A blog by the TransportCloud team. We write about shipping, E-Commerce, international business, and customs.
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.
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:
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:
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.
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.
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.
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).