I am making a game that uses sprites of a low resolution (32x32 on average) and for some reason when i import my sprites into unreal engine they get screwed up!
Here is an image of the original sprite.
And here is the sprite directly after I have imported it into Unreal.
for example in the original image the tie is blue but when i put it into unreal it became almost grey and the blue pixels seemed to move across onto the suit
Try disabling sRGB and see if that helps. sRGB is a commonly used way to enhance that contrast of images, but it does more harm than good if you need the color and luminance values to be accurate. Also remember that there is an adjustments panel in the texture settings so that you can use to adjust the vibrance, saturation, etc. You can use that if you really need to, but it’s a bit of a last resort.
You will want sRGB on if the colors were hand authored, unless you also turned it off in your art tool. Compression is almost certainly the cause, it does not attempt to preserve individual pixels exactly, it is designed to reproduce photographic images with minimal perceptual loss.
I think the Userinterface2D compression preset is uncompressed.