UK to remove de minimis threshold on parcels by 2029

LVIs shipped delivered to a UK recipient from a country or territory outside of the UK, currently benefit from a relief that removes the requirement to pay customs duty. VAT is still due on all imports following the 2021 reforms. For business to business (B2B) sales, the buyer accounts for import VAT on the VAT return. For business to consumer (B2C) sales, the seller or the online marketplace facilitating the sale is responsible for accounting for VAT.

The relief was originally introduced to avoid administrative burdens for traders and HMRC when volumes of small consignments were low. However, this trade has changed rapidly due to the increasing popularity of cross border e-commerce, new business models and changing consumer behaviour.

Earlier this year, the government conducted a comprehensive review of LVI arrangements after concerns grew that domestic retailers were being undercut by sellers able to import low value items duty-free. Volumes of low value consignments have significantly increased year on year.  The total trade value declared within BIRDS (bulk import reduced data set) declarations has increased by over 50% from £3.8bn in 2023-24 to £5.9bn in 2024-25.

HMRC estimates that in 2024 1.6 million parcels a day were arriving to the UK from overseas sellers.

Many of these consignments take advantage of simplified data requirements intended for occasional or ad hoc imports.

The government has concluded that the current system no longer reflects the scale, complexity or compliance risks associated with modern e-commerce supply chains. The planned reforms will bring low value consignments within the scope of tariffs and will require stronger data reporting, helping to ensure a more level playing field between high street retailers, online marketplaces and overseas sellers.

The government has concluded consulting on the detailed design of the new low value import system. The consultation sets out how the removal of the current relief will be implemented and sought input from stakeholders on several key areas. A central element of the proposals is the introduction of enhanced data requirements for each consignment, reflecting the need for better visibility and compliance oversight as parcel volumes continue to grow. The detail that the government can obtain regarding the content of a parcel will allow for appropriate risking to take place prior to the parcel arriving in the UK, this will mean that substandard products coming from areas that raise concerns over product safety and forced labour may be prevented from reaching the UK.  The government also proposes that sellers, and online marketplaces where they facilitate the sale, should take responsibility for paying customs duty on low value imports. Under the suggested model, these businesses would make quarterly duty payments to HMRC after goods enter the UK, allowing for a more streamlined and predictable process.

The application of the UK Global Tariff will form the basis of the new arrangements, although the government is considering whether a simplified tariff bucket system might support businesses that struggle to apply the full tariff schedule. The consultation also raised the possibility of introducing an administrative fee to recover the costs of processing large numbers of low value consignments. This fee would be limited to the cost of services such as system maintenance, document verification and border checks. Alongside these proposals, the government is also exploring whether VAT collection processes should be updated so that they align more closely with the new customs framework.

Businesses that import or sell low value goods into the UK will need to start evaluating the implications of the new regime. A first priority will be understanding the potential duty exposure once the relief is withdrawn, since many existing product lines currently enter the country free of customs duty. Companies will also need to assess whether their systems can capture the enhanced data that is likely to be required and whether they can support quarterly duty reporting for potentially high volumes of consignments.

The withdrawal of the relief may also prompt a review of supply chain models. Some fulfilment routes that were viable under the current rules may become less attractive once tariffs and any administrative fees are introduced, which could lead businesses to consider alternative sourcing, consolidation or shipping arrangements. Online marketplaces that facilitate sales to UK consumers are likely to face new reporting and payment obligations for both customs duty and VAT, meaning their onboarding processes and seller monitoring procedures may need to be strengthened.

Pricing and margin planning will also be important. Businesses will need to consider how the new costs will be absorbed or passed on to consumers, and whether any competitive advantages held by overseas sellers are reduced or eliminated.

Removal of the £135 low value threshold for parcels is designed to level the playing field for UK retail businesses, as foreign sellers will have to comply and remit duty payments to HMRC. The removal of scope for abuse of the LVI scheme will significantly reduce competition to UK retailers from goods which have avoided both import charges as well as product safety requirements.

The additional product information that HMRC will require from overseas sellers and marketplaces will allow them to accurately apply a risking processes to the products before they cross the border, this should strengthen their controls over imports to the UK of goods that raise quality or product safety concerns.

The Menzies Retail team can support you in assessing any potential duty exposure your business may face under current and upcoming customs rules. We can review your supply chain and transactions in detail, identify areas of risk, and advise on suitable customs procedures or reliefs that may help mitigate or defer additional duty costs.

In addition, we are very happy to work directly with your overseas suppliers to help them understand how the new Low Value Import (LVI) regime will impact their supply chains when shipping goods into the UK. This includes practical guidance on compliance requirements, changes to documentation, and the most efficient ways to structure deliveries to minimise disruption and unexpected costs.

With a joined-up approach, we ensure both you and your suppliers are well prepared to manage the transition smoothly and efficiently. Get in touch to find out how we can support you.