UK to Scrap Tax Break on Low-Value Imports by 2029, Sparking Price Concerns
The UK government has announced plans to eliminate the tax break on imports valued at less than £135, subjecting them to customs duty, with the changes set to take effect by March 2029 at the latest. This move aligns with actions by the US and EU, which have already removed similar exemptions, but it has raised alarms among business groups over potential price increases and harm to small companies.
Business Groups Warn of Inflationary Pressures
The British Chambers of Commerce (BCC) has voiced strong concerns, warning that ending the "de minimis" exemption could push up prices and disproportionately affect small- and medium-sized enterprises (SMEs). According to a BCC survey of 608 businesses, more than half of UK goods importers would pass on cost increases of 5% to 10% to consumers, with only a fifth able to absorb the additional expenses. The survey also revealed that nearly two-thirds of companies were unaware of the planned change or unsure of its impact.
Global Trends and Retailer Support
This policy shift follows global trends, with the US removing its de minimis exemption in August and the EU planning similar measures, including new handling charges for cheaper packages. British retailers such as Primark, Currys, and Boohoo have backed the move, arguing that the current tax break has allowed Chinese rivals like Shein and Temu to undercut them. However, they have criticized the government for delaying implementation until 2029, citing the need for a more timely response to unfair competition.
Proposed Changes and Industry Response
The BCC has called for a phased approach to ending the exemption, urging ministers to avoid introducing per-item or consignment charges, which could distort business behavior and inflate costs. William Bain, head of trade policy at the BCC, emphasized that e-commerce is vital to the UK economy and global trade, and any reforms must be proportionate. He recommended retaining VAT charges at the point of sale and focusing on targeted enforcement without new flat-rate fees.
Government Justification and Implementation Timeline
An HM Treasury spokesperson defended the reform, stating that the rapid growth in low-value imports is harming high streets and retailers. The changes aim to support UK businesses, control border safety, and align with international partners. The delay until 2029 is attributed to the need to build a new duty collection system from the ground up to handle the volume of low-value shipments and allow businesses time to prepare.
Potential Impacts on Trade and Consumer Behavior
Beyond price hikes, the BCC survey found that 21% of businesses would switch suppliers and 20% would consolidate shipments to mitigate duty impacts, while 12% would scale down activity, reducing overall trade volumes. Additionally, nearly a quarter of UK goods exporters said that cost increases of 10% to 15% due to the removal of other countries' exemptions could put more than half of their overseas sales at risk.
As the UK moves forward with this significant trade policy change, stakeholders are urging careful consideration to balance competitiveness with economic stability, ensuring that small firms and consumers are not unduly burdened.
