The European Union has politically agreed on the most ambitious overhaul of its customs framework since the customs union was established in 1968. Across the Channel, the United Kingdom is pursuing its own, though earlier-stage, customs modernisation agenda, the first since its withdrawal from the EU. Together, these reforms will reshape how goods move across Europe’s borders.
This briefing is the sixth in our Customs Reform Unpacked series. In parallel with the EU’s own overhaul of its customs rules, the UK is removing the customs duty relief for low-value imports (LVIs) and introducing a mandatory new customs arrangement, expected to go live in October 2028. These changes will fundamentally alter how LVIs are declared, taxed, and controlled at the UK’s external border, with new obligations placed directly on sellers and marketplaces instead of the consumer. The LVI reform is the most advanced element of a broader UK customs modernisation programme, which is also exploring trade digitalisation and the future of customs authorisations, piloting AI tools, and taking steps to raise the quality of customs intermediaries.
Where this fits
Similar to what is already live in the EU, the UK government is pursuing the removal of the customs duty relief for LVIs, which are imports of goods with a value not exceeding £135 per consignment. Currently, consignments valued at £135 or less can be imported into the UK without paying customs duty. The relief was designed for a different trading environment, where the cost of collection outweighed the customs duty collected, but the rapid growth of overseas sellers and online marketplaces has driven a significant increase in LVI volumes, and with it, increased risks of non-compliance and unfair competition with domestic retailers.
The UK customs reform objectives mirror in part those of the EU, but the two reforms are distinct in their measures and timelines. The UK government is proposing the introduction of a new mandatory LVI customs arrangement under which online sellers and marketplaces will be liable for customs duty and be required to register with HMRC, submit item-level data in advance, and pay customs duty on a quarterly basis. An additional per-consignment charge will be introduced to cover the administrative cost of the new system. The LVI reform sits within a wider customs modernisation programme that is reviewing not just what is taxed at the border, but how goods are declared, who is trusted to declare them, and what data underpins the system.
Key changes introduced by the reform
- Removal of the LVI customs duty relief and introduction of a mandatory LVI arrangement. Goods entering the UK in consignments valued at £135 or less will no longer benefit from customs duty relief. Instead, those goods will be subject to customs duty under the UK Global Tariff, and traders will need to classify goods using the full 10-digit commodity code; like the EU, the UK has abandoned the idea of a simplified tariff “bucketing” system. The new arrangement is limited to these LVIs – it does not apply to all distance sale imports, and goods in consignments valued above £135 will continue to move through standard import customs procedures. Whether the £135 threshold will be based on intrinsic value or customs value is yet to be confirmed. Not all low-value goods will fall within the new LVI arrangements: goods subject to excise duty, trade defence measures, other-than-value-based tariffs, or import restrictions, as well as goods for which a relief, suspension, or quota is claimed, will continue to be subject to standard customs procedures.
- Shift in customs duty liability. Online sellers and marketplaces will be liable for customs duty on LVIs. This consolidates compliance responsibility at the point of sale, reflecting the fact that online sellers and marketplaces already hold the most complete product information and bear responsibility for VAT collection. Online sellers and marketplaces will be required to register with HMRC, submit item-level data in advance of goods entering the UK, and pay customs duty directly to HMRC on a quarterly basis, with the option to align payments with VAT return cycles. HMRC will issue a unique reference number for each submission, which will be used to clear goods.
- Introduction of a fiscal representative. Non-established online sellers and marketplaces will be required to appoint a fiscal representative; this is a UK business that assumes joint and several liability for customs debts arising from the seller’s LVI declarations under a new section 19A of the Taxation (Cross-border Trade) Act 2018. This goes beyond the existing indirect customs representative role, both in scope and in liability. The government has acknowledged concerns about market availability and cost, and further provisions will follow in secondary legislation.
- UK handling fee. The government will introduce an additional administrative fee on LVI consignments to cover the administrative cost of the new arrangements, similar in concept to the EU’s handling fee on e-commerce imports. The fee will sit on top of customs duty, and its design and amount are still under consideration.
- VAT interaction remains under consideration. The government has not yet finalised how VAT and customs duty collection will interact under the new LVI arrangements. It is assessing several models, including retaining the existing point-of-sale VAT collection or moving to an integrated system that calculates VAT on a duty-inclusive value. Further detail will follow after continued stakeholder engagement. The new LVI arrangements will apply to both B2C and B2B consignments, though the government’s VAT proposals have so far focused primarily on B2C imports.
- New standards for customs intermediaries. The UK government is taking steps to raise the quality of customs intermediaries across the board. This initiative is not limited to e-commerce or LVI-related customs activity. On 23 June 2026, HMRC published a consultation on the introduction of mandatory registration for all customs intermediaries who submit customs declarations on behalf of traders, covering both imports and exports and all types of customs activity. This complements a new Customs Intermediaries Standard, published in June 2026 in partnership with the British Standards Institution, which sets best-practice expectations for the sector and will be supported by a voluntary certification scheme.
When does this apply?
The UK government has accelerated its timeline for removing duty relief for LVIs. The new customs arrangements are now expected to go live in October 2028, six months earlier than originally planned. The primary legislation is making its way through Parliament as part of the Finance Bill 2026–27; the detailed operational requirements will follow in secondary legislation.
Looking beyond LVIs, HMRC and HM Treasury launched a broader Call for Evidence on Customs Modernisation on 23 June 2026, inviting industry views on trade digitalisation and the future of the UK customs regime. While separate from the LVI reform, this signals a wider modernisation agenda that businesses should monitor.
Three reasons why this matters for your business
Reason 1: If you sell or facilitate the sale of LVIs into the UK, you may become the liable party. Under the new LVI arrangements, if you are an online seller or a marketplace facilitating the sale, you will be directly responsible for registering with HMRC, submitting item-level data, and paying customs duty quarterly based on the UK Global Tariff. The consumer and the carrier step out of the picture. You should review whether your systems can generate and submit the required item-level data to HMRC, assess the financial impact of customs duty and the handling fee on your product lines and pricing, and revisit your delivery terms and fulfilment models accordingly.
Reason 2: If you are not established in the UK, you will need a fiscal representative, which comes with costs and risks. Non-established online sellers and marketplaces will be required to appoint a fiscal representative who will be jointly and severally liable for customs debts arising from their LVI declarations. This is a new relationship to set up, negotiate, and manage, and it will carry a cost, since the fiscal representative is taking on material liability exposure. For UK-based businesses considering acting as fiscal representatives, the risk profile is significant and will need to be reflected in commercial terms, indemnities, and due diligence on the sellers they agree to represent. You should begin exploring fiscal representative options well ahead of October 2028, and ensure that the contractual arrangements clearly allocate risk, liability, and data-sharing obligations between you and your representative.
Reason 3: The UK and EU reforms are converging in objective but diverging in design, meaning that you cannot assume compliance with one satisfies the other. Both the UK and the EU are removing their customs duty reliefs for low-value consignments and shifting accountability to online sellers and marketplaces. But the two regimes differ in important ways, with different data requirements, compliance touchpoints, liability structures, and enforcement mechanisms. If you trade into both markets, you should map where your EU and UK customs obligations overlap and where they diverge, and ensure your compliance teams and systems can accommodate both regimes without assuming that meeting one set of requirements will satisfy the other.
About the Reed Smith International Trade team
Reed Smith’s International Trade team is known for its deep experience in customs law, advising clients across the globe on the full spectrum of customs and international trade matters – from regulatory compliance, customs classification, origin, and valuation, to anti-dumping proceedings, sanctions, and export controls. Our team represents clients in customs litigation before courts and regulatory authorities worldwide, and advises multinational businesses on complex cross-border trade projects in every major jurisdiction. If you have questions about how the reforms discussed in this briefing may affect your operations, please reach out to your usual Reed Smith contact or one of the team members below.
This briefing is based on publicly available EU and UK legislative proposals and official policy documents as at the date of publication. The legislative process has not yet been fully completed, and key operational details are still to be determined. Timelines, thresholds, and specific requirements discussed in this briefing may change as the legislative process advances. Readers should verify any information against the final legislative texts and official authority guidance before making compliance or business decisions.
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