Import VAT and customs duties: What UK businesses need to know

Published Friday 30 October 2026

Table of contents

• What is import VAT?
• Import VAT vs customs duty: What’s the difference?
• When do you pay import VAT? The £135 threshold
• How to calculate import VAT and customs duty
• VAT on imports from the EU after Brexit
• Postponed VAT accounting: How to avoid paying upfront
• Reclaiming import VAT with a C79 certificate
• Common import VAT mistakes to avoid
• Keep on top of import VAT with Xero
• FAQs on import VAT

Key takeaways

• Import VAT is charged at 20% on most goods brought into the UK, and since Brexit, that includes goods from the EU.
• Customs duty is a separate charge that depends on what your goods are and where they come from.
• Postponed VAT accounting lets VAT-registered businesses account for import VAT on their VAT Return instead of paying it at the border.
• You can only reclaim import VAT if you're VAT-registered, using a C79 certificate or your monthly postponed VAT statement as evidence.

What is import VAT?

Import VAT is the VAT charged on goods you bring into the UK from abroad. It's usually charged at the standard rate of 20%, the same rate you'd pay buying the goods here. A few goods are reduced-rated at 5% or zero-rated at 0%. You can check the rate for yours in the HM Revenue and Customs (HMRC) list of VAT rates.

The charge applies to almost all commercial imports, whatever they cost. It follows the same logic as the VAT on your everyday sales: a tax on the value of the goods, collected as they arrive.

Import VAT vs customs duty: what's the difference?

Import VAT and customs duty are two different charges, and mixing them up is one of the most common mistakes new importers make. They can both apply to the same shipment, but they're worked out in different ways and treated differently on your accounts.

• Import VAT is a percentage of the total value of your goods, usually 20%, and VAT-registered businesses can normally reclaim it.
• Customs duty is based on the type of goods and where they were made, and you can't reclaim it.

So customs duty is a genuine cost that hits your business. Import VAT is often only a temporary cash outlay you get back later. That distinction matters when you're pricing your products and working out your margins.

When do you pay import VAT? The £135 threshold

When and where you pay import VAT depends on the value of the consignment. The £135 threshold decides whether VAT is collected by the seller at the point of sale or at the UK border.

For consignments of £135 or less sold directly to UK customers, the overseas seller charges VAT at the checkout and pays it to HMRC. There's nothing to settle at the border. Above £135, import VAT and any customs duty are collected when the goods arrive. The £135 limit applies to the value of the whole consignment, not each item in it. HMRC explains the detail in its guidance on overseas goods sold directly to UK customers.

One change is worth knowing about. The government has confirmed it will remove the customs duty relief on low-value consignments, with new rules taking effect by October 2028 at the latest. Its plan to reform the customs treatment of low value imports sets this out. Import VAT isn't changing, so the current rules on when you pay it still apply.

How to calculate import VAT and customs duty

Import VAT is charged on the "VAT value" of your goods, which is more than just the price you paid the supplier. Customs duty, where it applies, is added into that value first, so you can end up paying VAT on top of the duty.

Here's how to work out the cost step by step:

1. Start with the value of the goods, plus shipping and insurance to the UK.
2. Find your commodity code in the UK Trade Tariff to get the customs duty rate, then add that duty to the figure above.
3. Charge import VAT at 20% on the combined total.

Say your goods plus freight come to £1,110 and the duty rate for your commodity code is 12%. That means the duty is £133.20, giving a VAT value of £1,243.20. Import VAT at 20% is £248.64. Your commodity code drives the duty rate, so classifying your goods correctly is what keeps this sum accurate.

VAT on imports from the EU after Brexit

Since 1 January 2021, goods you buy from the EU are treated the same as goods from anywhere else in the world. Import VAT applies to them just as it would to a shipment from the United States or China. This catches out a lot of businesses that imported from Europe VAT-free before Brexit.

Northern Ireland has separate arrangements under the Windsor Framework, so if you move goods to or from Northern Ireland the rules differ. HMRC explains these in its guidance on trading and moving goods in and out of Northern Ireland. For most Great Britain businesses buying from the EU, the practical point is simple: budget for import VAT on those orders.

Postponed VAT accounting: How to avoid paying upfront

Postponed VAT accounting (PVA) lets any UK VAT-registered business declare and reclaim import VAT on the same VAT Return. There's no need to pay it in cash at customs and wait to get it back. For most businesses that means no upfront hit to cash flow. This practical guide to postponed VAT accounting walks through it in more detail.

You don't need to apply or get approval to use PVA, and any VAT-registered business can choose it, as HMRC confirms in its guidance on accounting for import VAT on your VAT Return. You select it on the customs declaration when your goods are imported. If a courier or freight agent handles the declaration, tell them in writing you want to use PVA before they make it.

On your VAT Return, the import VAT goes in box one as output tax and is reclaimed in box four as input tax. The value of the goods goes in box seven. To complete the return you download your monthly postponed import VAT statement from the Customs Declaration Service (CDS). HMRC sets out these box numbers in greater detail in its guidance on completing your VAT Return to account for import VAT.

Reclaiming import VAT with a C79 certificate

If you pay import VAT at the border instead of using PVA, you can still reclaim it on your VAT Return. You just need to be VAT-registered and the goods must be for your business. You have to register for VAT once your taxable turnover passes the £90,000 VAT registration threshold. If you're near that point, it's worth checking how to go about registering for VAT.

Your evidence for the claim is the C79 certificate, a monthly statement HMRC issues showing the import VAT you've paid. You download it from the Customs Declaration Service (although you must already be subscribed), then reclaim the VAT as input tax in the usual way. It works much like reclaiming VAT on other business costs. HMRC explains how to get the certificate in its guidance on managing your import duties and VAT accounts.

Common import VAT mistakes to avoid

Most import VAT problems come down to a handful of avoidable slip-ups. Knowing these mistakes in advance saves you unexpected charges and a scramble at return time.

• Don't treat customs duty and import VAT as the same charge.
• Don't assume postponed VAT accounting covers duty, when it only covers import VAT.
• Don't use the wrong commodity code, which can give you the wrong duty rate.
• Don't reclaim import VAT on goods that aren't for business use.

If you're unsure about a classification or whether goods qualify, it's worth checking before the goods ship rather than after they've landed.

Keep on top of import VAT with Xero

Importing adds a layer to your VAT Return, and keeping clear records of what you've paid and postponed makes that return far easier to complete. Xero helps VAT-registered businesses record import VAT, track it against each purchase, and prepare returns to send to HMRC.

Want to see how it fits the way you buy and sell? Get one month free.

FAQs on import VAT

Here are quick answers to some of the questions UK importers might ask.

Is import VAT the same as customs duty?

No. Import VAT is a reclaimable tax on the value of your goods. Customs duty is a separate, non-reclaimable charge based on the type of goods and their country of origin.

Do you pay VAT on goods from the EU?

Yes. Since 1 January 2021, EU goods are treated like imports from any other country, so import VAT applies. Northern Ireland has separate rules under the Windsor Framework.

Can you claim back import VAT?

Only VAT-registered businesses can reclaim import VAT, and only on goods used for the business. You reclaim it as input tax using a C79 certificate or your monthly postponed VAT statement as evidence.

Do you need to register to use postponed VAT accounting?

No separate registration or approval is needed. Any VAT-registered business can choose postponed VAT accounting on the customs declaration for each import.