The UK to Scrap Low-Value Parcel Tax Exemptions! Income-Tax Freeze Increases Pressure on Workers! Sharp Drop in Net Migration Driven by Falling Work and Study Arrivals!
- TBA
- 5 days ago
- 5 min read
The UK is poised to repeal its tariff exemption on packages under 135 pounds by March 2029
During the release of last week’s Autumn Budget, the UK government announced that it will abolish the current de minimis customs exemption for parcels valued under £135 by March 2029, and will launch a public consultation before the policy is formally implemented. This move is expected to have a major impact on Chinese cross-border fast-fashion platforms—such as Shein and Temu—that rely on rapid shipment of low-value goods.
Under the current system, international parcels valued at under £135 can enter the UK without customs duties, and customs checks are relatively relaxed.
According to UK fiscal-year data, the UK received £3 billion worth of low-value parcels over the past year. The majority came from China and were sent mainly by e-commerce platforms like Shein and Temu, which depend on low-cost direct shipping.
For years, this small-parcel tax-exemption policy has drawn criticism from the UK retail industry, which argues that it allows foreign e-commerce platforms to compete at lower prices, thereby “undercutting domestic retailers and harming fair competition.”
British media have reported that many retailers have, in recent months, repeatedly urged Chancellor Reeves to reform the system as soon as possible.
The UK’s move aligns with the European Union’s approach. Although the EU currently exempts parcels valued under €150, it is moving toward eliminating that threshold. The European Commission last week proposed accelerating the removal of the €150 exemption in order to protect the competitiveness of businesses in the 27-member bloc. Meanwhile, in August of last year, the United States fully abolished its tax exemption for parcels valued under $800.
To prevent customs and logistics systems from becoming overloaded after the exemption is removed, the UK government will conduct a public consultation beforehand to design an alternative mechanism.
The income tax freeze will push millions into higher bands
Chancellor Rachel Reeves has confirmed that the freeze on income-tax thresholds will be extended until 2028, and introduced a £26 billion package of tax increases in the Autumn Budget. Together, these measures mean that more people in the UK will face higher tax burdens in the coming years.
According to data from the Office for Budget Responsibility (OBR), as incomes rise with inflation while tax thresholds remain unchanged, more than 1.7 million people will be pushed into higher tax bands:
780,000 people will start paying income tax for the first time
920,000 people will be pushed into the Higher Rate band
4,000 people will fall into the Additional Rate band
In addition, based on estimates from wealth manager Quilter (assuming 5% annual wage growth and 3% inflation), all income groups will pay more income tax and National Insurance (NI) between the 2028/29 and 2030/31 tax years:
Salary £25,000: +£234 income tax; +£93 NI
Salary £50,000: +£1,166 income tax; +£186 NI
Salary £100,000: +£2,648 income tax; NI rises from £60 to £186
Even higher-income earners (£125,000–£150,000), who already face an effective marginal tax rate close to 60% due to the tapering of the personal allowance, will still pay roughly £1,279 more in income tax.
Quilter tax expert Rachael Griffin noted that if the personal allowance (£12,570) had been indexed to inflation since 2021, it would now be £15,714, while the higher-rate threshold (£50,270) would be £62,845. She warned that increasing the tax burden by “freezing thresholds” rather than raising headline tax rates undermines transparency in the tax system.
The OBR added that if thresholds were adjusted for inflation up to the 2030/31 tax year, the personal allowance would need to rise by £4,900 to £17,470, and the higher-rate threshold by £20,100. It estimates that the share of taxpayers paying higher-rate or additional-rate tax will rise from 15% in 2021/22 to 24% by 2030/31.
Separately, the UK will also restrict salary-sacrifice pension tax advantages starting in April 2029, meaning middle-income earners will face a “double squeeze”: any salary-sacrifice pension contributions above £2,000 per year will incur both employee and employer National Insurance charges.
For example, for an employee earning £60,000, sacrificing £6,000 into a pension would exceed the £2,000 limit by £4,000, requiring the employer to pay an additional £900 in NI contributions.
Sharp fall in UK net migration with drop in arrivals for work and study
According to newly released preliminary data from the Office for National Statistics (ONS), net migration to the UK fell to 204,000 in the year to June 2025—roughly two-thirds lower than the 649,000 recorded in the previous year. The sharp decline was mainly driven by a significant drop in non-EU migrants arriving via work and study routes.
The report states that arrivals of dependants on work and study visas fell by around 70%, making it the primary factor behind the drop in net migration. Prime Minister Sir Keir Starmer said the fall in net migration was “a step in the right direction.”
However, a separate set of figures released by the Home Office in the same period shows that the number of people seeking asylum has reached a historic high.
According to Home Office data up to September 2025, the total number of asylum applications reached 110,051, the highest since records began, although the backlog of pending cases fell by 36% compared with the same period in 2024. Among them, more than 36,000 asylum seekers were temporarily accommodated in hotels—an increase of 2% compared with September 2024.
In addition, in the year to September 2025, the number of people arriving in the UK after crossing the English Channel illegally in small boats rose by 53%, reaching 45,659, close to the 2022 peak of 45,774. This included 5,151 minors, of whom 2,700 were accompanied children.
Under the UK–France “one in, one out” pilot returns mechanism, 153 people have been returned to France, while 134 have been transferred from France to the UK. This includes one case of an individual who was returned on 16 October but crossed back to the UK again on 8 November by small boat (counted only once).
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