Understanding UK Import Duties, VAT, and Tariffs

Importing goods and items into the United kingdom has got different costs and charges, like items duties, Value Added Tax (VAT), and commodity tariffs rate. These things affect the businesses by importing products, and understanding them is important to avoid such and unwanted expenses. This guide has a comprehensive breakdown of UK import duties, value added tax (VAT), and tariffs rates, by helping consignor to go through the entire customs process efficiently.

What Are UK Import Duties?

Import duties are taxes imposed on goods entering the UK from other countries. The duty rate varies based on the different factor that can be calculated through formula. However, below are the factors;

1. The type of product (classified under the UK Trade Tariff system- Click here to see more details )
2. The country of origin (due to trade agreements whatever agreed with the origin country- See above link).
3. The value/price of the items/goods (including shipping cost and insurance costs).

Factors Affecting Import Duty Rates

Factor affecting means that the duty on imports goods are affected due to the following factors;

1. Free Trade Agreements (FTAs): If the UK has an agreement with the exporting country, import duties may be reduced or eliminated.
2. Product Classification: Items are classified with the specific Harmonized System which is called (HS code) codes, which depends on the UK duty rates as agreed with the origin with UK trade tariff system.
3. Customs Value: The total cost of the shipment, which including shipping and insurance cost, and that is affect the duty amount as well.

How to Calculate UK Import Duties

To check the import duties;

1. Find the correct tariff/HS code called HS code using the UK Tariff govt website or you can ask your shipper at the origin- See here
2. Check the duty rate for the specific product you want to import using the govt website- See above link
3. Calculate the duty will be determine as per the goods total value (cost of goods + shipping + insurance (If any) ).

Example Calculation:

1. Product value: £1500
2. Shipping & insurance: £200
3. Duty rate: 5% – You can see tariff rate using duty tariff website – See here
4. Total Import duty would be = (£1700 x 5% duty/100) = £85 (GBP)

By using this way, you can find the duty on specific product in your shipment you want to import into the UK.

How UK value added tax ( VAT ) on Imports

Value added tax (VAT) is applies on goods imported into the UK other than foods items. The value added tax (VAT) rate is 20% on all items as per the UK tariff, but some goods may reduced or zero rates apply.

Who Pays Import value added tax (VAT) ?

• VAT registered in the UK can reclaim it as input tax after 3 months tax return by the importer accountant through UK govt gateway.
• Individuals – Not registered must be paid VAT tax at customs process before clearance and receiving their shipments. Its mostly pay by the customs agent.

How to Calculate Import VAT

1. Add the cost of shipment goods, shipping cost, and import duty (See above in duty section).
2. Multiply by the VAT rate as 20%

VAT calculation Example:

• Total goods value (goods + shipping + duty rate) = £1500
• VAT rate applies: 20%
• Import VAT = (£1500 x 20% VAT/100) = £300 (GBP)

When to Register for VAT tax with govt

If you’re importing shipments as a business through many years and your taxable turnover must be over £85,000 per year, VAT registration is required to get tax back from the GOVT. VAT-registered businesses can reclaim VAT tax after quarter period of time. Mostly 3 months gap to reclaim your VAT tax from GOVT by your accountant using dashboard gateway.

UK Tariffs & Trade Agreements

After Brexit with EU, the UK has the UK Global Tariff (UKGT), replacing EU tariff. Some countries got a good benefits from lower tariffs due to Free Trade Agreements (FTAs), by decreasing the import costs charges.

Key Trade Agreements Impacting Import Duties

• UK-EU Trade: Some EU goods are eligible for tariff-free trading.
• UK-USA Trade Relations: Standard tariffs apply unless there is a specific trade agreement in existence.
• Developing Countries Trading Scheme (DCTS):Tariff cuts for developing countries that meet certain criteria.

Duty & VAT Exemptions – Free or Reduce

Few imports implies for exemptions means duty free or mat reduce for the following, including:

• Personal items (Goods priced below the duty-free allowance for passengers).
• Temporary items imports (goods imported for exhibitions or testing or sampling purposes – It can be exported back again).
• Low-value trade tariff under £135, which are VAT free but may incur duty tax as well.

How to Pay Import Duties & VAT in the UK

There are three ways you can pay the import duties and VAT taxes in the UK, which are follows;

Payment Methods:

Method 1: Online via HMRC’s Duty & VAT Payment scheme, mostly advised by the customs agent using FAS notification.

Method 2: Pay using a customs agent customs process on your behalf.

Method 3: Direct payment (for personal imports purposes).

Businesses can use the Postponed VAT Accounting (PVA) scheme to postponed the VAT tax and get cash flow for onward business.

UK Customs Clearance Process documents

Importers should have required documentation to get the shipment customs cleared. Below are the documents which must be obtained by the importer at the time of customs clearance requested by the customs agent;

• Commercial Invoice – Must
• Packing List – Must
• Bill of Lading or Airway Bill – Must
• Customs Declaration (via CDS) – Must
• Generalize system of preference GSP – Must for reducing duty tax only
• Authority letter – For customs agent authorization – For customs audit purposes

Any many other documents which are required for your customs clearance process. Your agent can guide you while finalizing your import entry.

Common Mistakes & How to Avoid Extra Costs

1. Incorrect Tariff: the wrong HS code may lead you to the incorrect duty rates and charges.
2. Under-declaring Goods Value: Lower declared value can lead to penalties.
3. Ignoring Additional Fees: Couriers like Royal Mail customs fees add processing charges etc.
4. Missing VAT Registration: importer should be VAT registered to claim the import VAT tax back.

Post-Import Strategies: Selling & Scaling Your Import Business

See the below business growing strategies while importing your goods into the UK border;

• Sell Online: Sell on the online platform like Amazon, eBay, and Shopify can help lead to the targeted customers.
• B2B Marketplaces: website like Alibaba and Global Sources connect with customer and the wholesaler.
• Marketing online skill: Like SEO, ads, and social media to lead to the bigger sales via online.

Conclusion

Understanding UK import duties, VAT, and tariffs is essential for cost-effective importing. By classifying goods correctly, using trade agreements, and ensuring accurate documentation, importers can minimize costs and avoid delays.