VAT and Imports: What to Pay After Brexit

How Import VAT Works Post-Brexit

Since the UK left the EU single market on 1 January 2021, goods imported from the EU are treated the same as goods imported from the rest of the world. Import VAT applies to all goods entering the UK, regardless of origin.

Import VAT is charged at the same rate as if the goods were supplied domestically — usually 20% (standard rate), though some goods attract the reduced rate (5%) or are zero-rated.

When Is Import VAT Charged?

Import VAT is due when goods enter the UK. The VAT is calculated on the customs value of the goods, which includes:

• The price paid for the goods
• Shipping and freight costs to the UK border
• Insurance costs during transit
• Any customs duty payable

Example: You import goods worth £10,000, with £500 shipping and £200 customs duty. Import VAT = 20% x (£10,000 + £500 + £200) = £2,140.

Postponed VAT Accounting (PVA)

Postponed VAT Accounting is a significant benefit for VAT-registered businesses importing goods. Instead of paying import VAT at the border (tying up cash), you account for it on your VAT return.

How PVA Works

1. When goods arrive, you don't pay import VAT at customs
2. You account for the import VAT in Box 1 of your VAT return (as output tax)
3. You simultaneously reclaim it in Box 4 (as input tax, subject to normal rules)
4. The net effect is usually zero — no cash payment required

This is a major cash flow advantage. Without PVA, you'd pay import VAT upfront and wait until your next VAT return to reclaim it.

Who Can Use PVA?

Any VAT-registered business importing goods into the UK can use PVA. You elect to use it when completing your customs declarations — it's not an application process.

Monthly Statements

HMRC provides monthly postponed import VAT statements through the Customs Declaration Service (CDS). These statements show the import VAT you need to include on your VAT return. Download them monthly and reconcile with your records.

Customs Duties

In addition to import VAT, you may owe customs duties depending on the type of goods and their country of origin.

• Duty rates vary by product (classified using commodity codes)
• The UK Global Tariff applies to most imports
• Free trade agreements may reduce or eliminate duties for goods originating in certain countries (e.g., the UK-EU Trade and Cooperation Agreement provides zero-tariff access for qualifying goods)

Customs duty is a real cost — unlike import VAT, it cannot be reclaimed through your VAT return.

Low-Value Consignment Relief

For goods valued at £135 or less, the overseas seller (or the online marketplace) is responsible for collecting and remitting UK VAT at the point of sale. The buyer doesn't pay import VAT separately.

For goods over £135, import VAT is collected at the border or through PVA.

Importing Services

Import VAT on services works differently. If you receive services from an overseas supplier, you account for VAT under the reverse charge mechanism on your VAT return. See our guide on VAT reverse charge.

Record-Keeping

For imports, keep:

• Commercial invoices from overseas suppliers
• Customs declarations (C88/E2 entries)
• Monthly postponed import VAT statements from HMRC
• Shipping and freight invoices
• Evidence of origin (for preferential tariff rates)
• Payment records

With Accounted, Penny helps you record import transactions, match customs declarations to supplier invoices, and include the correct figures on your VAT return.

Import with confidence. Start your free trial with Accounted and let Penny handle the import VAT accounting.