UK import duty and VAT on goods from China: how to work it out

Most first-time importers work out duty as a percentage of the factory price and VAT as 20% of the same figure. Both numbers come out too low. Duty is charged on the freight as well as the goods, and VAT is charged on the duty as well as everything else. On a 12% product, the difference can wipe out the margin on a whole order.

The calculation itself is simple once you know which costs go into which figure. Here it is in four steps, with the official sources at the end.

The calculation in four steps

Step 1: Find the commodity code and duty rate

Every product has a 10-digit commodity code. Look it up on the UK Trade Tariff, open the code, and choose China as the country of origin. The page shows:

• the third-country duty, which is what applies to Chinese goods because the UK has no trade agreement with China;
• the VAT rate, 20% for most goods;
• any trade remedies: anti-dumping or countervailing duties on specific Chinese products, charged on top of normal duty.

Some current rates for common products from China:

UK Trade Tariff, checked 9 October 2026. Our guide to importing from China to the UK lists the full commodity codes.

Two products that look alike can sit under different codes and different rates: a cotton jumper and a synthetic one, for example, or a bag with a leather outer and one with a plastic outer. Classify by what the product is made of and what it does, not by what your supplier calls it.

Step 2: Work out the customs value

For UK imports, the customs value is normally the transaction value: the price you paid for the goods. Then you add the costs of getting them to the UK border:

• freight up to the place the goods enter the UK;
• insurance up to the same point;
• commissions and packing costs you paid, if they aren’t already in the price.

You can leave out transport and insurance after the UK border, if they are shown separately on the invoice.

So the Incoterm on your invoice matters for the arithmetic. A FOB price needs the sea or air freight and insurance added. A CIF price already includes them. See our Incoterms guide for what each term covers.

If your invoice is in US dollars or yuan, it is converted at HMRC’s published exchange rate for the month, not the rate your bank charged.

Step 3: Calculate the duty

Duty = customs value × duty rate.

If the commodity page shows an anti-dumping or other additional duty for China, add it. These can be large, and they apply to specific products such as some steel, aluminium and chemical goods. Your broker should flag them, but the importer is responsible for getting it right.

Step 4: Calculate the import VAT

Import VAT is charged on a bigger figure, the VAT value:

• the customs value;
• plus the customs duty;
• plus transport and other costs to the first destination in the UK, such as your warehouse or 3PL, when that address is known at import.

Multiply by the VAT rate, usually 20%.

A worked example

You buy 2,000 pairs of men’s leather shoes at £4.00 each FOB Ningbo, ship them by sea, and deliver them to your warehouse in Leicester.

The duty is £712, not the £640 you would get from 8% of the shoe price, because duty applies to the freight too. The VAT is £2,002.40, not £1,600, because it applies to the duty and the UK delivery as well.

Don’t let import VAT tie up your cash

If you are VAT registered, use postponed VAT accounting. Your broker selects it on the import declaration, and instead of paying VAT at the border you declare it on your VAT return and reclaim it on the same return. For a business that can recover all its VAT, the net cost is nil and no cash leaves the business.

HMRC shows the amounts on a Monthly Postponed Import VAT Statement, which you download from your Customs Declaration Service account. No approval is needed to start using it.

If you pay the VAT at the border instead, you reclaim it later using the C79 certificate HMRC issues. That works, but your money is tied up until the return is processed.

Duty is different: it is a real cost and can’t be reclaimed on your VAT return. Regular importers often open a duty deferment account, which lets you pay duty once a month instead of on each shipment.

Low-value parcels: a different system

Consignments of £135 or less sent straight to UK consumers follow different rules. There is currently no customs duty on them, and the seller or marketplace charges VAT at the point of sale instead of import VAT. The government has confirmed the duty relief will end by October 2028 at the latest, when sellers and marketplaces will account for duty too. If you ship stock to a UK warehouse in bulk, the normal rules above apply.

Mistakes that cost importers money

1. Calculating duty on the factory price only. Freight and insurance to the border are in the customs value.
2. Calculating VAT on the goods only. Duty and UK delivery costs are in the VAT value.
3. Guessing the commodity code. If HMRC later finds the wrong code, you pay the difference, and interest and penalties can follow.
4. Accepting a low-value invoice “to save duty”. Undervaluing goods is customs fraud, and the importer of record carries the liability.
5. Missing postponed VAT accounting. Paying 20% at the border and waiting to reclaim it strains cash flow for no reason.

The bottom line

Find the 10-digit commodity code first and check the China rate and any trade remedies. Calculate duty on the goods plus freight and insurance to the border. Calculate VAT on that figure plus the duty and UK delivery. Then use postponed VAT accounting so the VAT never ties up your cash. The duty is the number that changes your margin, so know it before you choose a supplier.

If you want the landed cost worked out before you commit to an order, send us your product details and we will cost it door to door.