Guides / Worked duty and VAT example · Updated 19 October 2026

How to calculate import duty and VAT in the UK: a full worked example

If you have searched how to calculate import duty UK, or how to calculate import duty and VAT UK, the method is well documented but rarely shown end to end with a currency conversion in it. Here is one shipment, taken through every step HMRC's own guidance sets out.

Our guide to how import duty and import VAT are calculated in Great Britain sets out the method step by step: commodity code, customs value, preference, duty, then VAT on a larger base. This guide does not repeat that explanation. Instead it runs one realistic shipment through every step, including the part most explanations skip: what happens when your invoice is not in sterling.

The shipment

A UK homeware retailer buys a pallet of ceramic plant pots from a supplier in Poland. The commercial invoice is priced in euros. The goods travel by road from the supplier's warehouse to a UK distribution centre, crossing by ferry. None of the figures below are real duty or VAT rates for this or any product; they are placeholders so the arithmetic is easy to follow. Always look up your own commodity code in the UK Trade Tariff.

Step 1: the commodity code decides everything that follows

HMRC describes commodity codes as "internationally recognised reference numbers" that describe a specific product, and the code is what "works out the rate of Customs Duty and import VAT" for your goods. Our retailer looks up ceramic plant pots in the Trade Tariff tool and notes the code, the ad valorem duty rate shown against it, and the fact that no licence or quota applies to this product.

Step 2: convert the invoice to sterling, using HMRC's rate, not the bank's

The invoice is priced in euros, so it has to be converted to sterling before anything else can be worked out. This is the step most explanations leave out entirely, and getting it wrong changes every number that follows. HMRC's customs valuation guidance is specific about which rate applies: the importer "must use the rate of exchange published by HMRC," and that rate applies "at the time the declaration to free circulation is accepted." HMRC "publishes the rates on the internet" "at the end of every month," and those rates "are applicable from the first to the last day of the next calendar month." That means the rate in force is the one published for the calendar month in which the declaration is accepted, not the rate your bank quoted on the invoice date, and not a daily spot rate.

For this shipment, the retailer applies HMRC's published rate for the month in which the declaration is accepted to convert the euro invoice price into sterling. Every later figure in this example is already in sterling.

Step 3: build the customs value

HMRC's valuation guidance says the customs value includes the goods and specific delivery costs up to the "place of introduction" into the UK. For road freight, that place is defined as "the point where the goods first pass a customs office," and the guidance says "you must also include all inland transport and associated costs in the country of export in the customs value." Insurance in transit is included too: "you must include in the customs value the cost of insurance against loss or damage for the goods in transit."

Step 4: calculate the duty

Duty is the customs value multiplied by the rate shown in the Trade Tariff for the commodity code. Using an illustrative rate of 3.7%:

Step 5: build the VAT value and calculate import VAT

HMRC's guidance on VAT for imports says the VAT value is the customs value, plus "incidental expenses such as commission, packing, transport and insurance costs," plus "any Customs Duty or levy payable on importation." That means the onward haulage from the UK port to the retailer's distribution centre, which was excluded from the customs value because it falls after the place of introduction, is added back in at this stage, together with the duty just calculated.

The total landed tax cost for this shipment, before any freight invoiced separately by the haulier, is the duty plus the import VAT: 328.75 + 1,872.75 = 2,201.50 GBP, on top of the sterling cost of the goods themselves.

What changes if the exchange rate is fixed by contract

If the Polish supplier's sale contract had instead fixed a settlement exchange rate for this order, that fixed rate would apply to the invoice conversion in step 2 instead of HMRC's monthly published rate, and the customs value in step 3 would have to be recalculated from that figure. A small difference in the exchange rate used changes the sterling invoice price, which changes the customs value, which changes the duty, which changes the VAT base. None of the later arithmetic changes; only the starting number does. If you are not sure which rate applies to your purchase, check the sale contract before you declare.

Where this example differs from a simple GBP invoice

• A sterling invoice skips step 2 entirely; this example cannot, because the commercial reality for many UK importers buying from the EU is a euro or dollar invoice.
• Inland transport in the country of export is easy to miss when the supplier quotes an ex-works price; it still belongs in the customs value.
• Costs incurred after the UK border (here, the final leg of haulage) are excluded from customs value but reappear in the VAT value, so leaving them out of both figures understates VAT.

Common mistakes with currency and value

• Converting the invoice using the bank's transfer rate or a daily spot rate instead of HMRC's published monthly rate.
• Forgetting that a fixed-rate sale contract overrides the monthly published rate.
• Leaving the exporting country's inland transport out of the customs value because it was billed separately by the supplier.
• Dropping the post-border haulage leg from the VAT calculation because it was excluded from the customs value.

For the full method behind each of these steps, read how import duty and import VAT are calculated in Great Britain. If you would rather run your own numbers through a calculator than build the table by hand, Easy Clearance offers a worked example of calculating UK import duty and VAT as an interactive tool.

Related guides

• How import duty and import VAT are calculated in Great Britain

• Buying clothing in the UK to resell in Poland: customs guide

• Importing art and antiques into the UK: tariff, VAT and licences

Sources

• Finding commodity codes for imports or exports (GOV.UK)
• Customs valuation: exchange rates (GOV.UK)
• Delivery costs to include in the customs value (GOV.UK)
• VAT on imports, acquisitions and purchases from abroad (GOV.UK)

General information, not legal, tax or customs advice. Rules change; confirm current requirements on gov.uk or with a registered agent before you ship.