How to Calculate Import Duty in the UK

The United Kingdom is one of the world's largest hubs of international trade. The United Nations Conference on Trade and Development (UNCTAD) ranks the UK as the 12th top trading country globally. In 2021 alone, UK residents imported goods worth over £505 billion into the country. Like other countries, the UK charges a specific rate on all goods imported into its territory. These rates are called import duties or import tariffs. The UK got a total of £4.79 billion in 2021 from customs duty tax on all import and export goods that crossed its borders. As an importer, it is vital to know the rates the customs authority will charge to release your import products. This article will shed light on this by discussing how to calculate the required duties on your imports and the scenarios in which your import duty might be reduced or completely removed.

Import Duties in the UK

The United Kingdom generally levies taxes on all products imported into its borders. However, some exceptions attract a zero or reduced rate. These exceptions include:

• Generalized System of Preferences (GSP): This is a UK scheme that applies to imports from developing countries. Under the scheme, imports from developing countries attract a zero or reduced tax rate. These developing countries are either the least developed countries, low-income countries, or countries that have not adequately integrated with global trade. The countries currently under the GSP include India, Algeria, Mozambique, Indonesia, and Bolivia. You can look through the official GSP document to determine if the scheme covers your product. More importantly, these imports must originate from the countries listed under the GSP for the benefits to apply. For an importer to prove origin, the UK customs authority requires evidence of a stamped and signed origin declaration. The customs authority will charge the total duty rate if an importer cannot prove that the goods originated from the GSP country.

• Trade Agreements: Since the UK exited the European Union, it has signed trade agreements with some countries. These trade agreements allow duty-free access for imports from those countries. The UK currently has trade agreements with Singapore, New Zealand, and Australia. The Singapore agreement recently took effect. Essentially, importing from Singapore will attract zero duty rates.


• Duty Suspensions or Autonomous Tariff Quotas (ATQs): There are scenarios in which the UK suspends duty payments on certain goods to promote the competitiveness of domestic companies. The goods subject to such duty suspensions are often used to produce other goods. The UK currently has duty suspensions that allow goods to be imported at an unlimited quantity and with reduced import duty. However, the ATQ only allows limited importation at a reduced duty rate. Products currently covered by duty suspensions and ATQs in the UK include food products like fish and raw cane sugar.


• Tariff Rate Quotas (TRQs): Tariff Rate Quotas are similar to ATQs. TRQ is a scheme that allows the limited importation of goods at a zero or reduced duty rate. However, the TRQ only applies to specific products from specific countries. For example, in the UK’s most recent document on TRQs for specific products, UK importers can import frozen lamb from Australia at a zero duty rate.

Calculating Import Duties in the UK

The next step is determining the duty rate charged on your product's classification. It is important to note that import duties differ from Value Added Tax (VAT). While VAT may be charged alongside the import duty, both are charged separately. You can determine the duty rate on your product by visiting the UK Import Tariffs Website.
When you determine the duty rate, the next step is calculating your product's actual duty amount. This duty amount is often dependent on the total value of the imports.

The import duties that the UK customs authority charges differ according to the classification and value of the project. However, before determining the import duty on your products, you must first determine your product's classification code. Finding the classification code is vital because the code will help determine the duty rate required on the product. Each import product has a classification code attached to it. If you are confused about the specific code of your product, the UK has a dedicated website for you to find the code.

There are two ways to calculate the import duty:

1. Contract, Insurance, and Freight (CAF):

The CIF calculation method is the most common. The calculation takes your shipping costs and the product value into account. To calculate your import duty using the CIF method, determine the total value of your import product by adding your shipping and insurance costs. So, say you intend to import cars from India to the UK, and the total value of your cars is £10,000, your shipping costs are £500, and your insurance costs are £200. Add up all the costs and that will give you £10,700. This amount is your customs value; it is the amount from which your duty charges will be deducted. So if you have a duty rate of 4% on those cars, your duty charge will sum up to £428.

2. Free on Board Method:

This duty calculation does not consider your shipping or insurance costs. The duty charge is deducted from the actual value of your goods. Hence, if your import products are worth £5000 at a duty rate of 5%, your duty charge will sum up to £250.

Official Calculation

While the methods mentioned above are undoubtedly straightforward, other factors play out in the import process. For example, you may be importing goods from a developing country with a lower duty rate within UK borders. Also, imports from countries like Belarus and Russia have a higher duty rate. Hence, the customs authority might charge you less or more than your calculations with the initial methods. Hence, it is safer to use an official rate if you are unsure about the existence of lesser charges from the country you are importing from or if you are importing from a labelled country like Russia. The UK government has a dedicated website for these official calculations. All you need to do is get your classification code, input the expected import date, the country you are importing from, and the total value of your imports. The calculator may also require you to state your shipping and insurance costs according to the CIF method.

Conclusion

Challenges may occur in paying your duty charge before customs authorities release your goods. To avoid these delays and keep your import process hassle-free, you can engage the services of a freight agent. The freight agent will be in charge of paying your duty rate and getting your products released. All you need to do is give the agent details on your import’s value and appropriate documents like origin declaration (if it applies).