Chancellor Rachel Reeves has announced a four-year delay to abolishing a controversial tax break that benefits low-cost foreign retailers like Shein and Temu, dealing a blow to British high street chains that had demanded immediate action.
Budget Decision Sparks Retailer Frustration
The Treasury confirmed the 'de minimis' rule, which currently exempts parcels worth under £135 from import duties, will remain in place until at least March 2029. This comes despite months of intense lobbying from major UK retailers including Next, Currys, and the British Retail Consortium.
More than 1.6 million parcels enter the UK daily under this exemption, creating what domestic retailers describe as an unfair competitive advantage for overseas sellers. The Treasury estimates scrapping the rule would raise approximately £500 million per year once implemented, with the government pledging to channel these funds into public services and business support.
Balancing Border Concerns and Fair Competition
Reeves defended the delayed implementation, stating: "I'm backing Britain's high streets and the businesses that power them. 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."
However, Treasury officials indicated the phased approach is necessary to prevent potential border chaos experienced by other countries that have taken similar action. In the United States, former President Donald Trump's scrapping of America's low-value exemption earlier this year triggered widespread delivery delays, while the European Union is phasing out its €150 exemption with full implementation due in 2028.
Retail Sector Faces Mounting Pressure
The decision arrives during a particularly challenging period for UK retailers. Recent data shows retail sales fell 1.1 per cent in October, erasing September's gains and marking what analysts describe as a "disappointing" start to the crucial golden quarter shopping period.
Helen Dickinson, chief executive of the British Retail Consortium, expressed frustration with the timeline: "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."
The government will launch a consultation on the design of new customs arrangements within weeks, with detailed proposals expected next year. Meanwhile, the extended timeline means low-cost importers will maintain their significant pricing advantage for several more years, during a period when domestic retailers already face falling sales and fragile consumer confidence.
