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Government bans sale of Duty Free electronics and clothing from January

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The Government has published its new rules for duty free and tax free sales from 1st January 2021.

It is likely to cause significant problems for many retailers, and we may see the end of Dixons Travel and many clothing shops.

Dixons Travel to close following UK duty free changes

The good news for smokers and drinkers ….

There will be no duty charged on alcohol or tobacco products from January 2021. This applies irrespective of whether you are travelling to an EU or non-EU country.

This saves you:

  • £2.23 on a 75cl bottle of wine.
  • £2.86 on a 75cl bottle of Champagne or Prosecco.
  • £2.28 on six 50cl cans of 4% ABV beer.
  • £11.50 on a 1l bottle of 40% ABV spirits.

…… although I don’t know how many people really stock up on cans of beer at Heathrow to take to their holiday destination.

This applies to ports, airports, international rail stations and sales on ships, trains and planes.

The new personal limits on what you can bring home are covered below. Again, this applies to both EU and non-EU arrivals. You will, for example, be able to bring back three crates of beer without paying any duty. Good luck fitting that into the overhead locker.

The bad news for people who like ‘stuff’ you can’t smoke or drink ….

The Government is ending all other tax free sales from January 2021.

VAT is currently charged on goods taken into the EU but not on good taken outside the EU.

To make it easier for stores to price goods, they have generally set a blended price. A jumper which would be £100 if taken into the EU or (£100/6×5) £83.33 if taken outside the EU is sold for £90ish to everyone. If the customer is travelling to the EU, the shop quietly pays the VAT for them.

The Government was unhappy that customers travelling outside the EU were not getting the full benefit of the VAT saving. The saving has therefore been abolished.

All clothing, electronics, toys etc purchased at UK airports from January 2021 will include VAT and will presumably be sold at standard retail prices.

New UK duty free rules from 2021

VAT refunds are being scrapped for tourists

People leaving the UK to return home will no longer be able to reclaim the VAT they spend on items in the UK. This is likely to have a major impact on London shops which rely heavily on sales to non-EU visitors who can reclaim the VAT on exit.

The only exception is when an item is shipped directly from the seller to the home address of the customer.

Coming into the UK?

Here are the new inbound duty free allowances for people entering the UK:

Alcohol

  • 42 litres of beer
  • 18 litres of still wine
  • 4 litres of spirits OR 9 litres of sparkling wine, fortified wine or any alcoholic beverage less than 22% ABV

Tobacco

  • 200 cigarettes OR
  • 100 cigarillos OR
  • 50 cigars OR
  • 250g tobacco OR
  • 200 sticks of tobacco for heating
  • or any proportional combination of the above

Any other goods

  • £390 or £270 if travelling by private plane or boat

Conclusion

I’m not sure that subsidising smoking and drinking at the expense of clothing and electronics is a massive vote winner, especially amongst the young.

I don’t see any major changes to the shopping line-up at Heathrow, except potentially for a new monster sized cigarette shop. The core customers in the expensive boutiques are usually busy people who don’t have time to visit Harrods or Bond Street during the week, or tourists buying items they cannot find at home. Removing the VAT saving won’t make a major difference.

We may see the end of Dixons Travel. Buying a new iPhone at the airport and then having to keep it safe during your holiday isn’t worth the trouble if it doesn’t save you any money. The profit margin on IT equipment is often very low and Heathrow rents are very high.

I would also guess that stores at other airports with a less affluent customer base will suffer. Many of those stores do rely on value seekers rather than convenience seekers, and the value will no longer be there.

You can find out more about these changes on gov.uk here.

Comments (260)

  • AJA says:

    I’ve often wondered how those shopping centres with an airport attached make money. It can’t really all be based solely on saving the customer 20% VAT and any duty. I’ve never bothered to buy a phone or any electronics in Dixon’s “duty” free and the last time I tried to buy some swim shorts at LGW they didn’t have anything in my size or for less than £30. So I didn’t bother.

    I don’t know how much their business will be affected by this change. I hope there was some analysis of the potential impact on the economy.

    That said I guess I am not the target customer as i rarely stop to look at anything in the shops, I usually head straight to the lounge to get away from the noise and thousands of fellow travellers.

    Also even the booze and perfumes are over priced compared with any small supermarket or perfume shop in Spain.

    • ChrisC says:

      If it is just duty free they make the money they would make selling it on the High Street because on the High Street they paid the VAT to HMRC and were left with the Duty free price. Why the business model worked is because people can’t resist a saving so maybe bought things they never would have on the High Street. As people know even saving the VAT it wasn’t cheaper but most sensible people would confirm quickly online before buying. Going forward people won’t be as keen to buy last minute at the airport for the same price they can normally, so will probably have a big impact on some stores, unless they use the stores to sell sale items only.

      • AJA says:

        But VAT is paid by the consumer not the seller. The seller is merely a tax collector and passes the net VAT (offsetting any input VAT on their purchases) to HMRC. The true turnover (ex-VAT) /selling price determines what profit margin the store will achieve. The VAT saving only encourages the customer to buy in the airport rather than on the high street. The store doesn’t make any saving or increased turnover because the customer “saves” the VAT. A customer only chooses to buy if they feel the price they pay is good value.

  • Smid says:

    A couple of consequences:

    1) The overhead luggage bins are going to suffer, stuffed with masses of spirits and if someone actually tries to do a lot of beer, even wine, another big drama on boarding.

    2) The imbalance of amounts means there will also be large issues the other end as people try and bring in 4 litres to anywhere. Making UK travellers definite targets.

    3) Is there anywhere in the world with comparable spirit import amounts? Even 2 litres? Why is that? I’d not be surprised if there was a legal reason for that, and the government doesn’t like experts like lawyers.

    4) What about high value items like cameras and laptops? I’ve not had experience of this, but I guess the 400 odd quid limit is back, and don’t we have to prove we owned it on the way out to avoid duty on the way back? There’s going to be a lot more customs agents making a lot more checks.

    • blenz101 says:

      Well the UAE allow 4 litres in so it is not that unique, not exactly known for not taxing booze in the Middle East either.

      Has to be politically motivated and the reality is most people won’t take their full allowance. Supermarkets have driven the price of spirits down that much (combined with weak GBP) that the cost difference between buying at home and abroad will be in the low pounds for the average mainstream brand of Vodka, Whiskey or Gin.

    • flyforfun says:

      3) Is there anywhere in the world with comparable spirit import amounts? Even 2 litres?

      Australia has a 2.250 ( I think it’s that) limit so you can buy 2 x 1.125l bottles on the way in at their reasonably priced duty free stores.

  • Axil23 says:

    I am guessing this includes the various designer shops selling bags and watches? No more VAT back on them?

  • Colin says:

    This is misleading. Currently all goods sold within three EU are Duty Paid at the point of sale and therefore are subject to further import duties. This allows the free movement of good between EU countries. Duty has always been paid on imports form Non EU countries, hence the various channels upon arrival at LHR. All goods now brought into the UK will be subject to import duty no matter where you travel from. In the past you had to produce your boarding ticket to show that you were travelling to a non EU designation to receive the tax free sales at LHR, but this became too complicated so now all gods sold are me at to be cheaper that the high street price. In realty they are not and you can get a much better deal in the high street.

    • Andrew says:

      Shops do still ask for boarding passes for all sales. Tax free prices are offered at the high end designer shops and watch brands. Perfume is generally no cheaper than when places like Debenhams are doing a promotion. So it depends what you’re buying. I bought a Fendi bag last year with a retail price of £3500, flew to Madrid for the weekend and more than made back the cost of the holiday in what I saved than buying it at Harrods.

    • Martin Louis says:

      So no more ferry crossings to pile up your car with loads of good well priced wines in France then.

      • Andyf says:

        Could you claim these amount per person. So instead of 18litres per couple we could go to France and bring back 36 litres between the two of us. A complete pain in the arse after cancelling our wedding this year and moving it to next year. We had planned to make a cost saving by buying our wine in France.

        • Blenz101 says:

          Yes, the allowance has always been a personal allowance. The allowance is supposed to be for personal consumption.

          Even when we were in the EU you could only import (without limit) for your personal consumption. If you were suspected of bringing back to sell on you would could still be stopped and duty could be levied (if they could prove).

  • ChrisC says:

    Is it possible to buy a cheap one way ticket collect a ring and then not fly? I know it’s frowned upon but I had promised my wife a ring from Tiffany’s when we were supposed to fly back in April for our anniversary, she said she was happy to wait back then. Luckily it isn’t one of the really expensive ones but it is still ~£350 cheaper.

    • Rob says:

      Easier just to fly for a cheap day trip.

      • ChrisC says:

        Still got a bit of Covid fright for getting on a plane, as I get some mild asthma with my hay fever and get wheezy, so really don’t want to catch it. I’ve got four 2-4-1s and £8.5k in BA vouchers so would love to jump on the plane to somewhere exotic but with so many idiots these days not taking it seriously it does concern me. A day trip to save £350 I’d rather go and pay full price.

    • blenz101 says:

      Yes, or even buy yourself a fully flexible ticket, offload yourself, then claim a refund on the ticket. There are guides on Flyertalk about getting yourself back landside either escorted or using the train.

      Doubt it is legal and some would say certainly not ethical to do this though.

    • Lady London says:

      No.

  • KBuffett says:

    This is disappointing news. What are the best EU countries to buy? I guess we would be able to claim back most of the VAT on purchased in the EU if/when we properly leave.

    • blenz101 says:

      What is it you are looking to buy? Are you talking airport duty free at the airport or buying in country in terms of value and then looking to claim VAT back?

  • Tilly says:

    Such a shame. I like to stock up on my Clarins and Jo Malone whilst flying out as they are genuine savings. Plus the occasional treat from Prada, Gucci etc. if I had my eye on something which I’ve always found in duty free.

    • Josh says:

      Clarins is usually a good price at Debenhams when on promotion and they sometimes have free gifts as well…beauty points on top too.

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