A Comprehensive Guide to UK Import Tax and Duty

What Are Import Duties and Taxes?

When goods are imported into the UK, they are subject to UK import tax and duties to regulate trade and generate revenue. These charges typically include:

• UK Customs Duty: A tariff based on the product’s type and value.
• VAT (Value Added Tax): Calculated on the total landed cost, including the value of goods, shipping, and duty.

Do All Goods Require Import Tax?

• Goods imported from countries with free trade agreements or under special schemes, like the GSP (Generalised System of Preferences), may benefit from reduced or zero customs duty.
• Items valued at under £135 may be exempt from UK customs duty, but VAT will still apply.

How to Calculate UK Import Duty and Tax

The total import charges in the UK are calculated using two primary methods: CIF (Cost, Insurance, and Freight) and FOB (Free On Board). Let’s explore both.

1. CIF (Cost, Insurance, and Freight)

This method includes the cost of goods, shipping, and insurance when calculating the duty and VAT.

Example Calculation:

• Goods Value: £5,000
• Shipping & Insurance: £500
• Subtotal for Duty Calculation: £5,500
• Duty Rate: 3.5% (for the product) → £192.50
• Subtotal after Duty: £5,692.50
• VAT (20%): £1,138.50
• Total Landed Cost: £6,831

Using the CIF method results in higher import charges due to the inclusion of shipping and insurance in the calculation.

2. FOB (Free On Board)

This method excludes shipping and insurance from the duty calculation, resulting in lower costs.

Example Calculation:

• Goods Value: £5,000
• Shipping & Insurance: £500
• Subtotal for Duty Calculation: £5,000
• Duty Rate: 3.5% → £175
• Subtotal after Duty: £5,175
• VAT (20%): £1,035
• Total Landed Cost: £6,710

The FOB method is less expensive since shipping and insurance costs aren’t included in the duty calculation.

Breaking Down Import Charges in the UK

UK Customs Duty

The amount of UK customs duty depends on the product’s classification under the Harmonized System (HS) Code. Each product has a specific HS code that determines the duty rate.

How to Determine UK Customs Duty:

• Find the correct HS code for your product.
• Use the UK government’s online tariff tool to calculate the duty percentage.
• Ensure accurate classification to avoid fines or delays.

Pro Tip: Work with a freight agent or customs broker to ensure correct tariff coding.

VAT (Value Added Tax)

VAT is calculated on the total landed cost, which includes:

1. The value of the goods.
2. Shipping and insurance costs.
3. Customs duty.

Example:
If the total landed cost (goods + shipping + duty) is £5,692.50, VAT at 20% will be £1,138.50.

Paying UK Import Duty and VAT

Once your goods arrive in the UK, your freight agent or customs broker will inform you of the total import charges. They will typically provide an invoice, which you can settle before your goods are released.

Claiming VAT Back (For VAT-Registered Businesses)

If you’re VAT-registered, you can reclaim VAT on imported goods during your VAT return. HMRC provides a Certificate C79, which serves as proof of VAT paid on imports.

Special Cases and Tax Relief

Goods for Resale vs. Samples

• Resale Goods: Subject to both duty and VAT.
• Samples: May qualify for duty and VAT relief if they are of negligible value and used for obtaining orders.

GSP Scheme (Generalised System of Preferences)

The GSP grants reduced or zero duty on goods imported from certain developing countries. To benefit, ensure your supplier provides a Form A (Certificate of Origin).

Example: A product imported from a GSP-eligible country may be duty-free, significantly reducing your total import charges.

FAQs About UK Import Tax and Duty

1. How is UK import tax calculated?

UK import tax includes customs duty and VAT. Duty is based on the product value and HS code, while VAT is calculated on the total landed cost (goods + shipping + duty).

2. What is the difference between CIF and FOB calculations?

• CIF: Includes shipping and insurance in the duty calculation, resulting in higher costs.
• FOB: Excludes shipping and insurance, leading to lower duty charges.

3. Who pays UK customs duty?

The importer (buyer) is responsible for paying UK customs duty, unless otherwise agreed with the seller.

4. Are all goods subject to duty?

No, goods under £135 in value may be exempt from duty, but VAT still applies. Additionally, goods from GSP-eligible countries may benefit from reduced or zero-duty rates.

5. Can VAT be reclaimed on imports?

Yes, VAT-registered businesses can reclaim VAT paid on imports during their VAT return using the HMRC Certificate C79.

Conclusion: Simplifying UK Import Tax and Duty

Calculating UK import tax and duty doesn’t have to be intimidating. By understanding the basics of UK customs tax, HS codes, and VAT calculations, you can accurately estimate your import costs. Whether you’re importing goods for resale or personal use, working with a reliable freight agent and staying informed about the latest regulations will help ensure smooth transactions.

If you’re unsure about your obligations, consult with a customs broker or use the UK government’s online tariff calculator for accurate duty rates.