Reeves set to close the Shein and Temu tax loophole

Chancellor Rachel Reeves is expected to use her Budget to close a tax loophole that has helped fast-fashion giants Shein and Temu grow rapidly in the UK. Under current rules, parcels worth under 135 pounds can enter the country duty-free, while more expensive packages face customs duties of up to 25%.

The arrangement has become central to the business model of these online marketplaces, where most sellers are based in China. Almost 6 billion pounds worth of cheap imports entered Britain last year without paying any customs duties at all, and imports from Shein and Temu rose by 53% year-on-year.

British retailers, including Next, JD Sports, Sainsbury’s and Superdry, have long argued that the exemption creates an uneven playing field: they must pay import taxes on the goods they sell, while their overseas competitors do not. « These imports are often evading many millions of pounds in VAT liabilities, aside from the loss of high street sales, » said Andrew Goodacre of the British Independent Retailers’ Association.

Scrapping the exemption would raise around 500 million pounds a year for the government, according to the Treasury. Reeves said the move was about « standing up for the British high street » against imports that undercut local shops on price.

The UK would be following the lead of other major markets: the United States scrapped its own ‘de minimis’ rule earlier in 2025, and the European Union has pledged to end its version of the exemption by 2028.

Adapted from CityAM and Drapers, November 2025