How to calculate import duty and VAT UK

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

 
The border value means the cost of the goods and any transport or insurance costs until the port of entry. The following example uses an EXW (Ex-Works) invoice value so that we can demonstrate multiple currencies. Please check your incoterm to confirm all costs to the border are included in your commercial invoice. 

 

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:

 

EUR 1.1577.

USD 1.4051.

 

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.

Total: 11045.08.

 

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%. 

VAT is calculated using the same values for duty, the duty, and a value for VAT adjustment. The value for VAT adjustment is to represent the post-landing charges (check your incoterm to see if this is already included) and will depend on whether you are importing as a full load or a part load:

 

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.

 

 

 

UK IMPORT DUTY CALCULATOR

Now you know how to calculate import duty and VAT UK. 

If you want to calculate import taxes for your shipment into the UK, use our free import duty calculator or get in touch with us for more information. 

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