The trade relationship between Malaysia and the United Kingdom has flourished over the past 26 years, reaching a significant value of around €5.6 billion. As both nations continue to ease trade barriers, we’re seeing more opportunities for Malaysian businesses to expand into the UK market.
For businesses exploring these prospects, understanding the UK import tax, customs charges, and duty rates is essential to keep operations smooth and cost-effective.
This article will provide you with all the UK import duties and taxes that Malaysian businesses need to be aware of when importing goods into the UK.
Customs duties and import taxes in the United Kingdom are under the purview of Her Majesty's Revenue and Customs (HMRC). This authority primarily enforces 2 types of duties and taxes on goods imported into the UK:
HMRC applies customs duties to imported goods valued above GBP 135. These duties typically range from 0% to 25% of the goods' value, with the exception of gifts.
Gifts valued between GBP 135 and GBP 630 incur a customs duty rate of 2.5% or less, while gifts exceeding the GBP 630 threshold are subject to higher rates, determined by their specific commodity codes.
Refer to the table below for clarity:
Imported goods in the country typically incur a standard 20% VAT rate. However, certain products like health items, fuel heating, and child car seats are taxed at a 5% VAT rate.
While essential items like most food, books, and children's clothing are VAT-exempt, it's important to note that their sale must be reported on your VAT return. Additionally, gifts valued below GBP 39 are also exempt from VAT.
In summary, here’s the VAT charges:
Besides, HMRC also levies 2 other types of duties and taxes based on some situations:
Anti-dumping duty is charged on imported goods intentionally priced lower than similar products in the UK.
This duty is enforced by the UK government to protect the local businesses from unfair overseas competition. The exact rate of anti-dumping duty varies based on the goods and the importing country but can reach up to 50% of the imported goods' value.
Excise Tax is a duty that applies only to imported liquor and tobacco products, but the way charges are imposed varies for each category.
Alcohol duty is determined based on the type of alcohol, strength of alcohol, or 'alcohol by volume' (ABV). Here's a list of alcohol duties for all types of products
All kinds of tobacco and alcohol products, whether for commercial use, gifts, or personal effect, will be subject to excise tax. Shipments will be seized if they are:
Spirits more than 35 centiliters without a UK duty stamp
Cigarettes or hand-rolling tobacco without UK health warnings or fiscal marks
Different rates apply to different kinds of tobacco. Here’s how each category of product is taxed
There are 2 ways to calculate customs duty: CIF or FOB.
To determine which to follow, you’ll need to refer to the term specified in your shipping agreement.
Once that’s clear, identify your goods' commodity code on the UK tariff trade site, and check the applicable customs duty and VAT rates. Then, multiply the values of goods by the customs duty rate stated.
Here’s an example:
CIF (Cost, Insurance and Freight)
If you’re following the CIF calculation, note that CIF takes into account the value of goods, insurance and freight.
To begin, add the total value of your shipments, which is GBP 10,000 in this case, to the insurance and freight cost, which is GBP 500. This gives you a total CIF value of GBP 10,500.
Next, multiply the total CIF value by the customs duty rate of 4% from the UK tariff trade site, resulting in customs duties of GBP 420 applicable to your shipment.
In total, your shipment will cost GBP 10,920.
Calculation formula:
CIF x Goods Duty Rate = Customs Duty
Calculation breakdown:
1. Calculate the Total Value of 2000 Umbrellas:
GBP 5 x 2000 = GBP 10,000
2. Add the Total Value of 2000 Umbrellas with the insurance and freight cost to get the CIF Value:
GBP 10,000 + GBP 500 (Insurance and Freight Cost) = GBP 10,500
3. Calculate the Total Import Duty Rate:
GBP 10,500 x 4% = GBP 420
FOB (Freight On Board)
If FOB is the term applied to your shipment, note that it does not take into account the insurance and freight costs.
Hence, to calculate, just multiply the total value of your goods, GBP 10,000 in this case, by the duty rate specified in the UK trade tariff, which is 4% for this item. This results in customs duties of GBP 400 for your shipment.
Calculation formula:
FOB value x Goods Duty Rate = Customs Duty
Calculation breakdown:
1. Calculate the Total Value of 2000 Umbrellas.
GBP 5 x 2000 = GBP 10,000
2. Calculate the Total Import Duty Rate.
GBP 10,500 x 4% = GBP 400
To calculate VAT, multiply the value of your shipment, either CIF or FOB depending on your shipping agreement's terms, by the VAT rate specified on the UK tariff trade site.
Continuing from the previous example, umbrellas have a VAT rate of 20%. The calculation will be as follows:
By now, you know that the UK enforces several types of import duties on shipments. Each duty has its own calculation method and exemption rules. For UK customs duty regulations, the de minimis threshold for commercial shipments is set at £0, meaning all goods are subject to UK customs charges.
For personal shipments, however, there is a duty threshold of £135. Goods valued below this amount are exempt from customs duty, while those above it are charged accordingly. Gifts, too, have specific exemptions. Items valued between £135 and £630 incur a 2.8% duty rate.
When it comes to UK import VAT, exemptions apply only to gifts under £39 and many children's items, including food, books, and clothing. Additionally, certain free trade agreements can provide duty exemptions, although currently, no agreement exists between Malaysia and the UK.
Typically, UK customs will notify your chosen courier service of the applicable UK import tax and customs duty charges, so you won’t need to handle the calculations manually.
However, to expedite the clearance process, you can request a copy of the shipping invoice from your supplier before the delivery and inform your courier in advance about the charges, enabling them to clear the payment before the shipment arrives in the UK.
Other than paying through a courier, there are several ways to pay import duties and taxes.
A duty deferment account allows you to make one single transaction in a month for multiple consignments and allows you to delay payment for customs duty, excise duty and VAT.
However, you'd need to register for a duty deferment account to use this transation method.
Additionally, Great Britain and Northern Ireland have different ways to apply for a duty deferment account.
If you have access to the Customs Declaration Service, you can use a cash account to manage UK import tax and customs duty payments. Through a cash account, you will be able to:
The 3rd option you have is to pay through a general guarantee account. A general guarantee account allows you to:
You can use a general guarantee account to pay:
Lastly, there's immediate payments, which can be made in 2 different ways via the Customs Declaration Service or CHIEF.
To pay through the Customs Declaration Service, you'll require the Customs Declaration Service Immediate (CDSI) reference number, which you'll receive during your declaration process. This reference number typically starts with 'CDSI,' followed by a combination of 12 numbers and letters. Be sure to provide an accurate CDSI reference number to avoid any delay in customs clearance. As for CHIEF, it is an option available for a Direct Input Trader (DTI) agent only.
Remember, UK import duty is only one part of the process. You may also need licenses for certain imports, especially for excise goods. If this sounds overwhelming, DHL Express is here to support you. Our team helps businesses handle customs paperwork and clearance, making international shipping to the UK as smooth as possible. Whether you're dealing with import duties Vietnam or import duty Australia, DHL Express ensures that your shipments comply with local regulations and are cleared quickly. Open a business account today for a hassle-free experience.
Yes. For commercial shipments, all shipments are subject to UK import duty rates, while for personal effects, shipments valued at £135 (approximately MYR 790) and above, customs duties are levied based on their value.
Additionally, all goods are subject to VAT, regardless of their value.
To calculate the UK import duty tax for your items, follow these steps:
The formula to calculate the duty amount is:
Total Shipment Value (Commercial Value of Item + Shipping Cost + Insurance + Freight Cost) x Duty Rate x VAT Rate = Duty Amount
There are 4 ways to pay for duties and taxes in UK:
To know what are the requirements for each method, refer to the guide above.
UK customs charges 4 types of duties on import shipment:
The payment of duties and taxes is generally made by the receiver but duties can be paid by either party, sender or receiver.
If you would like to pay the duty and tax on behalf of the receiver, you can easily manage this through DHL Express account.
20% is the standard VAT rate charged on all imported shipments. However, goods like health products, fuel heating and car seats for children can enjoy a reduced rate at 5%. And VAT is exempted for foods, books, and children clothes.
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