How Much is Import VAT?

Import VAT is usually charged at the same VAT rate that would apply if the goods were supplied in the UK. For many imported goods, this means 20%, but the amount payable depends on more than the VAT rate alone.

To work out how much import VAT may cost, businesses need to consider the customs value of the goods, freight and insurance, customs duty, excise duty where relevant, and the VAT liability of the imported goods. This means two shipments with the same purchase price can create different import VAT and customs duty costs if the commodity code, country of origin, duty rate or shipping terms differ.

This guide from the VAT experts, The VAT People, explains how import VAT is calculated, how customs duty affects the VAT figure, and what businesses should check before goods arrive in the UK.

For wider support with import, export and customs VAT, The VAT People can help you confirm the correct VAT treatment and reduce the risk of costly import errors.

How much is import VAT in the UK?

There is no single fixed amount of import VAT in the UK. The cost depends on:

• The value of the imported goods
• Freight and insurance costs
• The commodity code
• The customs duty rate
• The country of origin
• Whether a trade agreement applies
• Whether excise duty or anti-dumping duty applies
• The UK VAT rate for those goods

In many cases, import VAT is calculated at 20%. However, some imported goods may be reduced-rated or zero-rated, depending on how the goods would be treated if supplied in the UK.

The key point is that import VAT is not normally calculated on the goods value alone. It is calculated on a wider VAT value that can include customs duty and other importation costs.

Is import VAT always 20%?

Import VAT is often 20%, but not always.

Most standard-rated goods imported into the UK are subject to import VAT at 20%. However, the VAT rate depends on the goods themselves. Some goods may be subject to the reduced rate of 5%, while others may be zero-rated.

For example, certain children’s clothing and most printed books can be zero-rated, while other goods may be standard-rated. The VAT rate should be checked by reference to the type of goods being imported and their UK VAT treatment.

Businesses should not assume that every import attracts 20% VAT, or that a zero customs duty rate means no import VAT is due. Customs duty and import VAT are separate charges.

How is import VAT calculated?

Import VAT is calculated by applying the relevant VAT rate to the import VAT value.

HMRC’s guidance on how to value goods for import VAT explains that import VAT is worked out by taking the value of the goods and adding charges payable on importation, including Customs Duty and Excise Duty, but not the VAT itself.

A simplified formula is:

Import VAT = VAT rate × (customs value + customs duty + excise duty + other relevant import costs)

In practice, this means import VAT is calculated on a duty-inclusive basis. If customs duty applies, it increases the value on which import VAT is calculated.

This is a common area of confusion. Businesses sometimes calculate VAT only on the supplier’s invoice value, which can understate the amount due.

What is customs value?

Customs value is the value used to calculate customs duty and import VAT.

The customs value is often based on the transaction value, which is the price paid or payable for the goods when sold for export to the UK. However, adjustments may be needed depending on the import terms and costs involved.

The customs value may include:

• The goods value
• Freight cost
• Insurance
• Packing costs
• Commissions or assists, where relevant
• Other costs required under customs valuation rules

HMRC’s guidance on preparing to work out the customs value of imported goods explains that importers must work out the value of goods to calculate Customs Duty and import VAT.

Businesses should keep evidence of the shipping invoice, supplier invoice, freight cost, insurance and exchange rate used.

How is customs duty calculated?

Customs duty is calculated by applying the relevant customs duty rate to the customs value of the goods.

The duty rate depends mainly on:

• The commodity code
• The type of goods
• The country of origin
• Whether a free trade agreement applies
• Whether any duty relief or suspension applies

The UK Trade Tariff can be used to look up commodity codes, duty rates and VAT rates. HMRC also provides guidance on finding commodity codes for imports and exports, which explains that importers should check the correct commodity code so they pay the right Customs Duty and import VAT.

Using the wrong commodity code can lead to incorrect import duty and VAT calculations. It can also cause problems if HMRC later reviews the import declaration.

Do you pay both import duty and VAT?

In many cases, yes. A business may need to pay customs duty and import VAT on the same shipment.

Customs duty is usually calculated first. Import VAT is then calculated on the customs value plus the applicable customs duty and any other relevant charges. This means duty can increase the VAT amount.

However, customs duty and import VAT are different:

For VAT-registered businesses, import VAT may be recoverable as input tax where the goods are used for taxable business purposes and the correct evidence is held. Customs duty is generally a cost of importation.

Worked example: how import VAT is calculated

A UK business imports goods with the following costs:

• goods value: £10,000
• freight and insurance: £800
• customs value: £10,800
• customs duty rate: 4%
• VAT rate: 20%

The customs duty is calculated first:

£10,800 × 4% = £432 customs duty

The import VAT value is then calculated:

£10,800 customs value + £432 customs duty = £11,232

Import VAT is then calculated at 20%:

£11,232 × 20% = £2,246.40 import VAT

The total duty and VAT payable before any VAT recovery is:

£432 customs duty + £2,246.40 import VAT = £2,678.40

This example shows why import VAT is not simply 20% of the supplier invoice. The customs duty forms part of the VAT calculation.

How is import duty and VAT calculated together?

To calculate import duty and VAT together, businesses should follow a clear sequence:

1. Identify the correct commodity code.
2. Confirm the country of origin.
3. Check the customs duty rate.
4. Work out the customs value.
5. Calculate the customs duty.
6. Check whether excise duty, anti-dumping duty or other charges apply.
7. Apply the correct VAT rate.
8. Confirm the total duty and VAT payable. 

A customs duty calculator or duty calculator can help estimate costs, but it should not replace technical review where the goods, origin or valuation is uncertain. The exact rate depends on the commodity code and the facts of the shipment.

What if the goods are worth less than £135?

Low-value goods can be subject to different VAT collection rules.

For many consignments valued at £135 or less, VAT may be collected at the point of sale rather than at import. This means the supplier, marketplace or platform may have VAT obligations depending on how the goods are sold and who the customer is.

Businesses importing goods should still check the VAT treatment carefully. The £135 rule does not remove the need to understand the commodity code, import declaration requirements, or whether customs charges may apply.

Who pays import VAT?

The importer of record is normally responsible for import VAT.

In practice, payment may be handled by:

• The importer
• A freight forwarder
• A customs agent
• A courier
• Royal Mail, in some consumer consignments

Import VAT is paid to HMRC through the customs declaration process, unless postponed VAT accounting is used. Where agents or couriers are involved, businesses should check that the import declaration, VAT evidence and business details are correct.

If the wrong party is shown as importer of record, the business may have difficulty recovering import VAT.

Can businesses reclaim import VAT?

VAT-registered businesses can usually reclaim import VAT as input tax where the goods are used for taxable business purposes and the correct evidence is held.

Evidence may include a C79 import VAT certificate or a postponed import VAT statement. HMRC’s guidance on getting import VAT certificates explains how businesses can access C79 certificates for import VAT paid at the border.

Import VAT recovery is not automatic. The business must be entitled to recover the VAT under the normal input tax rules and must retain the correct VAT records.

For broader support, The VAT People advises on reclaiming VAT in the UK, including import VAT recovery and evidence requirements.

What is postponed VAT accounting?

Postponed VAT accounting allows VAT-registered businesses to account for import VAT on their VAT return rather than paying it immediately at the border.

HMRC’s guidance on postponed VAT accounting confirms that businesses can declare and, where entitled, recover import VAT on the same VAT return. This can help cash flow because import VAT does not need to be paid upfront and reclaimed later.

The VAT People has a dedicated guide explaining what postponed VAT accounting is for businesses that need more detail on how it works.

What records are needed for import VAT?

Businesses should keep clear records to support import VAT calculations and recovery.

Useful records include:

• Supplier invoice
• Shipping invoice
• Import declaration
• Commodity code
• Customs value calculation
• Customs duty rate
• Freight and insurance evidence
• Exchange rate used
• C79 import VAT certificate
• Postponed import VAT statement
• VAT return workings

These records are important because HMRC may check whether the import VAT, customs duty and input tax treatment have been calculated correctly.

The VAT People can assist with VAT returns, including the treatment of import VAT and postponed VAT accounting entries.

Common import VAT calculation mistakes

Common mistakes include:

• Calculating import VAT only on the goods value
• Excluding customs duty from the import VAT calculation
• Using the wrong commodity code
• Applying the wrong VAT rate
• Ignoring freight, insurance or other import costs
• Assuming import duty and VAT are the same
• Overlooking excise duty or anti-dumping duty
• Reclaiming import VAT without the correct evidence
• Using postponed VAT accounting incorrectly
• Failing to check whether the importer of record is correct

These errors can increase import costs, create VAT return issues and lead to HMRC queries.

How The VAT People can help

The VAT People advises UK businesses on import VAT, customs VAT, VAT recovery and VAT return treatment.

Our support can include:

• Reviewing how import VAT is calculated
• Checking customs value and landed cost calculations
• Advising on VAT rates for imported goods
• Reviewing import duty and VAT treatment
• Considering postponed VAT accounting
• Checking import VAT recovery evidence
• Reviewing VAT return entries
• Supporting businesses with HMRC questions or disputes

With over 30 years of experience, The VAT People provides practical VAT advice for businesses that import goods and need to manage VAT correctly.