What's Happening?
Chancellor Rachel Reeves has announced that the UK's de minimis rule, which exempts parcels valued under £135 from import duties, will remain in effect until March 2029. This decision comes despite pressure
from British retailers who have been advocating for the immediate removal of the rule. The de minimis rule has been criticized for creating an uneven playing field, as it allows low-cost overseas sellers like Shein and Temu to benefit from the tax break. Last year, imports under £135 surged by 53%, reaching nearly £6 billion in value. Retailers such as Next, Monsoon, and Superdry have expressed support for closing this tax loophole. However, logistics firms like Royal Mail and DHL Express have raised concerns about the operational impact of scrapping the rule without adequate preparation, which influenced the Treasury's decision to delay the removal.
Why It's Important?
The delay in scrapping the de minimis tax break has significant implications for the UK retail sector. By maintaining the exemption, overseas sellers can continue to offer lower prices, potentially disadvantaging domestic retailers. This decision prolongs the period during which UK high streets face unfair competition, especially during a time of fragile consumer confidence and declining sales. The government anticipates that removing the exemption will eventually generate £500 million annually, which will be allocated to public services and business support. However, the delay means that these benefits will not be realized for several years, leaving retailers frustrated and concerned about the competitive landscape.
What's Next?
Chancellor Reeves plans to launch a consultation on new customs arrangements within weeks, with detailed proposals expected next year. The UK government is considering a phased approach to the removal of the de minimis rule, similar to the EU's gradual phase-out of its €150 threshold. Retailers are urging for faster action, but Treasury officials emphasize the need for a long runway to avoid disruption and ensure compliance systems are ready. The consultation will involve discussions on the design of new customs arrangements, aiming to balance the interests of retailers and logistics providers.
