UK parcel tax loophole change: Government accelerates move – but retailers still unhappy

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The government has moved to accelerate the closure of a significant import tax loophole.

However, the retail sector remains unimpressed, branding the revised timeline “unacceptable”.

Currently, overseas businesses can dispatch small packages valued under £135 to the UK without incurring import duties, a rule that has long been criticised for creating an uneven playing field.

In 2025, the Chancellor indicated reforms would be introduced by 2029, mirroring measures taken in the US and Europe.

However, the Treasury announced on Tuesday that it would bring forward the removal of this customs duty relief by six months, now targeting October 2028.

The department said that this acceleration followed discussions with industry, asserting the changes would “ensure fairer competition between high street and online retailers”.

Parcels moving on conveyor belts at Amazon’s fulfillment centre in Swindon, Wiltshire (PA)

But retail leaders argue that the revised deadline is still too distant, particularly given the ongoing pressures faced by physical high street stores.

George Weston, chief executive of Primark parent group ABF, said: “This is so dispiriting.

“A system that the government itself recognises damages UK high streets and loses the exchequer hundreds of millions in potential revenue is being left in place for two more years.

“If the government expects to be seen as serious about rejuvenating town and city centres and preserving UK jobs, then ministers must examine how this unacceptable timeline can be accelerated and show more support for UK retail.”

Helen Dickinson, chief executive of the British Retail Consortium (BRC), said: “While the Government has rightly recognised that a three-year timeline for implementing low-value import reforms is too long, bringing it forward by just six months does not go far enough.

“UK retailers cannot afford to compete on an unfair playing field against importers not paying tariffs.”

The move was part of a range of tax policy updates, which also saw the government launch a review of how VAT is collected for business trading through online marketplaces.

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