Cheap import reforms sharpen retail pressure

The government has accelerated plans to remove customs duty relief on cheap imports, setting a new timetable that will affect online marketplaces, overseas sellers, high street retailers, and companies competing with low cost ecommerce supply chains.

HM Treasury and HMRC said goods valued at £135 or less will become subject to customs import duties from October 2028, six months earlier than previously planned. The measure forms part of a wider tax and customs package intended to reduce the advantage held by overseas sellers and online operators that can undercut UK retailers through lower import and compliance costs.

Ministers are also reviewing how VAT is collected from companies trading through online marketplaces. The government is seeking views on extending existing marketplace liability rules so that businesses selling into the UK comply with VAT obligations. Revenue from the measure is intended to support business rates improvements for pubs, restaurants, hotels, and other high street businesses.

Exchequer Secretary to the Treasury Dan Tomlinson said: “This action tackles the unfair competition and dodgy businesses that are doing real damage to our high streets.”

The proposals show how tax and customs rules are being reshaped around retail models that have grown faster than the underlying compliance system. Low value import relief has long reduced friction for consumers, but domestic retailers have argued that it leaves them carrying higher employment, property, rates, compliance, and tax burdens than overseas competitors selling directly into the UK market.

Although the change will not take effect immediately, the preparation period is not generous for companies with complex cross border sales models. Retailers, importers, customs intermediaries, ecommerce platforms, payment providers, and fulfilment operators will need to prepare for changes to pricing, duty calculation, stock flows, returns, customer communications, and landed cost transparency.

In categories where consumers compare prices instantly, small changes in duty treatment can be commercially visible. A product that looks competitive before checkout may become less attractive once duties and delivery costs are fully reflected, while companies that absorb those costs may see already thin margins weaken further.

The marketplace VAT review may prove equally demanding. Online marketplaces have become critical routes to UK consumers for overseas sellers, but tax authorities have faced persistent challenges in identifying sellers, enforcing compliance, and collecting tax efficiently. Placing more responsibility on marketplace operators would reflect the role those platforms play in listing infrastructure, seller onboarding, payment flows, fulfilment data, and transaction records.

That would change the operational burden for platforms. Seller verification, VAT checks, account suspension processes, reporting obligations, and customer-facing information may all need closer control. Online sellers using imported stock could face higher administration and price pressure, while domestic retailers with store networks are likely to welcome measures that narrow the gap between their cost base and that of overseas competitors.

The announcement lands alongside other tax changes already testing retailers’ systems. The government’s summer VAT cut has created short term operational pressure around pricing, staff training, refunds, and till updates, as examined in Retailers warned over summer VAT switch. The low value import reforms will require a different kind of preparation, with customs and tax exposure built into product and fulfilment decisions before orders are placed.

Retail tax change now reaches well beyond finance departments. It affects merchandising, ecommerce checkout design, customs declarations, inventory planning, customer service, returns, and supplier negotiations. Companies selling cross border into the UK will need a clearer view of duty exposure before goods are marketed, not after parcels are already in motion.

The policy also reflects renewed political focus on the economics of the high street. Physical retailers remain exposed to wages, energy, rents, rates, theft, and local demand, while overseas ecommerce sellers can often reach UK consumers without the same fixed cost base. Customs and VAT reform will not remove that structural difference, but it gives ministers a more direct route to tackling perceived tax leakage and unfair price competition.

Online marketplaces should expect more tax responsibility, more data sharing, and closer scrutiny of seller compliance. Platforms that once operated mainly as intermediaries are increasingly treated as control points in the tax system. The question now is how much liability should sit with the marketplace, and how the rules can distinguish between deliberate non-compliance and smaller sellers that rely on marketplace access but lack specialist tax capacity.

The government said further details are available through its Tax Update 2026 package and related consultations. The consultation process will determine whether the final rules focus narrowly on non-compliance or create a broader restructuring of marketplace obligations.