When you import goods into the UK, there are two main types of tax you’ll usually pay:
- Import Duty
- Import VAT
In this post, we’ll break down how each one is calculated so you can get a clear idea of what HMRC will charge on your next shipment.
Import Duty
Import duty is the tax charged on many types of goods entering the UK. You may also hear it referred to as Third Country Duty or the Most Favoured Nation (MFN) rate.
The UK generally has a fairly liberal duty structure — many products attract duty rates as low as 2%, and plenty sit at 0%. There are ways to reduce duty in certain situations (we’ll cover those in future posts), but for now let’s look at the basics.
Import duty is calculated using the Customs Value. For a simple sale of goods, the Customs Value usually includes:
- Cost of the goods
- Cost of transport up to the UK border
- Cost of insurance up to the UK border
- Any other charges or surcharges incurred up to the UK border
Example
- Cost of goods: £10,000.00
- Transport to UK border: £4,000.00
- Insurance: £157.00
- Fuel surcharge: £150.00
Customs/Landed Value: £14,307.00 Example duty rate: 2% Total import duty: £286.14
Import VAT
Import VAT is charged on most goods entering the UK, except for certain categories such as some foods and drinks.
To calculate the VAT value, you start with the Customs Value and then add a few additional costs. Here’s the simplified build‑up:
- Customs Value
- Import duty
- Transport within the UK to the first point of delivery
- Any other UK‑based charges billed to the importer (e.g., destination terminal handling, customs clearance fees, quay rent)
Example
- Customs value: £14,307.00
- Import duty: £286.14
- Destination terminal handling: £500.00
- Customs clearance fee: £100.00
- Inland transport to consignee: £800.00
Value for import VAT: £15,993.14 Example VAT rate: 20% Total import VAT: £3,198.63
Final Thoughts
As you can see, the basic method for calculating duty and VAT isn’t as intimidating as it first appears. However, the examples above are simplified and based on HMRC’s Method 1: Transaction Value; real‑world imports can involve additional complexities such as royalty payments, commissions, and interest.
If you want to explore HMRC’s official guidance, you can find it here:
- Customs Value: Working out the customs value of your imported goods – GOV.UK
- Import VAT: Working out the VAT value using the customs value of the imported goods – GOV.UK
We hope you found this nugget of learning useful. We’ll be diving deeper into valuation methods, and many other customs and freight topics, in future posts.