What is the difference between import duty and import VAT in the UK?

Full answer

When goods enter Great Britain from abroad, two distinct charges can apply, and people often confuse them. Import duty, also called customs duty or tariff, depends on the commodity code (classification) of the goods and the country of origin. The rate varies hugely by product and trade agreement, so there is no single figure - you must check the UK Integrated Online Tariff on gov.uk for the specific code. Duty is generally calculated on the customs value of the goods, which usually includes the price paid plus freight and insurance to the UK border. Import VAT is different: it is UK VAT charged on imported goods, at the standard 20% rate for most items (some goods are reduced-rated or zero-rated, mirroring domestic VAT). Crucially, import VAT is charged on the value of the goods plus shipping plus any import duty already added - so duty effectively gets taxed too. The key practical difference is recoverability. Import duty is normally a real cost you cannot reclaim. Import VAT, by contrast, can usually be reclaimed by a VAT-registered business as input tax, provided the goods are used in taxable business activities. Many businesses use Postponed VAT Accounting, declaring and reclaiming import VAT on the same VAT return so no cash leaves the business. Worked illustration of the mechanism: goods worth GBP 1,000 with GBP 100 shipping and, say, GBP 50 of duty give a VAT base of GBP 1,150, so import VAT at 20% is GBP 230. The exact duty depends entirely on the commodity code, so do not assume a rate - look it up. This affects importers, online sellers, and anyone buying business goods from overseas. Use the VAT calculator to work out the 20% import VAT on a known customs value, and check gov.uk for the duty rate on your specific goods.

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