With the recent bout of economic uncertainty and rising operational costs, many businesses are feeling a lot of financial pressure.
On top of this, environmental taxes might be placing additional strain on already tight budgets.
Understanding the risks posed by environmental taxes is essential for businesses to incorporate the burden into financial plans and preserve their cash flow.
Understanding environmental taxes can be the key to determining which sustainable practices to adopt in order to remain financially healthy.
No major new environmental taxes are being introduced, leading many businesses to conclude that they do not need to worry about them.
However, it is the rising pressure from the increase in existing environmental taxes that is impacting businesses.
If businesses have already calculated the impact of environmental taxes, they may be working off old data and outdated figures.
The Plastic Packaging Tax (PPT) has risen to £223.69 per tonne of waste that contains less than 30 per cent recycled content.
Previously, the rate was £217.85 per tonne, so the increase is substantial.
Businesses should become more mindful of the types of packaging utilised in their operations to avoid paying excessive tax.
Every year since the tax was introduced has seen it increase significantly, so we can expect to see further increases in the future as the Government aims to make plastic packaging less economically viable than recycled alternatives.
There is also a notable rise in the Landfill Tax, which is designed to make recycling more financially lucrative.
Seeing an increase from £103.70 to £126.15 per tonne at the standard rate, the Landfill Tax will continue to rise, forcing businesses to consider alternate means of waste disposal.
Alongside all of these measures designed to punish wasteful practices, there are a few incentives to encourage sustainability.
Annual Investment Allowance (AIA) can be used by sustainable businesses to deduct 100 per cent of qualifying plant or machinery expenditure from their taxable profits in the year of purchase, up to a £1 million annual cap.
Qualifying expenditure may include things like LED lights, the installation of solar panels, and high-efficiency HVAC systems.
You may also be able to claim 100 per cent first-year relief on green assets using Enhanced Capital Allowances (ECA).
One of the main places where this can be of benefit is with the purchase of electric vehicles if your business is looking to modernise transportation.
Electric vehicles benefit from a very low rate of three per cent for Benefits in Kind (BIK) compared to 25 to 35 per cent for petrol and diesel models.
With the rise and fall of fuel prices causing a great amount of uncertainty, transitioning to sustainable vehicles can be a way to keep costs down in the long run.
There is no guarantee that the UK will stay committed to Net Zero, but you can embrace sustainability regardless.
We can help minimise the impact of environmental taxes and bolster your cash flow with the reliefs that are available to you.
Build a financially and environmentally stable business by speaking to our team today!
