A coalition of Britain’s largest high street retailers, including Asos, Marks & Spencer, Primark and Next, has written to the Prime Minister and Chancellor demanding that planned changes to import tax exemptions be brought forward urgently, arguing that the current system hands an unfair advantage to overseas sellers such as Shein and Temu.
The firms have proposed the immediate imposition of a £2.60 flat fee on every small parcel sent to the UK, a measure they estimate would raise £1.7 billion a year for the Treasury. In their letter, the retailers warn that the problem is “intensifying through 2026, not 2029” – a pointed reference to the government’s current timeline for reform. They are pushing for meaningful progress by the peak 2026 trading season or, failing that, the introduction of an interim charge.
Other signatories include Currys, Halfords, Kingfisher, Argos, New Look and George at Asda, underscoring the breadth of concern across the sector. Low-value import (LVI) trade has jumped by more than 50% between the 2023/24 and 2024/25 financial years, according to the retailers.
The ‘de minimis’ loophole and its impact
At the heart of the dispute is the UK’s so-called “de minimis” threshold, which allows overseas retailers to send parcels worth less than £135 into the country without paying import duties. The exemption, originally designed to reduce administrative burdens, has become a “structural advantage for overseas retailers without a footprint in the UK”, the letter states. These firms undercut domestic businesses that employ millions of people, pay local taxes and comply with import duty obligations.
The volume of goods under the £135 threshold has tripled in the three years to 2024, reaching approximately 1.6 million parcels a day. The total value of small packages rose by 53% to £5.9 billion in the fiscal year ending April 2025. Chinese online giants Shein and Temu have grown rapidly on the back of this loophole, offering vast arrays of fashion and homeware at rock-bottom prices.
International moves to tighten similar exemptions have compounded the problem for UK retailers. The United States eliminated its $800 (£595) de minimis exemption for all countries in August 2025 under President Donald Trump. Since that change, the retailers’ letter notes an “immediate switch in overseas retailer focus into the UK and EU”, making the UK an “outlier” with a growing share of low-value imports being directed into its market. The European Union is also overhauling its rules: parcels worth less than €150 (£112) will no longer be duty-free, and a temporary €3 (£2.23) charge per item is due to take effect from 1 July 2026, with full tariffs expected by 2028.
Beyond the competitive imbalance, the retailers argue that closing the loophole would improve product safety checks, as low-value imports currently bypass stringent UK standards.
Proposed solutions and international context
Chancellor Rachel Reeves confirmed in the 2025 autumn budget that the government would review the customs loophole, saying she wanted to “support a level playing field in retail”. However, the proposed reforms were not expected to be in place until 2029 at the earliest, a timeline the government attributed to the need to design and roll out a new border duty collection system capable of handling the enormous volume of packages. A government consultation on reforming the low-value import regime closed in March 2026.
The retailers argue that a £2.60 flat fee per parcel could be introduced quickly and on a temporary basis, similar to the EU’s approach. They say the charge would both level the playing field and generate substantial revenue: ending the exemption is expected to produce hundreds of millions of pounds for the Treasury, while the cost to the domestic industry of the current loophole is estimated at up to £600 million annually. A source familiar with the matter indicated that the government could still decide to bring forward the end date, and ministers are considering interim measures.
Nevertheless, implementation challenges remain. The British Chambers of Commerce has warned that reforms could disproportionately affect small and medium-sized companies and customers who rely on e-commerce for single-item deliveries, potentially leading to price increases. The government has said any impact on consumer prices would be “modest”.
The proposed £2.60 fee would apply to each parcel under the existing £135 threshold, for which VAT is currently collected by the seller at point of sale. For parcels above that value, VAT is paid at import via a customs declaration. The gradual removal of the exemption, supported by further HMRC guidance, is intended to ensure imported goods meet UK standards while raising revenue and supporting domestic retailers.
