By Gareth Kobrin, Co-Founder & VAT Expert
Brace yourselves: the upcoming changes to the UK’s low-value goods import rules, due by March 2029, are about to shake up the world of online shopping. Consumers, sellers and platforms will all feel the impact.
The Missing 20%: How the £135 Loophole Became a Tax Time Bomb
Right now, if you buy something worth £135 or less from abroad, there’s no VAT or customs duty charged when it enters the UK. In theory, overseas sellers are supposed to register for VAT and add 20% at checkout. In reality, most don’t. That means shoppers often get a 20% “discount,” but it’s really a gaping hole in the tax system.
With hundreds of millions of parcels arriving each year, the lost VAT revenue adds up to billions. Meanwhile, compliant high-street retailers and law-abiding foreign sellers are left at a serious disadvantage, forced to price higher simply because they follow the rules.
Why the Government Says Enough Is Enough
As online shopping exploded, so did abuse of this oversimplified import system. The government argues that the current approach:
- Distorts competition by undercutting UK-based and VAT-compliant sellers
- Lacks transparency, making it hard to track what’s entering the country
- Undermines public revenue by depriving HMRC of essential funds
In short, the “cheap imports” loophole isn’t just unfair. It’s unsustainable.
What’s Coming in 2029 and Why You Should Care
When the dust settles in 2029, shopping for cheap overseas goods may feel very different. Here’s what’s changing:
- No more £135 relief. Imports under £135 will no longer be exempt from customs duty. These items will be taxed like any other imports.
- New data rules. Sellers or marketplaces will need to provide detailed item-level data for every parcel.
- Platforms may carry the tax burden. Major marketplaces like Amazon, eBay, Shein and Temu could become responsible for paying both customs duty and VAT.
- UK-based reps might be required. Foreign sellers may need to appoint a UK representative to ensure accountability.
- Border-handling fees. Small charges (estimated between 50p and £5 per parcel) may be introduced to cover enforcement and processing costs.
For consumers, this shift could mean a 20 to 30% price increase on many go-to online bargains.
Who Gets Hurt and Who Gets Hurt Less
What These Changes Mean for Your Business and What You Should Do Now
At Yonda Tax, we see this as a seismic shift, not just a minor update. If you’re an online seller or marketplace handling low-value imports, the countdown has started.
Here’s how to get ahead:
- Audit your import processes and confirm whether you’re properly VAT-registered
- Adjust your pricing to factor in new VAT, customs duty, and per-parcel handling charges
- If based abroad, explore setting up a UK representative to stay compliant
- Update your checkout and logistics flows to ensure proper tax collection and data capture
Final Thoughts: A New Era of Fairer Commerce Is Coming
The £135 VAT loophole has been a legacy feature of early e-commerce, but those days are numbered. This crackdown aims to restore fairness and transparency. Compliant sellers and UK retailers should see clearer skies ahead.
At Yonda Tax, we believe this isn’t just a revenue grab by HMRC. It’s a vital step toward a more level playing field, where trust, compliance and smart business all align.
Need help getting ready? Reach out to us today. Let’s make sure your business is future-proof.