How to Calculate UK Import Duty and VAT
Import duty and VAT are often the biggest costs after the goods themselves. Here is how HMRC works them out, step by step, with a worked example you can check against our free calculator.
The interactive calculator needs JavaScript. Enter your product price, quantity, freight, insurance, duty rate and destination country, and it shows the landed cost, duty, VAT and selling price.
Step 1: Find the commodity code
Every product imported into Great Britain is declared under a 10-digit commodity code from the UK Trade Tariff. The code sets the duty rate, the VAT rate and any licences or extra measures. Use our HS code lookup to search by description.
Step 2: Work out the customs value
For most imports the customs value is the price paid for the goods plus freight and insurance to the UK border. This is the CIF basis. If your supplier's price already includes delivery to the UK, the freight is already in the price.
If you buy in a foreign currency, convert it to pounds using HMRC's exchange rate for the period of import, not the rate on the day you paid.
Step 3: Apply the duty rate
Most rates are a percentage of the customs value. Some goods have a specific duty per kilogram, litre or item, or a mix of both. If the goods qualify under a UK trade agreement and you have valid proof of origin, a lower preferential rate, often 0%, may apply.
Step 4: Calculate import VAT
Import VAT is charged on the customs value plus the duty and any further costs to the first destination in the UK. The standard rate is 20%; some goods are reduced-rated at 5% or zero-rated.
Worked example
| Goods (converted to GBP) | £10,000.00 |
|---|---|
| Freight to the UK | £800.00 |
| Insurance | £50.00 |
| Customs value | £10,850.00 |
| Duty at 12% | £1,302.00 |
| VAT base (customs value + duty) | £12,152.00 |
| Import VAT at 20% | £2,430.40 |
| Total duty and VAT | £3,732.40 |
Step 5: Decide how to pay VAT
VAT-registered importers can use postponed VAT accounting to declare and reclaim import VAT on the same VAT return, so no cash is paid at the border. Duty is not reclaimable and is part of your landed cost.
Common mistakes
- Charging duty on the goods value only and forgetting freight and insurance.
- Using the wrong origin. Origin is where the goods were made, not where they were shipped from.
- Claiming a preferential rate without proof of origin.
- Ignoring specific duties, anti-dumping duties or quotas.
- Treating import VAT as a cost when the business can reclaim it, or forgetting it when it cannot.
Note
All figures are estimates, not customs advice. Check the commodity code, origin rules and any reliefs before you rely on a number.
Frequently asked questions
Is import duty calculated on the shipping cost?
Yes, in the UK. Freight and insurance to the UK border are part of the customs value.
Which exchange rate does HMRC use?
HMRC publishes monthly exchange rates for customs and VAT. Use the rate for the period when the goods are imported.
Do I pay duty on goods from the EU?
Goods that originate in the EU and meet the rules of origin can usually enter at 0% under the UK-EU Trade and Cooperation Agreement, if you hold proof of origin. Goods only shipped from the EU but made elsewhere are not covered.
Related
Calculate it with live rates
Use the free UK import duty calculator, or create an OCTA Cost account to put these numbers on a quotation.