The holidays are approaching, which means a lot of shopping and a lot of shipping.
If you have relatives or friends that live abroad in the UK on top of expensive shipping fees, you could also end up paying VAT, customs or excise duty.
Every package shipped to the UK from a country that is not a part of the European Union must go through customs before they are sent off the to the recipient.
There, they inspect the goods or gifts and decide if they require a tax or duty cost and then they hold them for three weeks until the receiver pays the fees. If you aren’t familiar with these taxes, how much they are, and what kinds of goods they apply to, you could end up owing a hefty bill.
If you take the time to do your research though, there are ways that you can not only predict how much tax you’ll need to pay, or you may even be able to avoid it altogether. First, though, you’ll need to be familiar with all of the rules and regulations followed by the UK’s customs.
What is Taxed by Customs and How?
Before we dive into the tricks of avoiding customs charges when shipping gifts to the UK, we must go over the ground rules.
The UK’s government website does a great job of explaining the process customs goes through when they inspect incoming imports. You can find that page here. Once customs receives a package, it is first checked to make sure that the goods sent aren’t banned or restricted.
Once they’ve confirmed that the box is not contraband, they identify what kind of product or gift it is and then decide whether it is subject to VAT, customs duty, or excise duty.
You may not be familiar with these terms so let’s go over what each of them is.
The first tax that could owe on a gift sent to the UK is called VAT which stands for “value-added tax.” The VAT is a general consumption tax added to most goods and services that are bought or sold in the UK.
In this case, it can it’s also owed on products and gifts sent from countries that are not a part of the European Union. It’s very similar to the sales tax that we have here in the US.
There is a standard VAT rate for most goods, but there are also special rates for certain products and others are subject to zero-rate, which means that those goods are not taxed.
Right now the standard VAT rate is 20% most goods and a reduced rate of 5% for specific products. There is a list of VAT rates for goods and services available on the UK’s government website.
If the good or gift that you are sending appears on this list, then you will be charged the VAT rate listed with it. Some goods’ VAT rate is 0% or isn’t on the list, which means there is no VAT charge.
The next tax that you may have to pay when shipping gifts to the UK is the customs duty. Similar to VAT, the UK is not the only country that collects this kind of tax. Many countries collect this tax on goods coming from other countries to control the flow of goods and protect the country’s economy.
When customs receive a package, they decide that it is subject to customs duties by accessing its value.
The value is the cost of the gift or right and how much it cost to ship and insure it. If it’s under $150, then you wouldn’t have to pay customs duty on the package. If the value is between $150 and $695 than the box would be subject to a 2.5% customs duty charge.
This last tax applies to some international and non-EU gifts or goods in excise duty. This tax is only for particular products, and that’s alcohol and tobacco products. There is a specific duty price assigned to each type of tobacco product and each kind of spirit. There is a list of duty prices of products on the government website.
Who Has to Pay Customs?
If you are shipping a gift to someone you know in the UK from the US, if after inspection, they decide that there are taxes owed on it, the recipient would have to pay them before they can receive the package.
Since the receiver pays, it’s so important to do what you can to either keep the taxes minimal or try to avoid owing them all together. You don’t want to have to hit the receiver with a huge bill to be able to get your gift.
How to Avoid Paying Customs
Now that you understand what kind of taxes imposed on incoming international packages to the UK, we can now look at how to avoid paying these charges. There are a few ways that you can take advantage of rules or navigate around them so that you don’t have to pay customs.
Reviewing the VAT Rates List
The easiest way to reduce your taxes on gifts you are shipping to the UK is to stick to purchasing and sending goods subject to little or no charge. The UK government provides a list of products and their associated VAT rate. You especially want to pay attention to these three VAT rates when reviewing this list and to decide what you’d like to purchase.
There are goods listed with 0% VAT and are known as zero rates because these are not subject to VAT. They are also on the list as exempt, which means that they are not subject to VAT. There are also goods with a reduced VAT rate, which happens to be 5% right now. Also, if you can’t find the good on the list, there is a good chance that that means it’s also not subject to VAT.
With the current VAT rate being 20% on all other goods you can imagine the money you are saving the receiver by making sure your choice one of the lower-rated products to send. Some of the items that aren’t subject to a VAT tax but could also make an excellent gift would be things like:
Keeping Costs Down
When deciding if they charge custom duty and how much of on an incoming international gift depends on its value. The value is the money spent on the goods plus the cost of shipping the gift to the UK.
If this total cost is less than €135 or $148 than custom duty is not owed on the package. There are a couple of strategies that you can try to keep the customs duty charge low or eliminate it.
First, you can try your best to stay with the $148 when purchasing and paying for shipping for the gift to avoid paying the customs duty.
If you have a bunch of items that would be over the limit in value if you shipped them all together, instead break them up and ship each item individually.
Lastly, pay attention to the weight of the package and try to choose the lightest gifts possible. Shipping costs are usually calculated using the weight of the box, keeping the weight low will keep the postage from adding to much value to your gift.
Send the Gift Directly from an Online Store
This last method to avoid pay custom duty when shipping a gift from the US to the UK takes advantage of how the government defines a gift. According to UK customs, a gift is defined as a good bought and sent between two individuals and would not include goods sent to or from a company.
So, if you buy a good from a store and have it shipped to a recipient in the UK, it would not be subject to customs duty.
To take advantage of even more savings purchase the gift from a store you know also has locations in the UK. Then, when you are buying the item navigate to the company’s UK website, usually .uk, and order it from there so it will ship from the UK and you will save on expensive international shipping costs.
Dealing with sending packages to other countries, especially with ones like the UK that has a lot of individual taxes and duties that you may not be familiar with, can be a hassle.
It can be hard enough deciding what exactly you’re going to get each person on your holiday shopping list, let alone calculate how much tax the receiver will have to pay on top of that to get their gift.
Armed with the knowledge that the UK government provides on customs procedures and charges will save you a headache or two when sending gifts abroad this holiday season.
Use the tips outlined above to either save on or eliminate paying customs tax on goods shipping to the UK. Or do yourself an even bigger favor, and order directly from the UK to save on shipping charges too. Whatever you do, you will know what to expect and how to react when you get a communication from Royal Mail.
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