Beware of additional import charges when shopping online!

This article does not apply to people living in Northern Ireland where the rules are slightly different.

Before 1 January 2021, if you bought goods online from within the countries of the European Union, then there were typically no additional charges over and above the cost of the item and any postage/packaging fee.

If you were buying goods online from outside the European Union, including countries such as China and the USA, then you may have faced additional charges including import customs duties and Value Added Tax (VAT). However, there was an exception on low value goods.

For goods arriving in the UK on or after 1 January 2021, the rules have changed, not only in respect of goods from EU countries – but also from non-EU countries. This is because as a consequence of leaving the EU, the UK now has the ability to agree the terms of trade with non-EU countries independently.

Now, whenever you are ordering items which are sent from outside the UK, in certain circumstances, you may have to pay some or all or the following after you have paid for your order, even if the website offers ‘Free shipping’ or appears to be based in the UK (as the order may actually be fulfilled from overseas):

• Customs duties
• Import VAT
• Handling or processing fees.

The upshot of all of this is unexpected bills and/or potentially less choice.The basic message is to not get caught out – check for additional costs so that you can work out exactly how much goods will be and make an informed decision about whether to go ahead with your purchase.  

We explain more about the different costs in the rest of this article to help you understand what you should check for.

What are customs duties and import VAT?

Both of these are essentially taxes on the value of goods. The idea here is to bring the cost of imported goods up to the same cost as those produced within the UK to keep competition fair.

Let’s look at customs duties first 

You may need to pay customs duty on certain goods sent from outside the UK it they are either:

• Excise goods (for example, tobacco, alcohol or fragrances), or
• Worth more than £135.

When you are considering if the goods are worth more than £135, you need to consider the amount inclusive of any postage, packaging and insurance.

The rate of duty is variable and depends on the nature of the goods being imported, and where they are being imported from. The rate can be 0%, depending on the circumstances.

The different rates of duty are linked to commodity codes which can be found on GOV.UK. These codes can be confusing, and some are linked to much higher rates than others, so it is worth contacting HMRC to check the rate.

If the goods qualify as a ‘gift’, and the value of the goods is above £135 but no more than £630, then lower rates can apply.

Import VAT

The VAT treatment will depend on the type and value of the goods. For non-gift items (which are exempt from VAT if they are worth £39 or less) and not including tobacco, alcohol and fragrances, a very basic outline of the rules is: 

Goods worth up to £135

For goods worth £135 or less in value, sellers located in both EU and non-EU countries (whether online marketplaces or direct sellers) should be responsible for charging and collecting UK VAT on behalf of HMRC. This VAT will be at the applicable rate for the item you are buying, so for example, if you are buying children’s clothes, the VAT rate should be 0% (not the usual 20%). You should also check that the EU supplier has not charged VAT twice i.e. EU VAT from their local country as well as UK VAT (as they are ‘exporting’ there should be no local VAT).

The £135 threshold applies to the overall value of the consignment, not to each individual item within it. The goods will still need customs declarations (often prepared by the seller) and will be subject to normal customs processes and procedures (for example, they may be examined for prohibited or restricted goods).

For non-EU countries, there used to be a VAT exemption on goods worth less than £15, which saved red-tape on low-value items. The removal of the £15 rule means that there will now be VAT to pay on all goods, no matter the cost – an item worth £14.99 will now cost £17.98, for example (assuming a VAT rate of 20% and no other duties or import costs payable).

This change is happening at the same time as the government has shifted the point where VAT is collected on goods worth £135 or less, from the time of importation to the time of supply to the customer. This means many overseas sellers will be forced to register for VAT in the UK (unless they use an online marketplace, which will do this), which could impact on the number of people willing to sell to people in the UK.

Goods worth over £135

For goods exceeding £135, VAT will not be charged by the seller and will be collected at the point of import (this is known as ‘Import VAT’ and is charged at the applicable rate). Alternatively, courier firms may collect the amount due on behalf of HMRC and charge you an admin fee for doing so (more on this below).

The import VAT percentage rate is applied to the sterling equivalent of the item value (converted to pound sterling using the rates of exchange for the month of importation as shown on the HMRC website), plus the cost of transport, postage and packing, insurance and any duty that may be payable. The import VAT rate is usually 20% but as VAT is based on the extras like customs duty too, it can appear higher than 20% of the original sales price.

How are import amounts calculated and charged?

Charges are calculated based on the customs declaration (which should contain a description and value of the goods). The responsibility for the customs declaration will depend on the terms of sale. If you are ordering online, you should check this before placing the order.

Under customs law, you (as the importer) can be legally responsible for the information on the declaration even if it Is filled in by the sender. Therefore it’s in your own interest to make sure, wherever possible, that the sender abroad completes the declaration accurately and in full and that there are no false valuations or misdescriptions.

If no declaration is made, or the information is inaccurate, the package may be delayed while the Border Force make further enquiries, or in some cases the package and its contents may be returned to the sender or seized by the Border Force.

Royal Mail and Parcelforce will usually ask you to pay the import charges before you can receive your item. A postcard or letter will be delivered to your address, detailing the amount due and the options available for payment. Once payment has been made, the package may be collected from the post office or if you have paid online/by phone you can arrange for it to be delivered. They will normally hold your parcel for about three weeks. If you have not paid the fee by then, it’ll be sent back.

For more detailed information on Royal Mail and Parcelforce processes, check out HMRC’s: A guide for international post users.

If you have any questions about a particular import charge, for example you think it is incorrect or you ended up returning the item, you should contact the Border Force as soon as possible using form BOR286 ( if Royal Mail or Parcelforce delivered the goods) or form C285 (if a courier or freight company delivered the goods. other-costs

Other costs

You may also have to pay a handling fee to Royal Mail or Parcelforce – often they will have dealt with the customs clearance process and paid the duty and tax charges on your behalf to ensure they can deliver your shipment as quickly as possible. But this incurs an administration fee. This may be set as a percentage of the value of the goods (for example, 2.5%) – but may also be subject to a minimum fee – say £10 or £12. HMRC do not have any authority over the level of charges they apply. 

Other operators, such as FedEx, may deliver your item but send you an invoice for the import charges and their handling fees later – do not rely on them not chasing you though – they are commercial businesses and will want to be paid. You should be able to find more information about different operators’ procedures on their various websites.

Further information

Further guidance on Changes to the VAT treatment of overseas goods sold to customers from 1 January 2021, can be found on GOV.UK.

The VAT exemption for gifts will remain (gifts are entitled to relief for consignments valued up to £39) – you can find more information from paragraph 2.4 onwards, in A guide for international post users.

VAT and customs duty will continue to be payable on the full value of tobacco, alcohol and fragrances, even if below the £135 limit. In addition, excise duty is payable on tobacco and alcohol. You can find more information here.