Chancellor Rachel Reeves has announced a significant change to the UK's customs rules, confirming that the exemption from import duties for small parcels valued under £135 will be abolished.
Closing the Loophole for Fair Competition
Currently, overseas online retailers can send goods worth less than £135 to the UK without customers paying import duties. This system has been heavily criticised by British high street retailers, who argue it creates an uneven playing field and allows international giants like Shein and Temu to undercut them on price.
Ms Reeves stated the move is designed to stop overseas firms from "undercutting our high street businesses" and will "support a level playing field in retail" by ensuring customs duty applies to parcels of any value.
The Financial Impact on UK Retail
The pressure for this policy overhaul came from major UK retailers, including Next, Superdry, and Primark. Industry experts have suggested the existing loophole costs the UK retail sector up to £600 million annually.
This financial impact is set against a backdrop of rapidly growing small package imports. According to a pre-Budget submission from the British Retail Consortium (BRC), the value of these small packages rose dramatically by 53% to £5.9 billion last year, up from £3.9 billion the year before.
Consumer Consequences and Industry Reaction
The Chancellor first indicated she would review the customs treatment back in April, following similar actions taken in the US and Europe. The confirmation came ahead of the Budget.
Silvia Rindone, UK and Ireland retail lead at EY, commented on the decision, stating: "Closing the import duty loophole for small parcels is a positive step towards fairer competition, but it could also push up online prices, prompting consumers to reassess buying habits."
She added that for premium retailers, a key concern will be whether higher taxes reduce the spending power of their core customer base.
