Customs, duty free and VAT after Brexit

The rules on the taxes you have to pay when you bring a good into Great Britain or receive one from a friend or online retailer abroad have changed since the end of the Brexit transition period on 31 December 2020. This explainer sets out how those rules work now for consumers.

The rules work differently for businesses bringing goods in. Such businesses should seek professional advice concerning their tax issues.

In addition, by virtue of the Northern Ireland protocol, different rules for the import of goods from the EU apply in Northern Ireland. These rules are essentially the same as those which applied to the UK as a whole before 31 December 2020.

What taxes have to be paid on goods brought into Great Britain?

There are three types of tax that can be charged on goods imported into Great Britain:

• customs duties (sometimes called tariffs) apply only to imported goods
• value added tax (VAT) applies to both sales of goods inside the UK and imports of goods from abroad, but the way it is collected differs
• excise duties are applicable to domestic sales and imports of alcohol and tobacco.

These rules apply differently to goods imported in three different ways:

• if the goods are brought in by a traveller from a foreign country in their luggage
• if the goods are ordered by a consumer from a retailer in a foreign country
• if the goods are received as a gift from someone in a foreign country.

How did the rules work for imports from other EU countries when the UK was an EU member state?

Customs duty

Under the EU customs union, there were never any customs duties on goods brought or sent to the UK from other EU countries.

VAT

Similarly, the UK was part of the EU VAT area. This meant that, if an individual bought a good while they were in another EU member state and brought it back to the UK or received a gift from someone in another EU country, they did not have to pay UK VAT, as VAT would already have been paid when the product was bought.

VAT was payable on goods purchased from shops in other EU member states, but the shop was required to incorporate it into the price of the good in the same way as shops selling within the UK do.

Excise duty

Individuals did not have to pay UK excise duty on alcohol and tobacco they bought in another EU country and brought back into the UK with them, provided that the goods were for their own personal consumption and excise duty had already been paid in that EU country.

UK excise duty was payable on alcohol and tobacco ordered from a retailer in another EU member state, but the retailer was ordinarily responsible for paying the duty.  Excise duty was also payable on gifts of alcohol and tobacco from another EU member state and individuals had to pay this directly to HMRC.

How do the rules work for imports?

Since 1 January 2021, the rules for the import of goods from outside the UK are now essentially the same, regardless of whether the goods originate in an EU or non-EU country.

Customs duty

Travellers are allowed to bring in up to £390 worth of goods without paying customs duty. If they exceed this, they will have to pay duty at a rate that varies depending on the type, value and origin of the goods.

Goods ordered from a retailer in a foreign country are only exempt from customs duty if they are worth £135 or less and do not contain alcohol or tobacco. These limits also apply to gifts.

VAT

Travellers bringing in goods within their £390 personal allowance are also exempt from paying VAT. Above the personal allowance, they must pay import VAT at the rate that would apply to the goods if they bought them within the UK.

Goods ordered from a retailer abroad are always liable to UK VAT.

Gifts sent from an individual abroad are exempt from VAT if they are:

• worth £39 or less, and
• contain either no alcohol, tobacco or perfume, or less than the special limits for those goods (which vary from product to product).

Excise duty 

Travellers may bring a certain quantity of alcohol and tobacco into Great Britain without paying excise duty – for example, up to 18 litres of non-sparkling wine.^[1]

Goods ordered from a retailer abroad and gifts sent from abroad that consist of alcohol or tobacco are always subject to excise duty.

How are import taxes paid in practice?

Travellers

For travellers, the most visible post-Brexit change is that there is no longer a blue channel (for travellers from the EU) at ports of entry in Great Britain. If a traveller has no goods to declare, they may go through the green channel.

If they do need to make a declaration, they have the option of using a new online service.^[2] If travellers choose to use this service, they will pay simplified rates of customs duty on their goods. They can pay this duty by credit card in advance and then go through the green channel at customs. If they do not use the online service, they have to go to the red channel at customs, make a declaration to a customs officer and pay duty at the standard rate.^[3]

Goods ordered from a retailer abroad

The rules for goods ordered from a retailer depend on whether or not the goods are:

• worth £135 or less, and
• not alcohol, tobacco or perfume.

If they are, then no customs or excise duty will be payable. VAT will be payable, but it is the responsibility of the foreign retailer to register for VAT with HMRC and charge its UK customers VAT as part of the purchase price (just as if a UK retailer were selling to them). The UK purchaser should not have to do anything when the goods arrive in the UK.

If they are worth more than £135 or contain alcohol, tobacco or perfume, the UK consumer has more to do. The foreign retailer is not required to charge VAT or excise duty (whether at the UK rate or its own) on the sale. Instead, the UK consumer must pay HMRC the tax owed. Usually, the postal service or the courier will pay HMRC on the individual’s behalf, then require the individual to repay them before the goods are released. They may also charge an administration fee for this service: for example, Royal Mail charge £8 per parcel, while some private courier companies charge substantially more.

Gifts

If import taxes are payable on a gift, they must be paid by the UK recipient in the same way as if the gift had been ordered from a retailer abroad – usually by paying the delivery company, which takes care of the charges on behalf of the recipient.

What if the goods are sent back?

UK customs legislation sometimes allows for customs duty and VAT to be refunded if the goods are re-exported (for example, if someone orders products from a retailer abroad and then sends them back because they are defective). In practice, however, it is very difficult for individuals to make use of these provisions – especially if the goods were brought by a traveller returning to the UK or shipped from a foreign retailer via a courier service – as the forms HMRC use to process refunds are not readily usable by consumers who are not registered as importers.

1. Gov.uk, Bringing goods into the UK for personal use, www.gov.uk/bringing-goods-into-uk-personal-use/arriving-in-Great-Britain
2. www.tax.service.gov.uk/check-tax-on-goods-you-bring-into-the-uk/previous-declaration
3. Gov.uk, Trade Tariff: look up commodity codes, duty and VAT rates, www.gov.uk/trade-tariff

This explainer is for reference purposes only. You should get professional tax advice if you want to understand how these changes may affect your personal circumstances.