Cheap Import Duty Relief Scrapped Six Months Early as Government Targets Online Marketplace VAT

The government has moved to scrap customs duty relief on cheap imports six months earlier than previously planned, bringing the change forward to October 2028. Announced on 23 June 2026, the move forms part of a wider package of tax and customs reforms that also targets VAT non-compliance among online marketplace sellers and fraudulent under reporting of sales on high streets.

The announcement was made by Exchequer Secretary to the Treasury Dan Tomlinson MP via Written Ministerial Statement HCWS141. HMRC published accompanying consultations the same day on online marketplace VAT liability and electronic sales suppression software, with a separate proposal on VAT reform for social housing land also launched.

Under current rules, goods valued at £135 or less entering the UK benefit from customs duty relief meaning no import duties are charged. That relief was originally due to end by spring 2029, following its abolition being announced at Budget 2025.

The government says it has since listened to representations from industry and has decided to bring the change forward by six months to October 2028 at the latest. The stated aim is to ensure fairer competition between high street retailers and online only sellers who source cheap goods from overseas.

What the change means for importers and retailers

Key details confirmed by the government:

• Affected goods: Any imported item valued at £135 or less, previously exempt from customs import duties
• New deadline: October 2028 at the latest, six months earlier than originally announced
• Legislative route: Government confirmed it will start legislating for the reforms in the current Finance Bill
• Consultation response: A consultation response setting out the new customs arrangements will be published shortly
• Rationale: To ensure "all goods are adequately controlled" while supporting fair competition and giving businesses time to prepare

The second major element of the package targets what the government describes as persistent VAT non-compliance among businesses trading through online marketplaces. Ministers say this costs an estimated hundreds of millions of pounds in lost VAT each year and puts honest businesses at a competitive disadvantage.

What the consultation proposes

The government is seeking views on:

A third consultation launched alongside the package focuses on electronic sales suppression where traders use payment systems to fraudulently under report income. The government says this type of fraud is unfair to legitimate businesses that report accurately.

Proposed approach

The consultation on Electronic Point of Sale and Mobile Point of Sale systems proposes:

• Software standards: Introduction of mandatory standards designed to prevent electronic under reporting of sales
• Target audience: Businesses, software developers, and wider stakeholders in the point of sale sector
• Government aim: To minimise burdens on compliant businesses while delivering secure, reliable record keeping that prevents fraud
• Status: Consultation, seeking views before finalising any approach

Separately from the high street measures, the government also launched a consultation on introducing a new zero rate of VAT for the sale of land intended for social housing construction. The proposal would remove a VAT barrier to delivering affordable homes and refocus existing relief specifically on land destined for social housing rather than general residential development.

Key points of the consultation

The government is seeking views on:

• New zero rate: A zero VAT rate would apply to the sale of land where construction of social housing is planned
• Current system: The consultation sets out how existing VAT rules on land operate and where barriers to social housing delivery arise
• Taxpayer cost: The government says any new relief must remain balanced and affordable for taxpayers
• Objective: Reduce barriers to building social homes and support more households into secure housing

The government framed 23 June's announcements as part of a continuing programme of tax and customs reform, building on commitments made in the HMRC Transformation Roadmap published in July 2025 and confirmed at Autumn Budget 2025.

Wider programme of changes announced the same day

Written Ministerial Statement HCWS141 also included a range of further measures:

What this means for businesses

For businesses importing low value goods, October 2028 now represents a firm planning horizon. The Finance Bill timetable means the legal framework will be in place well before that date, and the government's forthcoming consultation response is expected to give more detail on how the new customs arrangements will operate in practice.

For businesses trading on or operating online marketplaces, the VAT liability consultation is at an early stage and no legislative change has been announced. However, the direction of travel is clear: the government intends to extend marketplace liability and use the proceeds to reduce business rates costs for the physical high street.