Every time you order something outside of the UK, that item needs to go through customs clearance before you get it.
Duties and taxes are two common words you hear whenever you want to import anything into the country – this can be a piece of clothing, a car part, accessories or anything else you can purchase online.
But what exactly are duties and taxes? What types of duties and taxes exist and how do they differ? How is customs duty calculated?
This article will explain how customs duties and import taxes work. Also, we’ll show you an easy way to reclaim customs charges if you decide to return an item to a retailer abroad.
What is customs duty?
Customs duty is one form of tax collected for the goods that enter the UK. It is also known as import duty.
Tax is charged when importing goods outside the EU and those shipped from the EU but produced outside its borders.
There are different types of duties:
- Anti-dumping duty
- Trade tariff duty
- Excise duty
It is important to know what each one is so that you know when you must pay them.
Anti-dumping duty
Dumping is when a foreign exporter sells goods to a country at a lower price than the item would be priced in that particular market. One way to protect the UK market (or any other) is by introducing anti-dumping duty.
This duty increases the costs of importing goods to facilitate trade and support the local market. Anti-dumping duty can sometimes cost more than the product you want to import!
For example, you want to be extra careful when importing goods from China. Products such as solar panels, bicycles, and e-bikes, as well as ceramic tableware and tiles, are all subject to this type of duty, which can be pretty high.
You can see the products on the government website that are subject to this import duty. Anti-dumping measures change, so you should keep an eye on it, especially if you commonly order products outside the UK.
Trade tariff
Trade tariffs are introduced when countries cannot reach international trade agreements that benefit both sides. It is a type of duty, but what you as an international shopper need to be more up to speed with are commodity codes.
When importing goods, to get an accurate estimate of charges, you need to check which commodity codes fall under your tariff category. UK customs will charge the wrong duties if the wrong commodity code is added to the customs declaration. The correct commodity code helps you:
- fill in declarations and other paperwork
- check if you need to pay duty and VAT
Excise duty
Excise duty is paid for items like tobacco and alcohol. Like with customs duty, different rates are applied here, and it is up to HMRC to set them.
Unlike customs duty and import tax, excise duty is non-refundable.
Pay customs duty
Unfortunately, you need to pay import duty. Otherwise, you will not receive your shipment.
In the UK, the courier company pays the import duty and VAT on your behalf, and you need to reimburse them. They can either return the shipment or destroy it if you don’t pay for it – and there’s usually a time limit.
You don’t need to pay import duty in the following situations:
- If the parcel contains goods made in the EU
- You import gifts of negligible value (less than £39)
- The value of goods imported is under £135
We’ve listed three types of duties applied in specific situations and not on every product you import. Still, you need to pay import duty and VAT to receive the items you ordered.
What is import VAT?
Import VAT is the government fee placed on items coming into the country. It has different synonyms: sales tax, value-added tax (VAT), and goods and services tax (GST), but UK customs usually refers to it as Import VAT or Import tax, and this is what you will find in courier paperwork as well.
The tax in the UK is 20% of the total cost of the goods, with shipping costs included. Like import duties, couriers will pay import tax too, and you will have to cover the cost.
How are duties and taxes estimated?
Before you calculate UK import duty, you need to know what affects the amount you need to pay for a shipment. These factors are:
- The HS code
- Goods value
- Goods description
HS code
An HS code gives information about the product that customs authorities use to apply relevant taxes and duties. HS codes can be found within tariff codes – they are the first six digits. The remaining four digits are country specific.
Goods value
The value of the goods is another factor that helps generate accurate duties and taxes, together with freight and insurance fees.
Goods description
The goods description specifies the country of origin and the end-use of the product, and it should match the HS code.
It is important to fill in the commercial invoice with accuracy. If you’re missing information or enter incorrect information, the customs officials will determine duty and vat – you might end up paying more than you should.
How do you calculate import duty and VAT in the UK?
Calculating import duty can be done manually, but you will need information such as duty percentage rate, which you must find first.
You then have to add the value of the goods and the courier who delivers your shipment. Only then can you calculate import duty.
We’ve created a simple import duty calculator that allows you to get the duty rate estimate in a matter of seconds.
Enter the cost of purchase, product description, and your selected courier to get the estimate. The calculator will show the customs fees and VAT for that purchase.
When should you use the duty calculator?
Although the calculator gives you an estimate of your import duty, there are three primary uses for it:
- Check rates before you buy anything internationally
This will help you better understand the money you’re likely to be charged. - When you want a refund following a return
This will help you see how much money you expect to get back. - To see if you’ve been overcharged
If you didn’t fill out everything correctly on your customs declaration, it is possible that you have been overcharged. You can use the calculator to check the estimated rates and if they correspond to what you paid.
Additional costs when importing goods in the UK
Other than customs charges, which include import duties and taxes, you will probably have extra costs, such as courier handling fees and – if you want it – insurance.
When you order goods from any country abroad, you can get insurance through your carrier or separately. This is an optional expense, and it is completely up to you whether you want to include it or not.
Remember that handling fees are non-refundable. Knowing which taxes are refundable is crucial if you want to return the product to the seller.
Every UK resident that wants to return goods has the right to claim customs charges and get the money back.
How do I reclaim customs duty?
Usually, people return goods that are damaged or they don’t want. You can ask for an import tax and customs duty refund in the following situations:
- 90 days from the date the purchase entered the UK if you’ve returned an unwanted item
- 365 days from the date the purchase entered the UK if you’ve returned something because it’s damaged or defective
Once you miss this window, you can no longer ask for customs charges, so it’s best to start a claim early.
On our website, you can start a new claim by entering some basic information about your return.
You need to provide the description and cost of the goods you purchased, the tracking number of the order, and the courier who delivered your shipment.
We will also need your email and signature so that we can initiate the claim with HMRC on your behalf.
Once we send all the papers to HMRC, we will wait three to six weeks for them to send the money back to your account, keeping you updated every step of the way.
What’s the difference if you try to reclaim customs duties with HMRC?
You have the option to do the claim manually and initiate it with HMRC directly. If you pay VAT and pay duties, you do have the right to ask for a refund, but getting all the documentation together can be time consuming.
Benefits of reclaiming customs charges with Duty Refunds
We believe that reclaiming customs charges shouldn’t be a hassle for anyone.
We take care of all the heavy lifting and charge a 15% service fee off your final refund amount. If your claim isn’t approved, you aren’t charged.
You start a claim here today.