Import Duties & VAT: What You Need to Know When Shipping from China to the UK
For businesses importing goods from China, understanding customs duty and import VAT is essential to avoid unexpected costs and delays. The two charges are calculated differently, apply for different reasons, and getting the product information wrong can affect both.
This guide explains the difference between customs duty and imports VAT, how each is calculated, and why accurate product information matters at every stage of the process.
What is customs duty?
Customs duty is a tax charged on goods imported into the UK from outside the UK, including from China. It is paid once, at the point of import, and is based on the type of goods, their value and their country of origin.
Duty exists to regulate trade and, in some cases, to protect UK and domestic industries from being undercut by cheaper imports.
Not all goods carry the same duty rate. Some products may qualify for a reduced rate or a duty exemption, depending on trade agreements and the nature of the goods.
What is import VAT?
Import VAT is separate from customs duty and is charged on most goods brought into the UK, in a similar way to VAT applied to goods sold within the UK.
Unlike customs duty, import VAT is generally charged at the standard rate, currently 20% for most goods, although some products may qualify for a reduced or zero rate.
VAT-registered businesses can usually reclaim import VAT as input tax on their VAT return, in the same way they would reclaim VAT on other business purchases. This makes it important to keep clear records and the correct documentation for each shipment.
How the charges are calculated
Both customs duty and import VAT are calculated using the customs value of the shipment, but the way this value is built up differs between the two.
Customs duty is calculated as a percentage of the customs value, which is generally based on:
The price paid for the goods
Shipping costs to the UK border
Insurance costs, where applicable
The applicable duty rate depends on the commodity code assigned to the goods, which classifies exactly what they are.
Import VAT is calculated on a broader value, which typically includes:
The value of the goods
Shipping and insurance costs
Any customs duty already charged
Because import VAT is calculated after duty has been added, an incorrect duty calculation will also affect the VAT charged, making accuracy at every stage important.
Why the commodity code matters
Every imported product is assigned a commodity code, which determines the rate of customs duty applied and confirms whether any restrictions or licences apply.
Choosing the wrong commodity code can lead to:
Paying too much or too little duty
Delays while HMRC queries the classification
Potential penalties if goods are found to be under-declared
Complications if the goods are inspected on arrival
Commodity codes can be detailed and specific, so it is worth confirming the correct classification with a freight forwarder or customs specialist rather than assuming a similar product uses the same code.
Why declared value matters
The declared value of the goods directly affects both duty and VAT, since both are calculated from the customs value of the shipment.
Declaring an artificially low value to reduce charges is not a legitimate way to manage costs. HMRC can request evidence of the true transaction value, and discrepancies can lead to delays, additional charges or penalties.
The correct declared value should reflect what was actually paid for the goods, supported by a commercial invoice and any other relevant documentation.
Why country of origin matters
The country of origin can affect the rate of duty applied, particularly where trade agreements or preferential rates exist between the UK and certain countries.
For goods manufactured in China, this is usually straightforward, but complications can arise where goods are assembled from components sourced in multiple countries. In these cases, the country of origin is not automatically the country of shipment, and it should be determined correctly to avoid applying the wrong duty rate.
Common documentation required
To calculate duty and VAT correctly, and to clear goods through customs without delay, the following are typically required:
Commercial invoice showing the value of the goods
Packing list
Bill of lading or airway bill
Correct commodity code for each product
Proof of origin, where relevant
EORI number for the importing business
Missing or inaccurate documentation is one of the most common causes of delays at UK customs, so it is worth checking this before goods are shipped rather than after they arrive.
Why accuracy matters throughout the process
Getting product information right, from the commodity code through to the declared value, affects more than just the amount of duty and VAT paid.
Inaccurate information can lead to:
Shipments being held at the border for further checks
Additional charges or penalties once errors are identified
Delays that affect stock availability and customer delivery times
Extra administrative time spent resolving queries with HMRC
Working with a freight forwarder who understands UK customs requirements can help ensure the correct information is submitted from the outset, reducing the risk of delays and unexpected costs.
Getting it right from the start
Customs duty and import VAT are calculated differently, but both depend on the same underlying information: an accurate commodity code, a correct declared value and, where relevant, verified country of origin.
Taking the time to get this right before goods are shipped, rather than correcting it after arrival, generally leads to a smoother customs clearance process and a more predictable landed cost.
Talk to us about your next shipment
At CMGT Logistics, we support UK businesses importing goods from China, providing practical advice and end-to-end freight forwarding based on the needs of each shipment.
Whether you need help with customs clearance, product classification, sea freight, air freight, warehousing or onward UK delivery, our team can help you avoid unnecessary charges and delays.
Contact CMGT Logistics to discuss your next shipment or request a competitive freight quotation.
