Rachel Reeves will wait four years before scrapping a controversial tax break that benefits low-cost foreign retailers such as Shein and Temu, hitting British high street chains who had pushed for immediate action in next week’s Budget.
The chancellor has confirmed she will abolish the UK’s ‘de minimis’ rule, which exempts parcels worth under £135 from import duties, but not until at least March 2029.
The move follows concerns that an abrupt change could snarl border operations and trigger widespread disruption for delivery firms and brands.
More than 1.6 million parcels enter the UK each day under the exemption.
The delay comes despite months of lobbying from companies including Next, Currys, and the British Retail Consortium, who warned earlier this year that the tariff regime is distorting competition, weakening the high street and costing British jobs.
“I’m backing Britain’s high streets and the businesses that power them,” Reeves said. “It’s time to make sure our local shops can compete fairly with overseas sellers and keep driving growth and good jobs across the UK.”
The Treasury expects the change to raise around £500m a year once implemented, money the government claims will be channelled into public services and business support.
But the long runway to reform means low-cost importers will keep a significant advantage for several more years, during a period when domestic retailers are already struggling with falling sales and fragile consumer confidence.
Retailers push for faster action
The four-year delay has left executives frustrated.
Helen Dickinson, chief executive of the BRC, said: “It cannot come soon enough. The volume of potentially non-compliant goods entering the UK is growing exponentially and we encourage government to ensure this new policy is implemented as quickly as possible.”
George Weston, chief executive of Associated British Foods, added that the current system “has disadvantaged British business, damaged British high streets and allowed proper safety standards to be ignored”, adding that he hopes the government “implements [the change] rapidly”.
Reeves will launch a consultation on the design of the new customs arrangements within weeks, with detailed proposals due next year.
Treasury officials have said the phased approach is key to prevent the kind of border chaos seen in other countries that have taken similar action.
In the US for example, Trump scrapped America’s own low-value exemption for parcels under $800 earlier this year, triggering widespread delays.
Meanwhile, the EU is phasing out its exemption for goods under €150, with full implementation due in 2028.
Budget clouds weakening retail outlook
The decision lands during a difficult moment for the sector.
Retail sales fell 1.1 per cent in October, erasing September’s rise and marking what analysts called a “disappointing” start to the so-called golden quarter.
Clothing sales were especially weak, with consumers holding back as the late November Budget and talk of income tax rises weigh on sentiment.
The GfK confidence index fell to minus 19 in November, while sector employment has shrunk 10 per cent over the past decade and is forecast to fall another 10 per cent by 2028.
“Consumers held off ahead of Black Friday discounting, while unseasonably mild weather delayed purchases of winter goods,” said Oliver Vernon-Harcourt, head of retail at Deloitte.
Some relief may come from easing inflation, which fell in November for the first time since March, and lower interest rates.
But retailers warn that uncertainty around the Budget, coming just days before Black Friday, risks further denting sentiment.
“It falls at the most critical point in the trading calendar,” said Erin Brookes, European retail lead at Alvarez & Marsal.
“It risks denting consumer sentiment at exactly the wrong moment.”