Most importers know their supplier price. Far fewer know their real cost — the one that includes duty, VAT, freight and everything else before the goods hit their warehouse. That's your landed cost, and getting it wrong is one of the most common and expensive mistakes in importing.
Landed cost is the total cost of getting a product from your overseas supplier to your UK warehouse or delivery point. It includes every charge along the way — not just the product price.
The term comes from the phrase "landed" — meaning the goods have arrived (landed) at the destination port and are ready to be released. Your landed cost is what you've spent by the time you can actually sell or use the product.
A complete landed cost includes the following components:
This is the price you pay your supplier for the goods themselves. It's usually quoted either EXW (Ex Works — you collect from their factory) or FOB (Free On Board — they get it to the export port). Always confirm which Incoterm applies, as it changes what freight costs fall on you.
The cost to ship the goods from the origin country to the UK. This varies significantly based on:
Sea freight from China to the UK typically ranges from £800–£3,000 per 20ft container depending on market conditions. Air freight can cost 5–10x more but takes days rather than weeks.
Most freight forwarders recommend insuring your shipment. If your goods are lost or damaged at sea without insurance, you're unlikely to recover the full value. Standard cargo insurance typically costs around 0.3–0.5% of the CIF value (Cost + Insurance + Freight).
This is the customs duty charged by HMRC when goods enter the UK. The rate depends on two things: what the product is (its HS code) and where it comes from (the country of origin).
UK duty rates range from 0% (for many raw materials and goods from countries with trade deals) up to 12–20% for certain clothing, footwear and electronics. You can look up any product's duty rate using the LandedHQ HS Code Lookup — it pulls rates directly from the HMRC Trade Tariff.
Import duty is calculated on the customs value of the goods, which is typically the CIF value (supplier cost + freight + insurance) for UK imports.
Import VAT is charged at the standard UK VAT rate — currently 20% — on the total customs value plus any duty already charged. So if your goods attract 12% duty, you pay VAT on the duty-inclusive value.
The important difference between duty and import VAT: if you're VAT-registered, you can reclaim import VAT on your next VAT return. Duty, on the other hand, is a permanent cost you cannot reclaim.
Unless you're a registered UK importer filing your own import declarations, you'll pay a customs broker or freight forwarder to clear your goods through HMRC. This typically costs £50–£150 per shipment depending on complexity and the number of commodity lines.
UK ports charge fees for receiving, handling and releasing containers. These vary by port and typically range from £150–£500 per container. You may also face THC (Terminal Handling Charges) at the origin port.
The cost to transport goods from the UK port to your warehouse or premises. For a container from Felixstowe to a Midlands warehouse, this might be £350–£700.
Let's say you're importing 500 units of a ceramic plant pot from China. Your supplier quotes you £2,000 FOB (i.e., they get them to Shanghai port). Here's the full landed cost breakdown:
| Cost component | Amount |
|---|---|
| Supplier cost (FOB Shanghai) | £2,000 |
| Sea freight (Shanghai → Felixstowe) | £850 |
| Cargo insurance (0.4% of CIF) | £11 |
| Customs value (CIF) | £2,861 |
| Import duty (12% for ceramic goods, Chapter 69) | £343 |
| Import VAT (20% × £3,204) | £641 |
| Customs clearance | £95 |
| Port handling charges | £200 |
| UK delivery to warehouse | £380 |
| Total landed cost | £4,530 |
| Cost per unit (500 units) | £9.06 |
If you'd priced based on the £2,000 supplier cost alone, you'd have assumed a unit cost of £4.00. The real unit cost is £9.06 — more than double. That's the gap that kills margins.
HMRC uses the CIF (Cost, Insurance, Freight) basis for calculating customs value on most UK imports. This means duty is charged on the supplier cost plus international freight plus insurance — not just the product price.
This differs from the US, which uses the FOB value (product cost only, excluding freight). It's worth noting because if you're comparing UK and US duty calculations, the UK method results in a slightly higher tax base.
Yes — significantly. The UK has trade agreements with many countries that reduce or eliminate import duty for qualifying goods. For example:
If you're sourcing from a country with no trade deal, you're paying the full MFN (Most Favoured Nation) rate. Switching supplier to a country with a deal — where quality and price allow — can make a meaningful difference to your margins.
There are legitimate ways to reduce what you pay:
Not quite. Landed cost covers everything up to the point goods arrive at your warehouse. Total cost of ownership (TCO) goes further and includes ongoing costs — storage, quality control failures, returns, marketing. For buying decisions, TCO is the fuller picture; for import planning, landed cost is what matters.
Duty and VAT apply to commercial imports above the de minimis threshold. For the UK, all commercial goods imported from outside the UK are subject to duty at the applicable rate. There's no general duty-free threshold for B2B commercial imports (the £135 low-value goods rules apply only to B2C goods sold directly to consumers).
Import duty is typically paid — or a deferment guarantee provided — at the point of customs entry, before goods are released. If you use a freight forwarder or customs broker, they often advance the duty payment and invoice you afterwards. A Duty Deferment Account (DDA) lets approved importers defer payment to the 15th of the following month.
LandedHQ calculates your full landed cost using live HMRC duty rates — including duty, VAT and all fees. Free to start.
Start free — no card needed →