This is one of those awfully common "gray areas".
What really matters to them is anything you import into the UK and will be used or resold in the UK, rather than personal belonging you bring with you and will bring back out when you leave (including your clothes, toiletries, jewels, etc.).
In many places, there is however no explicit rule that says that the latter is not taxable (Have no idea if this actually the case in the UK or not), so by default, unless the total value is below the allowance (nearly impossible), you would be supposed to declare everything you bring in, pay all sorts of taxes on that, and then somehow claim the tax back on your way out.
If this applied to each and every traveller, of course it would be an enormous burden both on all travellers and on customs to process all of that.
So most countries, either formally or informally, accept that for visitors, personal belongings you bring in for the duration of your stay and will take with you when you leave are excluded from the scope of those declarations and taxes. Likewise for returning UK residents (in the reverse direction: stuff you would have taken with you and are bringing back).
So now, the issue is to make the difference between what they can reasonably admit to be yours and to be taken out again when you leave from what you may be importing and will stay in the UK (to give or sell), even if you'll be leaving the country again.
For high-valued professional items, it is common to use an "ATA Carnet" to avoid those issues (there's a list of items which is checked when you enter and when you leave the country). But this is cumbersome, and I don't even think you can use it for personal belongings.
So the goal is to make sure customs officers are not under the impression that you are importing those goods to remain in the UK. Some things will most definitely tick them off:
- Large quantities (you don't need 40 identical perfumes, do you?)
- Items which are obviously new
- Items still in their boxes (especially if they are still factory-sealed)
- Items which obviously don't match your level of revenue/lifestyle
- Possibly, items which are not your size (!), especially if you have assortments of sizes
- Recent invoices (unless they show the relevant tax has already been paid in whatever country you're entering)
- Any paperwork or other evidence showing you are due to deliver those items to someone for resale
What plays in your favour:
Any items you are actually wearing (!), within limits of course. Yes, I know Nicolas Hayek commonly wore 2 or even 4 watches, but still, if he went through customs like this he would probably have some explaining to do:
(Source: Jeweller Magazine -- hope it's the actual original source of that famous picture)
Items which are obviously used/worn or even old (of course antiques are another matter)
Items which you are likely to use/need during your stay
Quantities in proportion to your intended duration of travel
Most people travel with belong worth several thousand $/€/£ (just a bag, a few clothes, a phone, a laptop will quickly get you there) and nobody thinks about it.
Me and my partner have travelled extensively across lots of different countries, with belongings (clothes, electronics, watches) exceeding the tax-free allowances by a couple of orders of magnitude, and have never had any issue with this. Other than the occasional border officer alleging that some luxury item is a fake when it really isn't (yeah, they're supposed to detect fakes, but most of them are very bad at it), there's never been a question about the value of the items.
Note that there are other countries which may be more strict, and of course any regulated (cash, precious metals...) or forbidden items (drugs, fakes...) are a completely different story.