When goods arrive in the UK from overseas, two separate charges usually apply: import duty and import VAT. Many first-time importers treat these as the same thing, or don't realise that one of them is reclaimable. Getting this wrong means either mis-pricing products or leaving money on the table every quarter.
Import duty (also called customs duty or tariff duty) is a tax levied by HMRC on goods imported into the UK from outside the UK. The rate varies by product and is determined by the commodity code assigned to the goods. It can range from 0% on many electronic goods and raw materials, up to 12% for clothing, 17% for footwear, and higher still for some agricultural products.
Import duty is calculated on the CIF customs value of the goods: the cost of the product plus international freight plus insurance. This is a permanent cost — once paid, it cannot be reclaimed.
The duty rate also depends on where the goods come from. If the UK has a trade deal with the exporting country and the goods meet the rules of origin, a preferential (lower) rate may apply. If there's no deal — as with China and the US — the full MFN rate applies.
Import VAT is the same tax as domestic VAT, but collected at the UK border when goods are imported rather than at the point of sale. It's currently charged at 20% for standard-rated goods, 5% for reduced-rate goods (such as certain energy-saving products), and 0% for zero-rated goods (such as most food and children's clothing).
Import VAT is calculated on the customs value plus import duty. This means you pay VAT on the duty you've already paid — a tax on a tax. For example, if your customs value is £10,000 and duty is £1,200 (12%), import VAT is charged on £11,200 (so £2,240 at 20%).
This is the most important distinction for business importers:
There are two ways HMRC handles import VAT collection:
Historically, import VAT was paid upfront at the point of customs clearance, before your goods were released. Your freight forwarder or customs broker typically advances this payment and invoices you. You'd then reclaim it on your next quarterly VAT return — which could mean a cash flow gap of up to 90 days.
Since January 2021, UK VAT-registered importers can use Postponed VAT Accounting. Under PVA, you don't pay import VAT at the border at all. Instead, you account for it on your VAT return — declaring it as both a payment and a reclaim in the same return period. The result is effectively zero cash flow impact.
PVA is the default option for most VAT-registered businesses and offers a significant cash flow advantage over the standard method. To use it, your customs declaration must include your VAT registration number and select the PVA option.
If your business is below the VAT registration threshold (£90,000 turnover as of 2026) or you've chosen not to register voluntarily, you cannot reclaim import VAT. The full import VAT amount is a real, permanent cost to your business — similar to duty.
For businesses importing significant volumes of goods, this is often a strong argument for voluntary VAT registration — even if you're below the threshold. The cost savings from reclaiming import VAT can far exceed the admin burden of quarterly VAT returns.
| Cost component | Amount |
|---|---|
| Goods cost (FOB) | £8,000 |
| Sea freight + insurance | £1,100 |
| Customs value (CIF) | £9,100 |
| Import duty at 12% | £1,092 |
| Import VAT base (£9,100 + £1,092) | £10,192 |
| Import VAT at 20% | £2,038 |
| Total paid at border | £3,130 |
| Import VAT reclaimed (if VAT-registered + PVA) | −£2,038 |
| Net permanent import cost | £1,092 |
For a VAT-registered business using PVA, the real border cost is just the £1,092 duty. The £2,038 VAT is fully reclaimed. For a non-VAT-registered business, the total border cost is £3,130 — nearly three times as much.
Not all goods attract 20% import VAT. The UK applies VAT relief to certain categories:
Importantly, even on zero-rated goods, you still pay import duty at whatever rate applies to the commodity code. VAT relief and duty relief are completely separate.
Generally no. Import duty is a tax on the importation of goods and is not reclaimable. The main exceptions are specific duty relief schemes — such as Inward Processing Relief (IPR), where goods are imported for processing and then re-exported, or Returned Goods Relief for goods that were previously exported. These require specific customs procedures and approval from HMRC.
If you pay import VAT at the border (standard method, not PVA), HMRC issues a C79 certificate each month showing the import VAT you've paid. This is your evidence to reclaim the VAT on your VAT return. Under PVA, you use a monthly postponed VAT statement instead of a C79.
Yes, in most cases. Duty applies first (on the CIF customs value), then VAT is applied to the customs value plus duty. They are separate charges that accumulate. The only way to avoid both entirely is if your goods qualify for a specific duty relief and are also zero-rated for VAT — which happens but is relatively rare.
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