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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 (254)

  • Andrew says:

    For those wanting to make hay before the end of the year – remember that domestic flights also count if you’re buying from a retailer that offers tax free prices for EU passengers, so a day trip to Manchester from LHR could be worth it if you’re thinking of buying something expensive and no risk of quarantine!

  • Sukes says:

    I don’t think anyone has yet commented that the current allowances apply to UK but this Gov press release states the new regime applies to GB only. There is no mention of any changes to N Ireland. There is also no mention of what happens if you use the new allowance in GB then travel into NI. This + Timing of the PR is ‘interesting’ in the context of politicking over Boris’ internal mkt bill.

    • RussellH says:

      In this sort of situation I would always suspect lack of thought or even idiocy rather careful wording. The person who wrote it probably initially wrote “England” or “English” and a colleague told them to change it to “Graet Britain” or “British”. As far as I know, there is no adjective for “from or pertaining to the UK”

  • T W says:

    Thank you Rob! Does that mean you won’t get saving on watches either from 2021?

  • Tony says:

    Thinking about this decision the bet effect will be lots of retailers will leave airports and the rents they pay has effectively subsidised the landing fees. These landing fees will have to increase resulting in another nail in the coffin of cheap air fares.

    • Blenz101 says:

      In fairness, airports will adapt and the space will get taken up. Given the time needed between checkin and departure there is a captive audience with money to spend.

      For some airports there is a chance to considerably improve the food and beverage offer for example.

      • John says:

        Or the lounge offer…

        • Tariq says:

          Or vertically integrated retailers that can afford to discount their goods to the equivalent price. Potentially we see the end of general retailers like Dixons Travel and the Apple Store moves into their space…?

          • Blenz101 says:

            Well, many of the high end brands already present at the airport already operate that model so perhaps they will take the hit on their huge margins given the type of audience an airport provides. Apple won’t be one of them though. They never discount and their stores are basically marketing showrooms rather than profit centers.

            Either way – the space will get taken. Even if it takes some time to see what the average passenger now looks like with what could be a heavy shift towards leisure.

    • Anuj says:

      What nail ? Ryan air recently had a £5 sale and yesterday I saw a post somewhere for a one way flight for £2.10

  • Novice says:

    I’m disappointed with the Gov for this decision because they shouldn’t be encouraging smoking or alcohol abuse. I’m allergic to smoke; if I get a whiff of second-hand smoke I get the absolute worst sore throat and start coughing.

    Frankly, smoking should be banned because why should I have to injure my lungs on behalf of someone else’s bad lifestyle habits.

    All the smokers I know (which are only few in number) are banned from smoking around me. If it were snowing or raining outside, I’d still kick the smoker out to smoke.

    That’s one saving grace of alcohol. At least, its use doesn’t affect others’ healths. But it is still a contradictory message from the Gov as I thought they wanted to improve ppls’ healths.

    • J says:

      If that isn’t an exaggeration I’m very sorry for you as that must be very inconvenient? Do you also object to vaping and the new heated tobacco sticks? I find the latter an acceptable alternative. As a smoker I’m keen to avoid offending but also lucky enough to live somewhere where smoking is still allowed in bars, clubs etc. A cigarette and a drink is a welcome pleasure and one of the only things I’d agree with Mr. Farage on.

      • Novice says:

        @J, it wasn’t an exaggeration. Once I ended up in hospital with a negative reaction but that was years ago. Now if I see someone smoking I just hold my breath till I pass the person but thankfully it isn’t a huge problem where I live. And, Vaping seems to not give any severe reactions although I can’t say I have really tried to inhale the vaping. But, one of my uncle smokes so I know the difference in smell. When he vapes, the smell isn’t as bad. It’s weird. Although my parents don’t smoke thankfully, my mum loves the smell of it.

    • Optimus Prime says:

      Wait till cannabis is legalised…

    • Novice says:

      A person can’t help if they have a natural reaction to something and vaping thankfully doesn’t have the same effect on my health.

      @Peter North, you seem like an idiotic stain on this world. Always bashing me in comments. Who the hell are you to judge me? My comments are relevant to the article, yours are not.

  • Henry Young says:

    Seems Bicester Village needs to do a better job of paying off government ministers 😉

  • HAM76 says:

    This all sounds like what we have in HAM. No duty free shopping available at all, yet, Heinemann, one of the major former duty free shops is thriving. People are still buying perfume, candy, spirits, etc.

  • Riccatti says:

    20% of nothing will be nothing.

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