Customs duty to apply to all small parcels to UK, Chancellor confirms

Chancellor Rachel Reeves has confirmed she is closing a loophole that allows overseas online firms to avoid customs duties on small parcels to the UK.

Ms Reeves said she is to stop such firms from “undercutting our high street businesses by ensuring customs duty applies on parcels of any value” to “support a level playing field in retail”.

Currently, overseas retailers can send small parcels worth less than £135 to the UK without paying import duties – something British high street retailers have criticised as creating an “uneven playing field”.

Retailers including Next, Superdry and Primark have urged the Government to overhaul the policy, arguing it allowed international retailers such as Shein and Temu to undercut them on price.

Industry experts have suggested it costs the industry up to £600 million annually.

The value of small packages rose by 53% to £5.9 billion last year, compared with £3.9 billion the year previously, the British Retail Consortium (BRC) estimated in a pre-Budget submission.

Ms Reeves said in April she would follow in the footsteps of the US and Europe and review the custom treatment ahead of the Budget.

The British Retail Consortium said: “While we welcome the decision by the Chancellor to close the de minimis loophole, the proposed timeframe is simply too long.

“There are 1.6 million parcels arriving in the UK every day, double what they were last year, and businesses cannot afford any delay on scrapping the existing rules.

“The US has already removed its threshold, with the EU following suit next year; the Chancellor must take decisive action and remove the exemption as fast as possible.

“This will help protect British consumers from the risks of imported goods that don’t meet the UK’s stringent environmental and ethical standards, while promoting fairer competition.”

Silvia Rindone, UK and Ireland retail lead at EY, said: “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.

“For premium retailers, concerns will centre on whether higher taxes erode the spending power of their core customer base.”