document updated in December 2025 and expected to remain a live framework subject to regular revision.

Based on industry discussions, much of RAM reflects current recycling system capability, rather than future policy intent. In practice, this means materials are assessed against what local authorities and re-processors can demonstrably collect and recycle today, not what legislation or industry requires them to do tomorrow. This creates several near-term distortions.

A clear example is flexible plastic packaging. Under RAM, flexible plastics are automatically classified as Red, unless the producer can demonstrate participation in an approved take-back or closed-loop scheme. The rationale is simple: fewer than 75% of local authorities currently collect flexible plastics at the kerbside.

The anomaly is that legislation mandating universal local authority collection of flexible plastics does not come into force until 2027. As a result, for at least one year, producers using flexible plastics will face punitive fees – even where they are actively improving recyclability or supporting infrastructure development.

DATA QUALITY
Another major risk sits not in material choice, but in data quality.

Where obligated companies fail to submit packaging data that fully aligns with RAM requirements, PackUK will default the material to Red classification. For fibre-based composite packaging, this alone represents a 36.7% increase in fees compared with 2025.

For large multinationals, this is an administrative challenge. For SMEs, it is a structural risk.

The obligation threshold is relatively low – more than 50 tonnes of packaging placed on the market and turnover above £2 million –bringing thousands of businesses into scope, many without in-house compliance or packaging expertise. Also, pEPR moved the obligation onto the brand owner, a fundamental change to the previous packaging legislation, This covers not only when packaging carries branding but also when only a company name and address appears on the pack. 

For smaller obligated businesses, the most effective mitigation is early engagement with packaging suppliers. They should be able to provide material specifications, weights, recyclability evidence and RAM-aligned documentation. This not only supports accurate declarations but also allows companies to forecast their likely pEPR liability for late-2026 invoicing.

Basic controls also matter. Packaging weights should be independently verified rather than accepted at face value. Even minor rounding discrepancies can materially affect liabilities at scale. Records should be retained, as HMRC auditing powers apply to pEPR data and fee calculations.

Where possible, businesses should also explore lighter-weight formats or alternative materials that meet Green criteria under RAM – ideally achieving both material reduction and fee mitigation.

TAX BY ANOTHER NAME
pEPR is a tax, so obligated companies should treat it as such, ensuring it is fully reflected in product costing and recovered through pricing wherever commercially feasible.

This is particularly important against the backdrop of wider scrutiny. PackUK is understood to be under pressure from HMRC to ensure full recovery of the £1.4bn target for 2025, the sum required to fund local authority household waste services.

Industry reports suggest that a significant number of producers challenged invoices issued in October 2025, contributing to a funding shortfall reportedly running into the millions. There is growing speculation that supplementary invoices for 2025 may yet be issued to close the gap.

One conclusion is unavoidable: the cost of packaging will continue to rise. Modulated fees are explicitly designed to change behaviour, and future iterations of the RAM are likely to become more stringent as collection systems evolve.

For obligated companies, the priority is no longer awareness but control – understanding exposure, ensuring data accuracy, influencing material choices and recovering costs through pricing.

Those that fail to do so will not just face higher fees, but sustained margin erosion in a system that is only just getting started.