The thought of calculating UK import duty and taxes fills many with dread, but it is not such a difficult task once you understand the basics.

Let’s take a look at how to do it, beginning by looking at what duties and taxes are.

Import duty and taxes – what are they?

Whenever goods are purchased outside of the EU, duty and tax has to be paid to the UK Customs department.
Note that goods travelling within the EU will not have VAT levied against them; normally VAT is only charged on the cost of the shipping or carriage.

Once this is done, your goods will be released to you. Nearly all shipments of this type are subject to UK Duty and VAT charges so whenever you are calculating the cost of importing goods from overseas, these two additional charges need to be taken into account. Now we will take a look at each of the two costs individually.

UK Duty

How much import duty you will pay will depend upon the value and type of goods being imported as every product has a different duty percentage rate. In order to calculate the percentage of duty payable you can ask your UK freight agent or work it out yourself using the online tariff from the  UK government website . Much will depend on how the goods are classified and described so you will need a detailed description of the product and must take the time to allocate them to the correct tariff heading. Failure to get this right can result in costly fines and penalties. These tariff codes are often referred to as HS Codes.

How do HS Codes work?

Whenever any goods are imported to the UK, a customs harmonized tariff system code (HS code) needs to be used so that you can work out how much the percentage of duty will be. As the importer, you are legally bound to ensure that this is noted correctly. You will need a detailed description of the products to work out which category of tariff your goods fall into. With this in hand, you can calculate the correct UK duty and VAT.

VAT

As well as UK duty, you will have to pay VAT. Many people make the mistake of thinking that the VAT will be calculated only on the cost of the goods but this is wrong; VAT is calculated based upon the TOTAL cost of shipping the goods to the UK and is usually made up of the cost of the goods from the supplier together with the cost of shipping and duty. You are paying VAT on the total cost accrued when bringing the goods to the UK.

Calculating UK Duty and VAT

Here are a few simple examples to show you how to work out the costs of both UK duty and VAT.

Depending on how your parcels are shipping into the UK the duty and tax can be calculated using one of two methods.

1) CIF – Contract, Insurance and Freight

This considers the cost of shipping & insurance. This is the method that is most commonly used and will produce the higher costs of the two possible calculation methods.

Goods value: £5000 (purchased from outside of EU converted from USD to UK£)
Cost of Shipping/Insurance £500
Sub Total 1: £5500 (amount duty is calculated on)
Duty on Sub Total 1 @3.5%: £192.5
Sub Total 2: £5692.5
VAT @ 20% on Sub Total 2: £1138.5

TOTAL Landed cost including duty and VAT: £6831

So in this example, the total of UK duty and VAT (tax) payable to import these goods to the UK is £192.5 + £1138.5 which is £1331.

Here is a similar example created by our online calculator:

CIF Duty Calculation

2) FOB – Free On Board

This calculation does not take into account the cost of insurance and freight when calculating duty & taxes.

Goods value: £5000 (purchased from outside of EU converted from USD to UK£)
Cost of Shipping/Insurance £500
Sub Total 1: £5000 (amount duty is calculated on)
Duty on Sub Total 1 @3.5%: £175
Sub Total 2: £5175
VAT @ 20% on Sub Total 2: £1035

TOTAL Landed cost including duty and VAT: £6710

So in this example, the total of UK duty and VAT (tax) payable to import these goods to the UK is £175 + £1035 which is £1210.

Here is a similar example created by our online calculator:

FOB Duty Calculation

Paying your UK Duty and VAT tax

When you import your goods into the UK, the company that deals with your freight clearance will usually contact you to advise how much you need to pay. Most will send you an invoice and all you have to do is pay it so it is not at all complicated; all you need to do is nominate a freight agent in advance of the shipment arriving and then UK Customs will automatically contact them upon arrival. Your supplier overseas can also email you copies of the shipping invoices so that you can send ahead to your freight agent and pre-alert them of the imminent arrival.

If you are registered for VAT, you will have to pay the VAT but can claim it back when you do your VAT return using Certificate C79 which you should receive each month from HMRC.


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Import Duty Explained

Import duties have two distinct purposes: raise income for the local government and to give a market advantage to locally grown or produced goods that are not subject to import duties. A third related goal is sometimes to penalize a particular nation by charging high import duties on its products.

International Organizations

Around the world, several organizations and treaties have a direct impact on import duties. Several countries have tried to reduce duties to promote free trade. The World Trade Organization (WTO) promotes and enforces commitments that its member nations have made to cut tariffs. Countries make these commitments during complex rounds of negotiations.

Another example of an international effort to reduce tariffs was the North American Free Trade Agreement (NAFTA) between Canada, the United States, and Mexico. NAFTA eliminated tariffs, except those on certain agriculture, between the three North American nations. In 2018, the U.S., Canada, and Mexico signed a new deal to replace NAFTA called the USMCA.

In February 2016, 12 Pacific Rim nations entered into the Trans-Pacific Partnership (TPP), which significantly impacts the import duties between these countries. It is expected to take several years before the TPP comes into force.

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Trade War

What Is a Trade War?

A trade war happens when one country retaliates against another by raising import tariffs or placing other restrictions on the other country's imports.

Trade wars can commence if one country perceives that a competitor nation has unfair trading practices. Domestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers, pushing international policy toward a trade war. Also, trade wars are often a result of a misunderstanding of the widespread benefits of free trade.


Beginning in January 2018, former President Trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines. These duties impacted goods from the European Union (EU) and Canada, as well as China and Mexico. Canada retaliated by imposing a series of temporary duties on American steel and other products. The EU also imposed tariffs on American agricultural imports and other products, including Harley Davidson motorcycles.

By May 2019, tariffs on Chinese imports impacted nearly $200 billion of imports.2 As with all trade wars, China retaliated and imposed stiff duties on American imports. A study by the International Monetary Fund (IMF) shows that U.S. importers of goods have primarily shouldered the cost of the imposed tariffs on Chinese goods. These costs are eventually passed on to the American consumer in the form of higher prices, which is the exact opposite of what the trade war is intended to accomplish.