In the months following Brexit, we are still receiving questions such as “how to calculate import vat UK and duty?”. Although importers must consider customs clearance after Brexit in order to buy from the EU, the way import duty and VAT are calculated in the UK hasn’t changed.
This step-by-step guide shows how to calculate import vat UK and duty.
Also, read What Is VAT Registration Number?
Calculate your goods’ GBP border value
Border value refers to both the cost of the goods and any transportation or insurance costs, up until the port of entry. In the following example, we will demonstrate multiple currencies by using an EXW (Ex-Works) invoice value. Ensure your commercial invoice includes all costs to the border by checking your Incoterms.
The following values will be used in this example:
Ex-works value of the goods: GBP 10,000
Supplier-to-port freight: EUR 1200
The cost of the insurance policy: USD 12
For import taxes to be calculated, we need all of these in GBP.
The exchange rate for the month is obtained from HMRC’s site, here.
As of this month (March 2021), EUR and USD exchange rates are as follows:
The amounts shown here are how much we would get in each currency for every 1 GBP, so we must divide them to get the GBP rate.
Freight EUR 1200 / 1.1577 = GBP 1036.54.
Insurance USD 12 / 1.4051 = GBP 8.54.
In order to calculate import duty, we need the following values:
Value: GBP 10,000.
Freight: GBP 1036.54.
Insurance: GBP 8.54.
Also, read What is VAT reverse charge?
How to Calculate Import UK Custom Duty?
Customs declarations will typically only contain one commodity in the majority of cases. To illustrate how freight and insurance values react over a variety of items, we will use example 2:
Item 1: GBP 6000.
Item 2: GBP 4000.
Each item will then receive a proportionate amount of freight and insurance:
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.
Customs duty values for each item are now available:
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.
To calculate import duties, we need to look up the rate in the tariff.
The customs duty rate on item 1 is 4%, while the duty rate on item 2 is 7%:
Item 1: GBP 6627.04 * 4% = GBP 265.08.
Item 2: GBP 4418.04 * 7% = GBP 309.26.
Total duty: GBP 574.34.
Depending on the weight, concentration, or another third quantity, some commodities may have an additional duty.
The customs duty has been calculated so that VAT can be calculated.
Also, read What is VAT in Maths?
How to Calculate Import VAT UK?
Some commodities or circumstances may allow zero VAT to be applied, but most imports will incur a 20% VAT rate.
Calculations for VAT are based on the same values for duty, the duty, and the value for VAT adjustment. In order to calculate the VAT adjustment, we need to know whether or not your import is a full load or a part load.
There is an additional charge of GBP 550 per container for full loads.
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.
Also, read What is £600 plus VAT?
Here is how we would calculate VAT based on the example above and 1 full container:
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.
The calculation of import duty and VAT in the UK is now clear to you.
Our vat calculator can be found on our homepage if you want to calculate your vat.
Also, read How to Calculate VAT Inclusive?