The UK's £135 gap: British parcels caught between Washington, Brussels and Beijing
Britain will end duty-free entry for low-value parcels only in October 2028, after the United States and the EU have already closed their doors. Until then the UK is the soft landing for direct Chinese parcels, while British exporters face tougher terms in both of their biggest markets.
30 September 2026 · 13 min read · 38 sources · Jalal Boucheikha
Key points
The UK will remove its £135 customs relief by October 2028, six months earlier than first planned but more than three years after the United States ended de minimis.
VAT is already collected at checkout by marketplaces; the reform adds duty, a handling fee per consignment, full tariff classification and fiscal representatives.
Chancellor John Healey's first Budget on 28 October is the next chance to speed up the timetable, as retailers demand.
Royal Mail, owned by EP Group, is using universal service reform to shift resources to parcels in a market where Evri passed 1 billion parcels and InPost absorbed Yodel.
British exporters pay a 10% Section 301 tariff on top of normal duties in the United States, and a €3 duty per line plus a €2 handling fee in the EU.
Briefings are published in English first. Translated editions are rolling out.
Context: a £135 gap that closes last
The UK still lets goods worth £135 or less enter without customs duty. HM Treasury announced at the Autumn Budget 2025 that the relief would go, and consulted from 26 November 2025 to 6 March 2026, receiving 165 responses. On 23 June 2026 ministers said the removal would come by October 2028 rather than March 2029. The consultation response, published in July, confirms full classification under the UK Global Tariff (UKGT), rejects a simplified tariff schedule, introduces a handling fee per consignment whose amount is not yet set, and requires non-UK sellers and online marketplaces to appoint a UK-based fiscal representative with joint and several liability for customs debts.123
VAT is a different story. Since 1 January 2021, VAT on consignments of £135 or less has been charged at the point of sale, and online marketplaces act as deemed suppliers for goods sold through them. So the revenue gap is customs duty, plus the cost of checking parcels that arrive with thin data. HM Revenue and Customs (HMRC) is now assessing whether VAT collection should be realigned with the new customs process; Baker McKenzie notes mixed views among respondents.413
The flow the relief carries is large. HMRC data released under a freedom of information request showed £3 billion of small parcels arriving from China in 2024-25, more than half of all duty-exempt consignments. Retailers say low-value imports grew by more than 50% between 2023-24 and 2024-25. Ofcom reports that inbound international parcel volumes rose 19.8% in 2024-25, mainly from China, within a measured market of 4.2 billion parcels.869
The politics moved in the summer. Keir Starmer announced his resignation on 22 June and Andy Burnham became Prime Minister on 20 July. John Healey, the new Chancellor, delivers his first Budget on 28 October. Burnham has confirmed that VAT rates will not rise, and Healey has promised a wider high street strategy. We found no public signal that the Budget will bring the October 2028 date forward, but it is the next fiscal event at which it could.29303132
Outside, the other two rulebooks have already changed. The United States removed its $800 de minimis threshold for all countries on 29 August 2025. Since 24 July 2026 British goods face a 10% Section 301 tariff added on top of normal duties, while for EU goods the combined rate is capped at 10%. The EU has charged a €3 duty per tariff line on parcels under €150 since 1 July, and the Commission set a €2 handling fee per item on 21 September, due from 1 November.1920212524
Points of view
London: HM Treasury and HMRC
Close the gap, but build the system properly first.
The Treasury says the rapid growth in low-value imports is hurting our high streets and retailers, and Exchequer Secretary Dan Tomlinson says ending the relief tackles the unfair competition and dodgy businesses that are doing real damage to our high streets. Its case for waiting is design: full classification, a cost-based fee and fiscal representatives need new systems, and respondents warned that representatives will be scarce and costly.721
British Retail Consortium and high-street retailers
Two more years is too long.
The British Retail Consortium (BRC) said bringing the date forward by just six months does not go far enough. A group of retailers including M&S, Next, Primark, Argos, ASOS, Kingfisher and Currys proposed a £2.60 duty on low-value parcels and asked for meaningful progress delivered by peak 2026 trading; Bloomberg reported such a fee could raise about £1.7 billion a year. Their argument: goods refused elsewhere now land here.265
The platforms: Temu and Shein
Adapt the model rather than fight the rule.
Shein opened a 376,000 sq ft automated centre at Cannock in the Midlands in May, part of a €250 million European logistics plan. Temu recruits UK sellers through a local programme and gave them access to Royal Mail's Click & Drop in November 2025, with a stated aim that local sellers and fulfilment may reach up to 80% of its European sales.1718
Royal Mail and Ofcom
Letters shrink, parcels pay, but the service must work.
Ofcom allowed Second Class letters on alternate weekdays and lowered targets to 90% and 95%, estimating savings of £250 million to £425 million a year that could be redeployed to parcels. Royal Mail, owned by Daniel Křetínský's EP Group since a £5.3 billion takeover cleared with a government golden share, handled 1.4 billion parcels in the year to March 2026, up 7%. Ofcom opened an investigation in June after First Class hit 75.7% against a 93% target.11101213
Carriers: Evri, InPost-Yodel, DPD and others
Volume is growing, margin is not.
Evri passed 1 billion parcels in the year to February 2026 after merging with DHL eCommerce UK, and credits marketplace and second-hand trade. InPost, which bought Yodel, delivered 76.9 million UK and Ireland parcels in the first quarter but swung to a loss on integration costs; Advent and FedEx are buying InPost. Ofcom's data show parcel revenue down 0.8% in real terms while volumes rose 7.1%.1415169
Brussels: European Commission
The UK is a third country, and every parcel pays.
The Commission frames its €3 duty as fairness, consumer safety and anti-fraud. For British sellers that means the same treatment as any non-EU shop: Royal Mail tells customers the duty applies per line to parcels from non-EU sellers, including those registered for the Import One-Stop Shop (IOSS), and is not automatically refundable on returns. On the wider reset, EU officials still insist the UK cannot cherry-pick parts of the internal market.252326
Washington: USTR and the White House
A deal on sectors, a tariff on everything else.
The Economic Prosperity Deal (EPD) of 8 May 2025 delivered tariff-free pharmaceuticals, aerospace access and a 100,000-car quota at 10%, but British American Business rates digital trade, paperless customs and non-tariff barrier work as stalled. The Office of the United States Trade Representative (USTR) placed the UK in its lower 10% tier, applied to economies with forced-labour import bans, but without the cap granted to the EU. Both sides also pledged to cooperate on non-market policies of third countries.222021
The disagreement is about time and target. The Treasury and the retailers agree on the destination and argue over two years. The platforms have already moved part of the stock onshore, which makes a per-parcel charge less painful for them than for the small sellers who still ship direct. Brussels and Washington care less about the £135 gap than about whether London's China line matches theirs. Our reading: every month of delay is priced by someone else.16172622
The 2021 Integrated Review cast the UK as a maritime trading nation and a champion of free and fair trade, free to set its own rules. In this reading, running a separate customs timetable from Brussels and a separate tariff deal with Washington is the point of leaving, not a failure.
What it means for the parcel
Expect UK-specific rules, fees and data formats that differ from the EU's: carriers and platforms pay for two compliance stacks, and whoever runs both well can charge for it.35
Liberal free trade (Ricardo and Cobden tradition)
How it reads the situation
From Ricardo's comparative advantage to Cobden's campaign against the Corn Laws, this tradition holds that cheap imports raise welfare and duties protect producers at shoppers' expense. On this view the £135 relief was a low-cost consumer subsidy, and the real fix is enforcement of safety and VAT, not new charges.
What it means for the parcel
This is the argument that slows reform in the Treasury: it favours a modest, cost-based handling fee over a punitive levy, which keeps direct cross-border parcels viable for longer.36
Security-first de-risking (Farrell and Newman, weaponised interdependence)
How it reads the situation
Farrell and Newman show how states that control network hubs can use them for leverage and surveillance. Customs data, parcel gateways and marketplaces are such hubs: whoever sees item-level data on millions of Chinese parcels gains both enforcement power and exposure.
What it means for the parcel
Item-level data, fiscal representatives and joint liability turn logistics providers into policy instruments; expect data demands from the border, and pressure from Washington to align on China, to grow over time.37
Bradford argues that the size of the EU market pushes firms, and often neighbouring governments, to adopt EU rules. The UK's de minimis reform follows the EU's lead, and the reset, which Burnham is expected to continue, includes plans for dynamic alignment on food rules.
What it means for the parcel
Carriers can design one European customs data model and adapt it to the UK, rather than the reverse; a UK handling fee close to the EU's €2 would make British and EU inbound pricing converge.382629
Why it lands on the parcel: the UK as the soft landing
The mechanism is diversion. Once the United States ended de minimis and the EU added its €3 duty, a direct parcel from China cost more in both markets but not in Britain. The UK still charges VAT at checkout, collected by marketplaces, but no duty and no handling fee. The UK became the last large Western market where the direct model works on its original economics.19254
That is visible in the data. Ofcom recorded a 19.8% rise in inbound international parcels in 2024-25, mainly from China, and inbound revenues of £2.1 billion. A Bloomberg analysis points the other way for the start of 2026: the UK ranked sixth in the world for low-value imports between December and April, at about $1.8 billion, more than France and Germany combined, but 11% lower than a year earlier. That suggests the platforms' shift to local stock is already under way. Both can be true: fewer direct parcels overall, but a larger share of Europe's remaining direct flow landing in Britain.95
Our reading: the 2028 design splits the market in two. Platforms with UK warehouses, like Shein at Cannock, will import in bulk, clear once and pay duty on declared value. The direct model will carry full classification, a per-consignment fee and a fiscal representative's cost. Commercially: a step up in clearance fees from 2028, and volume moving from air gateways to domestic last mile.117
Royal Mail, EP Group and a crowded last mile
Universal service reform is a parcel story: Ofcom said fewer Second Class rounds free resources for growth areas such as parcels. Royal Mail now has about 30,000 parcel points, targets 45,000 by 2030, and saw out-of-home volumes rise 40% last year. Royal Mail itself made an adjusted operating profit of just £5 million.1113
The competitors are scaling at the same time. Evri targets 1.4 billion parcels by 2030. InPost operates 14,623 parcel machines in the UK and claims the largest out-of-home network. Our reading: whoever wins the local fulfilment volume from Chinese platforms after 2028 wins the growth, and the fight will be over locker density and price per drop, not over international gateway capacity. For shippers that means continued downward pressure on domestic rates; for carriers, margin depends on density more than volume.1415
The government cleared EP Group's takeover with undertakings on headquarters, tax residency and the universal service, backed by a golden share. Royal Mail has promised to meet its targets by April 2027. A Royal Mail that misses letter targets while chasing parcel growth will face political pressure from a Prime Minister described by Mayer Brown as favouring more regulation, not less.121029
Two borders out: British sellers facing Brussels and Washington
A British web shop selling into the EU now pays the €3 duty per tariff line on parcels under €150, and from 1 November a €2 handling fee per item. Italy adds its own €2 fee from 1 October. Royal Mail warns that the €3 duty is not automatically refunded when goods are returned. The reset has not addressed this: the sanitary and phytosanitary (SPS) agreement under negotiation covers food and plant health, and the UK-EU summit planned for 22 July was postponed after Starmer's resignation. Burnham says he looks forward to a summit later this year, but no date has been set.23242728
On the American side, the UK's 10% Section 301 rate applies in addition to normal duties, while the EU's combined rate stops at 10%. On any product with a positive most-favoured-nation (MFN) duty, such as many apparel and footwear lines, a British seller now pays more than a French or Italian competitor shipping the same item. The EPD's commitments on paperless trade and pre-arrival processing, which would help parcel clearance, are rated undelivered.202122
Our reading: the UK's cross-border parcel exporters face the worst of both, a third-country treatment in the EU and a less favourable tariff than the EU in the United States. The commercial consequence is margin compression on outbound DDP parcels and more interest in holding stock inside the EU for European customers, which moves volume away from UK outbound gateways.2320
Beijing: engagement without a golden era
London's China line is also moving. Starmer visited Beijing on 29 January, the first prime ministerial visit in eight years, and secured a cut in China's whisky tariff from 10% to 5% and a 30-day visa-free travel offer. East Asia Forum notes that the UK's room for manoeuvre is limited by its security dependence on the United States, and that the old golden era rhetoric has not returned. Our reading: London will not target Chinese platforms by name, but will let customs and safety rules do the work, while Washington watches whether that is enough.333422
Key figures
£135UK customs relief threshold for low-value imports, to be removed by October 2028
4.2bnParcels measured in the UK market in 2024-25, up 7.1% (Ofcom)
+19.8%Growth in inbound international parcel volumes into the UK in 2024-25, mainly from China (Ofcom)
10%Section 301 tariff added to normal duties on UK goods entering the United States since 24 July 2026
The Budget confirms 2028 without an interim fee. Platforms keep moving top-selling ranges into UK warehouses, direct parcels from China decline slowly, and domestic last-mile competition intensifies.
Signal to watch A Budget document that repeats October 2028 and publishes the handling fee design, with no earlier date.
Upside for high-street retailers: an interim charge
Possible
Seeking revenue, the Chancellor announces an interim flat charge on low-value parcels, close to the retailers' £2.60 or the EU's €2, from 2027. Direct parcels fall faster; bulk clearance and local fulfilment gain.
Signal to watch A Budget line on a flat per-parcel charge or a new legislative vehicle for an early handling fee.
Downside: two borders harden
Less likely
The EU-UK summit slips into 2027 without progress on trade friction, and Washington keeps the UK's additive tariff while pressing London to align further on China. British exporters lose share in both markets.
Signal to watch No summit date by December, or a USTR notice that changes the UK's tier or adds sector tariffs.
Watchlist
1 Oct 2026Italy's €2 customs administration fee on items under €150 from outside the EU applies to UK parcels
28 Oct 2026Autumn Budget from Chancellor John Healey: watch for the low-value import timetable, handling fee and high street strategy
1 Nov 2026EU €2 handling fee per item on goods bought from non-EU online shops, including British ones
By end 2026Planned EU-UK summit and possible conclusion of SPS negotiations; closing of the Advent and FedEx acquisition of InPost expected in the second half
Apr 2027Date by which Royal Mail has committed to meet its reformed delivery targets, under Ofcom investigation
Oct 2028Latest date for removal of the UK £135 low-value import relief
Decisions
For the C-suite
Price the UK as a separate customs regime: build a 2028 cost model with full UKGT classification, a per-consignment handling fee and fiscal representative costs, and put re-opener clauses in multi-year contracts signed now.
Offer fiscal representation, or partner with a firm that does: joint and several liability for non-UK sellers' customs debts will be a scarce, priceable service, but only with strict data and credit checks.
For UK exporters to the EU, move EU-bound volume to DDP with IOSS and line-level tariff classification data, count the €3 per line and €2 per item in checkout prices, and test EU-based stock for high-return categories where the duty is not refunded.
Recheck American landed cost for UK-origin goods: the additive 10% on top of MFN makes some lines dearer than EU competitors, so consider EU or third-country stock points for apparel and footwear sold to the United States.
Bid for the bulk-inbound, local-outbound work that Chinese platforms are moving onshore: container clearance, Midlands warehousing and locker-dense last mile sold as one product.
Keep a second carrier on each domestic lane through peak 2026 while Royal Mail's service recovery is under Ofcom investigation.
Bottom line
Britain is the last big Western market still open to the duty-free small parcel, and the timing of its closure, not the principle, now decides who gains the volume and the margin.
Acronyms in this article
UKUnited Kingdom
Great Britain and Northern Ireland, outside the EU customs union since 2021.
UKGTUK Global Tariff
The United Kingdom's own schedule of import duty rates, applied since 1 January 2021.
VATValue Added Tax
Consumption tax charged at each stage of the supply chain and paid in the end by the consumer.
HMRCHM Revenue and Customs
The United Kingdom's tax and customs authority, which collects VAT and import duties.
EUEuropean Union
27 countries with a single market and a customs union.
BRCBritish Retail Consortium
The main trade association for UK retailers, from high-street chains to online sellers.
IOSSImport One-Stop Shop
EU scheme letting sellers collect import VAT at checkout on consignments up to €150 and declare it monthly in one country.
EPDEconomic Prosperity Deal
The UK-US framework of 8 May 2025 that cut American tariffs on some UK sectors; it is not a full free trade agreement.
USTROffice of the United States Trade Representative
The United States agency that negotiates trade deals and runs Section 301 investigations.
SPSSanitary and phytosanitary
Rules on food safety, animal and plant health; a UK-EU SPS agreement would remove most border checks on agri-food goods.
MFNMost-favoured-nation
The standard, non-discriminatory tariff rate a WTO member applies to imports from other members.
DDPDelivered Duty Paid
The seller pays duties and taxes upfront: the customer pays nothing at delivery.