Nearly three months on from Brexit, one of the most common questions we are still getting is “How are customs charges calculated in the UK?”. The way to calculate import duty and VAT in the UK hasn’t changed but the need for customs clearance after Brexit has caused importers to consider this when buying from the EU.
This step-by-step guide shows how to calculate import duty and VAT UK.
Find the border value of your goods in GBP
For this example, we will use the following values:
EXW value of the goods: GBP 10,000
Freight from supplier to port: EUR 1200
Insurance policy: USD 12
We need these all in GBP in order to calculate import taxes.
We convert them using the HMRC rate of exchange for the month from their site, here.
For this month (March 2021), the rates of exchange for EUR and USD are as follows:
These are the amount of each currency that we would get for every 1 GBP so we must divide our values to get the rate in GBP.
Freight EUR 1200 / 1.1577 = GBP 1036.54.
Insurance USD 12 / 1.4051 = GBP 8.54.
Now we have all of the values that we need to calculate import duty:
Value: GBP 10,000.
Freight: GBP 1036.54.
Insurance: GBP 8.54.
Calculating customs duty
In a large majority of cases, the declaration to customs will only have one commodity. The following example will use 2 to show how the reaction of the freight and insurance values over multiple items:
Item 1: GBP 6000.
Item 2: GBP 4000.
The freight and insurance will then be proportionally allocated to each item:
Item 1 Freight = GBP 1036.54*(6000/10000) = GBP 621.92.
Item 2 Freight = GBP 1036.54*(4000/10000) = GBP 414.62.
Item 1 Insurance = GBP 8.54*(6000/10000) = GBP 5.12.
Item 2 Insurance = GBP 8.54*(4000/10000) = GBP 3.42.
We now have the values for calculating customs duty for each item:
Item 1: GBP 6000 + GBP 621.92 + GBP 5.12 = GBP 6627.04.
Item 2 GBP 4000 + GBP 414.62 + GBP 3.42 = GBP 4418.04.
Now, we look up the rate for calculating import duty in the tariff.
Imagine that item 1 has a customs duty rate of 4%, and item 2 has a rate of 7%:
Item 1: GBP 6627.04 * 4% = GBP 265.08.
Item 2: GBP 4418.04 * 7% = GBP 309.26.
Total duty: GBP 574.34.
Please note that some commodities have additional duty for weight, concentration or for another 3rd quantity. Check the tariff for more information on your commodity.
You have now calculated your customs duty and are ready to calculate VAT.
Calculating import VAT
There are certain commodities or conditions that allow for zero VAT to be applied; however, the majority of imports will incur a VAT rate of 20%.
Full load: GBP 550 to be added per container.
Part load / LCL: GBP 90 per 1000kgs + flat rate of GBP 80. GBP 170 minimum.
Airfreight: GBP 0.40 per chargeable kg, minimum GBP 100.
Using the above example and 1 full container, we would calculate VAT as follows:
CIF value: GBP 11045.08.
Duty: GBP 574.34.
Vat Adj. GBP 550.
Total value for VAT: GBP 12169.42.
VAT at 20%: GBP 2433.88.