You can bring in other goods worth up to £390 (or up to £270 if you arrive by private plane or boat). If you go over your allowance you pay tax and duty on the total value of the goods, not just the value above the allowance.
Thats a total amount so not a single item situation. IIRC duty can be paid online up to 5 days before landing back in the UK to save time at the port.
An example for you…. £5000 UK priced watch bought in Gibraltar at say £3500. A £1500 saving, but add the tax at 20% = £3500 + £700, therefore now £4200 so a great saving still.
The alternative is to get caught at the port/airport and pay the tax plus a penalty and worse case scenario have the watch ‘impounded’ which is unlikely of course.