UK firms warn over US small parcel tax

UK firms are warning that new taxes on sending low-value parcels to the US are bringing uncertainty and potential price hikes for their businesses.

US President Donald Trump cutting the “de minimis” exemption means parcels valued under $800 (£592) will be subject to tax from Friday.

The Federation of Small Businesses has warned this will push up costs and create new barriers for small firms in the UK trying to compete with bigger brands.

“I knew it was going to be an absolute chaotic mess,” said Helen Hickman, who has stopped shipping wool to the US due to uncertainty about the costs.

Her hand-dyed wool company, Nellie and Eve, in Carmarthenshire, west Wales, used to make about 30% of its sales to the US – but she has put them on hold.

“I didn’t have enough information to be able to comfortably say that I could ship as normal,” she says. “There is no way of giving the customer an upfront cost.”

“I didn’t want products to be excessively charged or returned to me or lost,” she says.

The changes mean packages valued at under $800 will face the same tariff rate as other goods from their country of origin – for the UK that’s 10%.

Previously, the de minimis exemption meant goods valued at $800 or less could enter the US without paying any border taxes.

The exemption was criticised by the president and his predecessor, Joe Biden, as harmful to US businesses as it allowed cheap goods from abroad to be quickly shipped from the manufacturing source – with no warehouse stock or associated overhead costs.

US consumers used the exemption to buy cheap clothes and household items from online commerce sites like Shein and Temu, as well as from countries other than China.

But from Friday, “a typical $100 order could now incur an additional $30 to $50 in costs, depending on the final sales tax rate adopted by US authorities,” says Martin Hamilton, partner and head of retail at accountancy firm Menzies.

“On top of that, brands will face extra fees from shipping providers for handling duties and taxes,” he says.

Julian Boaitey started his African skincare brand Yendy Skin in 2021 and said the US market had grown for his company with 20% of sales coming from across the Atlantic.

He had planned to make the American market 80% of his business but says he is now exploring whether to manufacture a small range in the US or export larger volumes there and ship directly to consumers from the US.

“The most frustrating thing is we don’t know what to do,” he says.

“I think we’re all trying to figure out exactly what we’re going to do and how we’re going to go about it.”

Earlier this month, postal services around the world paused some deliveries to the US over confusion around the new rules.

The Royal Mail says it has been working with the US authorities and international partners so its services will meet the new US de minimis requirements when they come into effect on Friday.

Jay Begum sells handmade wooden decorations and gifts through her small London-based business Knots of Pine.

She had already noticed a slowdown in orders from the US since President Trump announced tariffs earlier in the year, because it made American customers more jittery in general.

But now the de minimis tax change is having an even bigger impact, and she has decided to no longer ship to the US at all.

As the country makes up about 20% of her sales, it’s a significant hit. “Now, I only have the UK market,” she says.

Jay will have to put more money into marketing to boost her domestic sales if she is unable to start selling to the US again.

“It would be a lot of work, to claw back the sales that I’m losing.”

Tina McKenzie, policy chair of the Federation of Small Businesses, says: “Small firms in the UK have already been hit by US tariffs, with just over two in ten saying they have stopped, or may stop, exporting there altogether.”

She added: “The US Administration’s decision to scrap the de minimis threshold, combined with postal carriers temporarily suspending deliveries in response, will push up costs and create new barriers.”

Statistics published by HMRC show that in 2023 around 28,000 small businesses – companies with less than 49 employees – exported goods to the US.

Sophie Arnold runs a small jewellery business, the Little Vintage Emporium in Edinburgh, and stopped shipping to the US when she heard the $800 exemption was ending.

She says it will have a negative impact on her business.

“America is our main market,” she adds.

Ms Arnold thinks “big hitters” in the antique world may have the finances to pay extra duties, but says smaller businesses like hers will suffer.

“I might have to look at returning into an office or doing other jobs and not running my business full time,” she says.

The FSB says it wants the UK government to provide more support.

Ms McKenzie says raising the Trading Allowance – a tax-free allowance for casual income – from £1,000 to £3,000 would “make it easier for people to sell more, helping them cope with the extra costs that tariffs will bring in”.

“The UK and US should be working together to make it easier for small businesses to reach customers across the Atlantic. That means clear, practical rules, time to adapt, and systems that keep trade moving,” Ms Mckenzie added.

The BBC has asked the UK Treasury for comment.

In April, the UK government announced it was reviewing its own de minimis rules.

Low-value imports, which are worth £135 or less, are currently exempt from customs duties.

Emma Wall, head of platform investments at Hargreaves Lansdown, said changing the de minimis exemption, which is more than 100 years old, makes sense.

“The market has changed with ecommerce being a huge part of our everyday lives,” she said, adding it would also mean fair competition for domestic businesses.