Duty and VAT are two different charges
They are easy to lump together, but they work differently. Customs duty is a tax on importing certain goods and, for most businesses, it is a genuine cost you cannot recover. Import VAT is the same VAT you would pay on a domestic sale, applied at the border — and VAT-registered businesses can generally reclaim it. Understanding the split is what lets you forecast landed cost accurately.
How customs duty is calculated
Duty is most commonly charged as a percentage of the customs value of your goods. Three things set the rate:
- Commodity code — the tariff classification of the product, and the primary driver of the rate.
- Country of origin — goods that meet the rules of origin under a UK trade agreement may qualify for a reduced or zero rate, usually with a statement of origin from the supplier.
- Trade agreements and quotas — some products get a reduced rate up to a set quantity, after which the standard rate applies.
How import VAT is calculated
Import VAT is charged on the value of the goods plus any customs duty plus shipping and insurance to their first UK destination — not on the goods' value alone. It is applied at the rate the goods would carry if sold in the UK: the standard 20% for most products, with 5% or 0% for specific categories.
One important consequence: a business that is not VAT-registered pays import VAT in full at the border and cannot reclaim it, so registration status changes your real cost of importing.
When it is due — and how to defer it
Duty and import VAT are calculated once your declaration is submitted and can be paid through CDS at the point of import. You do not have to pay per shipment, though:
- Duty deferment account — settles duty and import VAT in a single monthly Direct Debit (collected on the 16th of the following month), giving roughly 30 days' credit.
- Postponed VAT accounting — lets VAT-registered businesses declare and reclaim import VAT on the same VAT return instead of paying it at the border.
- Bonded warehousing — storing goods in an HMRC bonded warehouse suspends both duty and import VAT until the goods leave for UK sale, so you pay as you sell rather than upfront.
One change to watch: the £135 low-value rule
Goods sold to UK consumers in consignments valued at £135 or less currently follow special VAT rules (see our cross-border guide). This is an active area of reform: the government confirmed in 2026 that it is removing the £135 customs-duty relief on low-value imports (to be phased in, and reviewing how VAT is collected via online marketplaces). The rules below are correct as of July 2026 — check GOV.UK for the current position before relying on the threshold.
Frequently Asked Questions
What is the standard UK import VAT rate?
Import VAT is charged at the same rate the goods would carry if sold in the UK — the standard 20% for most products, with 5% or 0% for specific categories. It applies to the value of the goods plus any customs duty plus shipping to the first UK destination.
Can I reclaim import VAT?
VAT-registered businesses can generally reclaim import VAT, or use postponed VAT accounting to declare and reclaim it on the same VAT return. Businesses that are not VAT-registered pay import VAT at the border and cannot reclaim it.
How can I delay paying import duty and VAT?
A duty deferment account settles both in one monthly payment (collected on the 16th of the following month). A bonded warehouse goes further — it suspends duty and import VAT entirely until goods are released for UK sale, which protects cash flow on stock that may sit for months.
Is the £135 low-value import rule changing?
Yes. The government confirmed in 2026 that it is removing the £135 customs-duty relief on low-value imports (phased in over the following years) and is reviewing how VAT is collected through online marketplaces. Treat the £135 rules as correct as of mid-2026 but subject to change, and check GOV.UK for the latest.