How to calculate VAT & Duty on goods imported from outside the EU

How to calculate VAT & Duty on goods imported from outside the EU


5 minute read | By Denholm Good Logistics

Last updated: January 16, 2024 | Published: November 30, 2018


If you’re planning on importing goods from outside of the EU, then VAT & Duty are two expenses that you need to factor into your costings. It may seem like you’re getting a great deal when importing from a far-flung supplier, but don’t fall into the trap of forgetting to include all of the related charges and expenses.

What is customs duty?

Customs duty is charged on goods sent from outside of the EU if their value is over £135. An important point to note is that this is the total value of the shipment, including the cost of the goods and the cost of shipping (postage, packaging and insurance).

How to calculate it?

The rate of customs duty depends on the type of goods and where they are being imported from. You need a commodity code from HMRC, which will allow you to look up the correct rate of duty payable. You’ll find a classification guide at to help ensure that you’re using the right commodity code – or you can call the HMRC helpline for exact clarification. If you’re using a freight forwarder or shipping agent, then they will be able to advise you on this.

Once you’ve identified the right commodity code for the goods that you wish to import, you’ll be able to look up the rate of duty payable and calculate this cost. Remember that you’re calculating duty as a percentage of the total value (goods + shipping costs + insurance).

What is excise duty?

Excise duty is applied to alcohol and tobacco. If you’re importing these items from outside of the EU, you’ll need to include excise duty as an additional cost.

How to calculate it?

Excise duty varies depending on the type of goods and can be complicated to calculate. Examples are as follows:

Cigarettes: 16.5% of the retail price, plus £4.34 on a packet of 20.

Cigars: £2.71 on a 10g cigar

Beer: (2.8% to 7.5% ABV): 19.08 pence per litre for each % of alcohol (e.g. One litre of 5% ABV beer = 19.08 pence x 5 = 95.40 pence beer duty)

Spirits: £28.74 per litre of pure alcohol (e.g. One litre of 40% ABV vodka = 40% of £28.74 = £11.50 spirit duty)

You can find a detailed list of the rates of excise duty at

What is VAT?

VAT is payable on goods with a total commercial value of over £15. As with customs duty, this value includes the cost of the goods, the shipping cost, the duty payable and the insurance cost – in other words; it’s the total cost of importing the goods to the UK. With that in mind, it’s clear that not many shipments are going to fall under the £15 threshold. Another point to note is that alcohol, tobacco and fragrance shipments are subject to VAT, regardless of their value.

How to calculate it?

The standard rate of VAT is 20%, although there are some exceptions. Some goods are charged at a reduced rate of 5% (children’s car seats, for example), and some goods are VAT exempt (such as most food and children’s clothing).

Remember, you’re calculating this cost as a percentage of the total value (goods + shipping costs + insurance + duty).

Of course, if your business is VAT registered, then this is a cost that can often be claimed back when submitting your VAT Return.

What happens if I don’t pay?

VAT and duty need to be paid before you can collect your goods from customs. If you don’t pay then your goods can be held at customs (and accrue expensive holding charges), destroyed or returned to sender.

The good news is, if you’re using a freight forwarder or shipping agent to organise your import, they will assist you in calculating and making your VAT and duty payments, saving you time and hassle – and also giving you the peace of mind that you’ve paid all the charges that are applicable to your shipment.

If you have any questions regarding VAT and Duty, our friendly team will be happy to help. Contact us here!

  • Filter by category

  • Reset