Online returns and refunds: what UK small shops must get right

If you sell online, your returns policy is not just a page in the footer. It is a legal document, a trust signal and, if it is wrong, a liability. The rules are official and fairly short, but many small shops get a detail or two wrong. This post walks through what GOV.UK says, what the penalties look like, and a checklist you can finish this week.

The 14 day cancellation right

For most goods sold at a distance (online, by phone, by mail order), customers can cancel within 14 days of receiving the item. They do not have to give a reason. GOV.UK's guidance says that after telling you, they then have another 14 days to send the item back.

The key point many shops miss is what happens if you never tell customers about this right. In that case, GOV.UK says they can cancel at any time within 12 months. If you tell them within those 12 months, the 14 days start from the day you tell them. So a missing or buried cancellation notice can leave you with a very long tail of possible returns.

Before an order is placed, GOV.UK also expects you to give your business name, address and contact details, the price including all taxes, payment and delivery arrangements, and how to cancel, including a standard cancellation form where the customer can cancel. This should be in a format the customer can keep, such as an email.

What you must refund, and when

GOV.UK's guidance on returns and refunds sets out the following for distance sales:

• You must refund within 14 days of receiving the returned item.
• The refund is the price of the item, with no deductions for fees, unless the item has been used or damaged.
• If the customer paid for delivery, you must refund the cost of standard delivery. If they chose a more expensive option, only the standard cost is owed.

The same guidance says customers may handle goods as they would in a shop, for example trying on clothes or opening packaging to look at the item. A customer doing that is not, on its own, a reason to refuse a refund.

Faulty goods are a separate right

Do not mix up change of mind returns with faulty goods. For faulty, misdescribed or unsuitable items, a full refund must be offered. GOV.UK says that if a faulty item is returned within 6 months, you must repair or replace it, unless you can prove the fault was not there at purchase. After 6 months, you can ask the customer to show the fault existed at purchase. Claims can be made for up to 6 years (5 years in Scotland). Sale items carry the same rights as full price items, and the guidance says restricting these rights, including with signs saying returns are not accepted, is illegal.

Items where the 14 day right does not apply

For distance purchases, GOV.UK lists items where you only need to refund if they are faulty:

• Personalised or custom made items
• Perishable items, such as frozen food or flowers
• Newspapers and magazines
• Unwrapped CDs, DVDs and computer software
• Sealed items that cannot be returned for health or hygiene reasons once opened

Separately, the distance selling rules do not apply at all to goods and services worth £42 or less, and there are other exclusions, such as gambling, vending machines and passenger travel tickets.

If you sell custom or made to order products, such as printed goods or bespoke orders, make the exception visible before checkout, not just in the terms. If your online shop is built on a platform that treats every product the same, check that it can show different return wording for different products. This is one of the things we look at when building ecommerce sites.

What if you charge for returns?

The GOV.UK pages I read do not say who pays return postage, so do not assume either way from them. If you plan to charge, make it very clear before the order, and take legal advice or check the official guidance for your situation.

It is also a commercial decision, not just a legal one. A Trustpilot survey of 2,000 UK online shoppers (fieldwork 17 to 21 November 2023, run by OnePoll) found that 58% said they would not use retailers that charge to return items, and 67% agreed a returns policy affects how much they trust a retailer. Trustpilot has its own interest in the subject, and what people say in surveys is not always what they do at the till, so treat this as a signal rather than a rule. Still, for a small shop that lives on repeat custom and reviews, it is worth weighing a charge of a couple of pounds against a lost customer.

Why it matters more now

Consumer enforcement has become more direct. A Mayer Brown review of the Competition and Markets Authority's first year with its new consumer powers says it can impose fines of up to 10% of global turnover, and that between April 2025 and April 2026 it ran 14 investigations and secured over £1.3 million in consumer refunds. The cases it describes were about hidden fees and pre-selected extras at checkout, not returns policies, and the big names involved are far larger than a typical small shop. But the same review says compliance is expected from all consumer facing businesses, and that checkout design is in scope. The sensible takeaway is to keep your checkout and policy honest and easy to follow. We covered one of those cases in our post on hidden fees and fake reviews.

On GOV.UK, the penalties for breaking the distance selling rules include being made to provide the goods or services as agreed, paying compensation, or an unlimited fine or prison sentence.

A checklist for this week

• Read your returns page against the points above. Does it say customers have 14 days from delivery to cancel?
• Check that the cancellation right and a cancellation form are provided before the order and again in the confirmation email.
• Make sure you refund within 14 days of receiving a return, and that standard delivery is included in the refund.
• Remove any wording like "no refunds" or "no returns accepted" that could be read as restricting statutory rights.
• Mark custom, perishable, sealed and similar products clearly on the product page.
• Keep faulty goods separate in your wording: repair, replace or refund, with the 6 month rule explained fairly.
• If you charge for returns, state the amount at checkout, not afterwards.
• Test the process yourself: place an order, cancel it, and see how long a refund really takes.

If your shop is slow to refund because stock and payments are handled by hand, process automation can usually take the repetitive steps out. Policies and checkout wording are legal matters, so if you are unsure about your particular products, check with a solicitor or Trading Standards.