UK Import Taxes
Intro
The two primary import taxes levied on UK imports are VAT and duty. The rate of UK import VAT is currently 20% and the rate of import duty varies from commodity to commodity.
UK import taxes are calculated based on several factors including the type of goods, their value, the country of origin, and the applicable trade agreements.
UK Import VAT (standard rate 20%)
The standard rate of 20% applies to most goods and services imported into the UK.
Import VAT is a type of Value Added Tax (VAT) that is applied to goods when they are imported into a country, including the UK. It is similar to the standard VAT charged on goods and services sold within the UK but specifically targets imported products.
It ensures that imported goods are taxed in the same way as goods produced and sold domestically, maintaining a level playing field for businesses.
Import VAT can usually be reclaimed if an importer is UK VAT-registered and has physically paid import VAT on goods which are intended for resale or for business use. This is done by declaring the amount on the company’s regular VAT return.
Alternatively, following Brexit, the UK introduced Postponed VAT Accounting (PVA), allowing VAT-registered businesses to account for import VAT on their VAT returns rather than paying it upfront at the point of import. This system simplifies cash flow for businesses, as they can defer the payment and reclaim the import VAT on the same VAT return. PVA statements can be accessed by logging in to the company’s Government gateway account.
If an importer is not UK VAT-registered then the import VAT must be paid at the time of importation and is non-reclaimable.
UK Import VAT (Reduced Rate 5% and Zero Rate 0%)
A reduced VAT rate of 5% applies to specific items, often for goods related to energy efficiency, health, and safety. Generic examples include:
Energy-saving products: Insulation, solar panels, and other energy-efficient equipment
Mobility aids: Certain products designed for disabled people (e.g., stairlifts, wheelchairs)
Children’s car seats: Car seats and booster seats for children are also subject to the reduced rate
Certain goods are exempt from VAT, meaning they are charged at a zero rate. This applies to items that are essential or serve a social good. Generic examples include:
Children’s clothing and footwear: School uniforms, baby clothes, footwear
Books and printed materials: Books (excluding e-books), newspapers and magazines, educational books
Medical equipment: Prescription medicenes, medical aids for disabled people, equipment for the treatment of chronic illness
Note: There are other factors which can affect which VAT rate should apply. Sometimes there are qualifying conditions and the nature of the goods alone may be insufficient for applying a lower rate of VAT.
UK Import Duty
Import duty is a tax imposed on goods when they are imported into the UK and it is calculated as a percentage of the customs value.
Import duty is a tax that is non-reclaimable.
Calculation Factors
Commodity Code (HS Code): Every product has a specific code that determines the duty rate. The UK Tariff (customs database) lists these rates.
Country of Origin: The duty rate can vary depending on trade agreements between the UK and the country of origin. For example, products from countries with Free Trade Agreements (FTAs) may have reduced or zero-duty rates.
Customs Value: Import duty is generally calculated based on the customs value of the goods, which includes: cost of goods + shipping fees + insurance costs. Import VAT follows the same formula but is also chargeable on import duty.
The most common ‘valuation method’ is the transaction value of the goods (amount paid for the goods) and this valuation method is known as ‘Method 1’.
Note: The rate of exchange can affect the customs value. HMRC publish the foreign currency exchange rates each calendar month and the rate of exchange that would apply to a particular import consignment is determined by the physical arrival date of the goods.
Simplified Formula
IMPORT DUTY = PRODUCT VALUE + SHIPPING FEES + INSURANCE x DUTY RATE (%)
IMPORT VAT = PRODUCT VALUE + SHIPPING FEES + INSURANCE + IMPORT DUTY x VAT RATE (20%)
Illustrative Example
Data | Calculation | Value | |
Valuation for import duty | Value of goods + freight + insurance costs | = | £2,000.00 |
Import duty | 4.00% * £2,000.00 | = | £80.00 |
Valuation for import VAT | Value of goods + freight + insurance costs + import duty | = | £2,080.00 |
VAT (standard rate 20%) | 20.00% * £2,080.00 | = | £416.00 |
General Comments
While can be difficult and often not possible to determine what the exact import VAT and import duty calculation will be in advance, the above guidance should help you to determine what the charges will be with a high degree of accuracy.
When data is submitted to HMRC via a customs declaration the system will automatically calculate the exact amount of import VAT and duty chargeable at that time and the accuracy of the tax calculation is naturally reliant on the accuracy of the data inputted and so it is important to check your customs documents to ensure that this is the case.
Diclaimer: The information provided on this website is for general informational purposes only and should not be considered professional advice. While we strive to ensure the accuracy and relevance of the information, Unity Logistics does not guarantee its completeness, reliability, or suitability for any specific purpose. Users should consult with qualified professionals before making decisions based on the content found on this website. Unity Logistics disclaims any liability for actions taken based on the information presented here.