Reeves to End £135 Import Duty Exemption in Budget
Chancellor Rachel Reeves is preparing to scrap a tax loophole that allows online retailers such as Shein and Temu to send low-value goods to the UK without paying customs duties.
Under current rules, parcels worth up to £135 can enter the country duty-free, a measure critics say gives overseas sellers an unfair advantage over British high street retailers.
The change is expected to be announced in Reeves’s November 26 Budget, following similar reforms in the United States and European Union, where exemptions for low-value imports have already been tightened or abolished.
Move Follows Growing Pressure from UK Retailers
Major British retailers including Next, Sainsbury’s, Currys, JD Sports, and Superdry have lobbied the government to close the loophole, arguing that it distorts competition and costs the UK industry up to £600 million annually.
These firms contend that UK-based sellers are forced to pay import taxes and VAT, while foreign competitors bypass the same obligations, allowing them to sell goods at lower prices.
Andrew Opie, director at the British Retail Consortium, said it was “time for the Chancellor to act” before the Christmas trading season. He added:
“British retailers face unfair competition from foreign sellers exploiting de minimis rules. There’s also a moral case for paying UK taxes if you profit from UK consumers.”
Surge in Cheap Imports from China
The popularity of Chinese e-commerce giants has surged across the UK. The value of small parcels worth under £135 shipped from China more than doubled in a year from £1.3 billion in 2023 24 to £3 billion in 2024 25, according to the BBC.
In the EU, over 4.6 billion parcels entered last year, with 91% coming from China. The US has already abolished its “de minimis” exemption to curb the flood of low-cost online goods.
Reeves’s planned reform aims to align the UK with these international standards and prevent the country from becoming a dumping ground for tax-free imports.
Shein and Temu’s Tax Practices Under Fire
Both Shein and Temu have faced mounting criticism over their tax contributions and business models.
Temu’s EU operations doubled profits to $120 million (£90 million) in 2024 while paying just $18 million in corporation tax, despite employing only eight staff.
Meanwhile, Singapore-based Shein saw global revenues rise 20% to $37 billion, but reported lower pre-tax profits amid growing regulatory and marketing costs. The company is currently exploring a Hong Kong stock market listing after earlier efforts in the UK and US faltered.
A Step Toward Fairer Competition
The government has acknowledged concerns from UK retailers and is reviewing how customs treatment can be made “fairer and more consistent”.
A Treasury spokesperson said:
“The Chancellor is reviewing the customs treatment of low-value imports after listening to concerns from Britain’s best-known retailers that the current system leaves them at a disadvantage.”
Economists estimate that closing the loophole could raise hundreds of millions in additional revenue while creating a level playing field for domestic sellers.
Global Trend Toward Tightening E-Commerce Tax Rules
The UK’s expected policy shift reflects a broader global crackdown on tax loopholes exploited by fast-fashion and online marketplaces.
Experts say this could reshape the low-cost retail landscape and increase consumer prices slightly, but also strengthen consumer protection and boost local business resilience.
As Reeves prepares her second Budget, the move is seen as both an economic and political signal: Labour intends to clamp down on unfair tax practices while pursuing fiscal responsibility ahead of growing budget pressures.
