Guides / Customs valuation methods · Updated 30 September 2026

Customs value for UK imports: the six valuation methods explained

Duty is usually charged on customs value, not simply on the invoice total. Here is how HMRC expects you to work it out, what to add and take away, and where importers most often go wrong.

This guide is also available in Polish.

Why customs value matters

Most UK import duty is charged as a percentage of the goods' customs value, and import VAT is worked out from that same figure plus further elements. Get the customs value wrong and every calculation that follows is wrong too. HMRC sets out six valuation methods. You must try them in a fixed order and move to the next one only when the previous method cannot be used.

The six methods, in order

Method	Basis
1	Transaction value: the price paid or payable for the goods
2	Transaction value of identical goods
3	Transaction value of similar goods
4	Deductive method, working back from sales in the UK
5	Computed value, built up from production costs
6	Fall-back method

In practice most commercial imports are valued under Method 1. The other methods are there for cases where there is no qualifying sale, or where the price cannot be relied on.

Method 1: transaction value

HMRC describes transaction value as the price paid or payable by the buyer to the seller when the goods are sold for export to the UK. The sale that counts is the last sale before the goods are imported. That matters in supply chains with intermediaries, because the price your supplier paid the factory may not be the one that should be declared.

When Method 1 cannot be used

According to HMRC's Method 1 guidance, transaction value is not available when:

There is no sale. Free-of-charge consignments, goods sent on consignment, transfers between branches of the same business, and goods that are hired, leased or loaned all lack a sale for export.
The buyer is restricted. Limits on how the buyer can use or dispose of the goods go beyond what law or geography requires and substantially affect value.
The price depends on conditions that cannot be valued. For example, the price is only available if the buyer also purchases other goods, and the value of that condition cannot be worked out.
The seller shares in resale proceeds and the right addition for that share cannot be calculated.

Deals between related parties need extra care. HMRC has separate guidance on branch offices and inter-company transfers, so check it before you rely on an intra-group invoice price.

What must be added to the price

The invoice price is only the starting point. HMRC's Method 1 guidance lists costs that must be added if they are not already included:

Transport and insurance to the UK border. This covers loading, handling and inland transport in the country of export. The cut-off is the place of introduction into the UK. That means the port of importation for sea freight, the point where the UK border is first crossed for air freight, the customs office at the border for road or rail, and the delivery address for post.
Freight surcharges. HMRC's delivery-costs guidance names peak season, security, war risk and UK port congestion surcharges as costs to include.
Containers and packing. Include both materials and labour, unless the containers are reusable and treated separately.
Selling commission and brokerage. Buying commission is treated differently (see below).
Assists. These are materials, components, tools, moulds or engineering and design work that the buyer supplies to the producer free or at reduced cost.
Royalties and licence fees. Add these when they relate to the imported goods and are paid as a condition of sale.
Proceeds of resale that go back to the seller.

Royalties: the two-condition test

HMRC says royalties and licence fees are dutiable only when both conditions apply: they relate to the imported goods, and they are paid as a condition of sale. A royalty counts as a condition of sale if, for example, you could not buy the goods without paying it to a licensor. Payments for the right to reproduce the goods in the UK can be left out if they are shown separately from the price of the goods. If a royalty covers several things and you cannot split it between dutiable and non-dutiable elements, Method 1 cannot be used.

What can be deducted

If the following amounts are included in the price and shown separately, HMRC's guidance allows them to be taken out:

delivery costs after the goods arrive at the place of introduction, including demurrage and separately charged UK terminal charges
UK duties and taxes included in the invoice price
genuine quantity, trade, cash and early-settlement discounts
buying commission paid to your own buying agent
interest charges under a financing arrangement
marketing costs borne by the buyer
assembly or construction work carried out after import

The phrase "shown separately" matters. A single all-in price with no breakdown usually means the whole amount stays in the customs value.

Where a freight invoice covers the whole journey without a breakdown, HMRC allows apportionment. You can use shipping line rates or, for air freight, published apportionment percentages. Keep the carrier's invoice or statement as evidence.

Methods 2 to 6 in brief

Methods 2 and 3 use the accepted transaction value of identical or similar goods exported to the UK at or around the same time. HMRC publishes guidance on adjusting for differences in commercial level and quantity. Method 4 works back from the price at which the goods, or identical or similar goods, are sold in the UK. Method 5 builds the value up from the cost of production. It is rarely practical because it needs the manufacturer's cost data. Method 6 is a flexible use of Methods 1 to 5, using reasonable means consistent with World Trade Organization valuation principles. HMRC's guidance says you must first have tried Methods 4 and 5 before using it.

Some situations have their own guidance, including goods that are free of charge, used, rented or leased, and goods that are lost, damaged or defective. Foreign-currency amounts must be converted using HMRC's published rules.

Common mistakes

Declaring the ex-works or FOB price without adding freight and insurance to the UK border. This is probably the most frequent error.
Adding UK inland delivery. Transport after the place of introduction can come out if it is shown separately, so leaving it in means overpaying.
Forgetting assists. Moulds, tooling or artwork you supply to an overseas factory are part of the value.
Ignoring royalties paid to a third party. A licence fee paid to a brand owner rather than the seller can still be dutiable.
Treating free samples or replacements as nil value. With no sale, Method 1 is not available, and a value must be found under another method.
Using a related-party price without checking it.

For a longer walk-through with worked examples, see this guide to common customs valuation mistakes and how to avoid them.

Getting certainty in advance

If the method is genuinely unclear, for example with royalties, related parties or assists, you can apply for an Advance Valuation Ruling. HMRC describes it as legal confirmation of the method to use. It is valid for up to three years and applies only to the holder. Applicants need an EORI number starting GB, or can apply through an agent. A ruling cannot be applied for retrospectively.

The customs value is declared on your CDS import declaration. If you use an agent, the figures still come from your commercial documents, so keep invoices, freight bills and royalty agreements to hand. If you are unsure whether to handle this yourself, see do you need a customs broker.

Related guides

Want worked examples?

Plutos is a UK–Poland customs information site run by the same team as this guide and Easy Clearance. Its valuation article goes through the methods and typical errors in more detail.

Read the Plutos valuation guide

Sources

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