What: Temu's UK sales more than doubled to $171mn in 2025 while the duty exemption on small parcels from China, worth over £3bn in 2024-25, stays open until 2028.

Why it is important: The UK keeps its customs exemption until 2028 while the EU has charged €3 per parcel since July 2026, a fee that has already hit Shein's European sales and margins, so UK retailers face the full price advantage of low-cost platforms for two more years.

Temu's UK sales more than doubled to $171mn in the year to December 2025, a 171% rise. The growth reflects the appeal of cheap goods sold directly to consumers and the use of a customs duty exemption for parcels worth less than £135. More than £3bn worth of such packages were shipped from China to the UK in 2024-25, up from £1.3bn the previous year, according to HM Revenue & Customs.

The Treasury has said the exemption will close in 2028, but high street retailers complain they will remain disadvantaged for two more years. In July, the EU introduced a temporary duty of €3 per item bought online below €150, and has promised an overhaul of its low-value import regime from 2028.

Temu earns revenue by providing transaction and marketing services to third-party merchants, largely in China, which keeps its UK footprint small. It had 31 UK employees and $6mn profit in 2025, against no employees and $3mn in 2024. Its UK entity paid $985,000 in corporation tax in 2025. The Fair Tax Foundation says less than 2% of PDD Holdings' corporation tax is paid outside China, while Temu says its contribution includes VAT and other taxes.

IADS Notes: The EU's phased response gives a reference point for the UK, where the customs exemption is set to close only in 2028. In November 2025, the EU moved to end the €150 customs duty exemption, with China accounting for over 90% of low-value parcels in 2024 (Forbes, November 2025). The following month, a €3 fee per parcel from July 2026 was approved, aimed at Shein and Temu and intended as a temporary step until a broader customs framework in 2028 (WWD, December 2025). Italy's earlier national €2 levy showed the limits of acting alone, as logistics flows were rerouted through other member states without curbing import volumes (Financial Times, January 2026). The EU-wide measure has applied since 1 July 2026, with mandatory product identifiers and a handling fee of €2 to €4 due on 1 November 2026 (Ecommerce Europe, August 2026). The effect on platform economics is already visible: Shein's second-quarter margin fell to 2.1% from 6.2% a year earlier, and its European sales dropped after it raised prices and cut advertising ahead of the €3 fee (Reuters, September 2026).

Temu's UK sales more than double to $171mn