British Retailers Call for Action on Small-Parcel Import Tax Loophole

British retailers are calling on the government to accelerate plans to close the loophole for small parcel import taxes, which allows overseas sellers to ship low‑value parcels into the UK without paying customs duty. Their appeal comes after the 2025 Autumn Budget confirmed that the longstanding low-value import (LVI) relief will be abolished by March 2029 at the latest. For companies competing with online marketplaces that ship millions of parcels valued at £135 or less, the wait for reform feels too long. Accelerating the closure of the loophole for small parcel import taxes would align the UK with reforms in the United States and European Union, helping restore a level playing field for domestic retailers.

A loophole that has grown too large to ignore

Under current rules, individual consignments valued at £135 or less can enter the UK duty‑free. The relief was originally designed for infrequent and low‑value transactions, but it has become a fundamental part of cross‑border e‑commerce. Parcel operators and customs intermediaries submit simplified declarations using a Bulk Import Reduced Data Set (BIRDS), which allows them to clear multiple consignments at once. This simplification has helped overseas sellers to flood the UK market with very cheap goods. 

HMRC estimates that the number of consignments imported using BIRDS more than tripled between 2021 and 2024, reaching around 600 million parcels a year. During the same period, the value of low-value imports recorded in BIRDS rose from £3.8 billion to £5.9 billion.

Removing customs duty from these parcels made sense when cross-border parcel volumes were low, but the low-value import relief the UK now offers distorts competition. UK‑based retailers import goods in bulk and pay duties at standard tariff rates, while overseas sellers shipping individual parcels valued under £135 effectively avoid customs duty. The government acknowledges that this situation undermines fair competition and has committed to reforms that will require all sellers, regardless of their location, to pay duties on goods sold to UK consumers.

What the government proposes and why it matters

The 2025 Autumn Budget signposted an end to low-value import relief in the UK, describing it as an “unfair customs arrangement” that allows some online retailers to import goods duty-free. HM Treasury and HM Revenue & Customs have since published a detailed consultation outlining UK customs duty changes for parcels and the broader low-value import regime. The document proposes that the new arrangements take effect by March 2029. For UK high street chains, that timetable feels far away, particularly now that the US has removed its $800 de minimis threshold, and the EU plans to eliminate duty relief on consignments under €150 by 2028.

The government’s consultation suggests three key changes:

• Duty liability shifts to sellers and online marketplaces

Under the proposed LVI customs arrangements, sellers and the operators of online marketplaces will be responsible for paying customs duty on consignments of £135 or less. This mirrors the existing VAT model, where marketplaces must charge and remit UK VAT on low‑value sales. By consolidating liability, duty could be collected through quarterly payments away from the border. That would reduce disruption at ports and ensure duty is visible at the point of sale, improving price transparency.

Potential introduction of an administrative fee

The government is considering a flat fee on low‑value imports to fund the extra customs and border costs associated with processing millions of parcels. This fee would be limited to the cost of services rendered and would be paid by sellers or the platforms facilitating sales. Similar fees have been proposed or introduced in other jurisdictions.

A simplified tariff schedule

To help sellers and marketplaces apply the correct duty without having to assign full commodity codes to every item, officials are exploring a “tariff bucket” system – effectively grouping products into bands with set duty rates. Simplifying classification could make compliance more manageable for overseas sellers unfamiliar with the UK Global Tariff schedule.

The consultation also proposes that overseas sellers without a UK presence appoint a fiscal representative in the UK who would be jointly liable for customs debts. The government intends to maintain the existing relief on gifts valued at £39 or less sent between individuals.

Why retailers want reform sooner

Retailers pressing for change argue that waiting until 2029 will allow overseas platforms to cement an even larger presence in the UK. The consultation notes that low‑value import volumes are already substantial, with an estimated 1.6 million parcels arriving every day. Since the United States abolished duty relief for imports under $800 in 2025 and the EU is moving to scrap its €150 exemption, the UK has become an outlier. Industry groups worry that global sellers will increasingly divert their parcels to UK consumers to exploit the remaining duty relief, further eroding domestic market share. They also highlight product safety concerns; when goods circumvent import duties, they often bypass quality checks.

From a revenue perspective, the low‑value import relief is becoming expensive. Once goods are subject to duty, receipts could help fund public services. Introducing an administrative fee of around £2.60 per parcel, as suggested by some retailers, could raise over £1 billion annually. However, designing and implementing new systems will take time, and businesses need certainty. HM Treasury has therefore signalled that reforms must balance fairness with the practicalities of collecting duty and data at scale.

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Practical steps for businesses

Although the new regime and UK customs duty changes for parcels may be several years away, businesses should not wait to prepare. Overseas sellers and marketplace operators should review their supply chains, ensure that systems can capture and report product data, and prepare for quarterly customs duty payments. 

Those not established in the UK may need to appoint a fiscal representative and budget for administrative fees. UK retailers should assess how the changes could affect pricing and inventory strategies; some imports currently shipped under the £135 threshold may become subject to duty and higher costs. 

All stakeholders can respond to the government consultation, which runs until March 2026, and help shape the final design of the new customs arrangements.

The abolition of LVI relief also interacts with VAT. Since January 2021, the UK has abolished the VAT exemption for goods under £15 and requires sellers dispatching goods valued at £135 or less to register for UK VAT and charge it at the point of sale. Businesses must continue to account for VAT correctly while preparing for future customs duties.

How Apex Accountants & Tax Advisors can help

Navigating cross‑border trade rules is complex. Apex Accountants & Tax Advisors works with retailers, online marketplace operators and logistics firms to interpret the evolving customs and VAT landscape. Our team can help you:

• Analyse how the removal of the LVI relief and the potential small parcel import tax loophole closure will affect your cost base and pricing.
• Register for UK VAT and design systems to collect customs duty and VAT on low‑value consignments.
• Prepare for quarterly duty payments and develop processes for appointing fiscal representatives if you do not have a UK establishment.
• Model the financial impact of possible administrative fees and simplified tariff schedules.

We collaborate closely with clients to ensure compliance with HMRC guidance, integrate duty calculations into accounting systems and plan for changes well ahead of the March 2029 target. Contact Apex Accountants today to discuss tailored strategies for your supply chain and e‑commerce operations.

Frequently asked questions

What is the low-value import relief, and why is it being removed? 

The LVI relief allows consignments of goods valued at £135 or less to enter the UK without paying customs duty. The government plans to abolish it by March 2029 because the relief has been exploited by overseas sellers, distorting competition and undermining tax fairness.

When will the new customs arrangements come into force?

HM Treasury intends the new LVI customs arrangements to take effect by March 2029, but British retailers are urging the government to implement changes sooner.

Who will pay customs duty under the new regime? 

The consultation proposes making sellers and online marketplace operators responsible for paying duty on low‑value consignments, aligning with existing VAT rules.

Will there be any exemptions? 

The government plans to retain the relief for non‑commercial gifts valued at £39 or less sent between private individuals. All other consignments will be subject to customs duty and potentially an administrative fee.

What is the proposed administrative fee and why? 

Officials are considering a flat fee on low‑value imports to cover the cost of processing millions of parcels. Retailers have suggested a fee of about £2.60 per parcel, but the government is still gathering views through its consultation.

How should businesses prepare? 

Companies should ensure they are compliant with VAT rules, plan for quarterly customs duty payments and monitor the consultation. Overseas sellers without a UK presence may need to appoint a fiscal representative. Engaging with advisers, such as Apex Accountants, can help businesses adapt their systems and minimise disruption.