The Cost of Importing Stock into the UK: Freight, Duty, Import VAT and Landed Cost

You have found a supplier, approved the samples and negotiated a price that leaves an attractive margin. The product costs £10 and you expect to sell it for £60. There should be plenty left to build a business with.

Then the shipment starts collecting invoices. Freight, insurance, clearance, duty and delivery to the warehouse all need paying. There may be import VAT too. By the time the stock is ready to sell, the £10 product has become rather more expensive, and the bank balance has done most of the travelling.

Importing can still be an excellent way to build a profitable ecommerce brand. The important calculation is what each unit costs when it is ready to sell, alongside how much cash you need before customers start paying you.

Those are different questions. Customs Duty is normally a genuine product cost. Import VAT may be recoverable, and postponed VAT accounting can avoid funding that VAT upfront. Treating everything as an expense understates your margin; ignoring the cash timetable can leave you unable to pay for the delivery.

This guide focuses on a UK ecommerce business importing bulk stock into Great Britain: England, Scotland and Wales. Northern Ireland has different arrangements, and low-value parcels sent directly to customers need separate treatment.

Start with the landed cost

Landed cost brings together the purchase price and the costs of getting the stock to the location and condition in which you can sell it. For a straightforward shipment, that means the goods, relevant packaging, transport, insurance, import duty and directly attributable handling and clearance costs.

Divide the total attributable cost by the units received, allocating costs sensibly where the shipment contains different products. A bulky item that takes up half the container should not receive the same freight allocation as a small accessory simply because both count as one unit.

For a business entitled to recover all its VAT, use costs excluding recoverable VAT. Customs Duty stays in the calculation. Import VAT that cannot be recovered generally becomes part of the cost instead.

You still need to pay advertising, payment fees, customer delivery, returns and overheads after that. These belong in the wider profitability model. Keeping them visible separately lets you understand whether the problem is an expensive product, an expensive route to customers or an operation that costs too much to run.

My target for an own-brand product is landed cost around 20–30% of selling revenue excluding VAT. The word “landed” matters. A supplier’s price within that range is only the start of the calculation.

Find out exactly what the supplier has quoted

Two suppliers quoting £10 per unit may be offering quite different things. One price might cover little beyond collection from the factory. Another might include delivery and import arrangements.

Ask for the agreed Incoterms (International Commercial Terms) rule, its named place and the version being used. These rules allocate important transport responsibilities, costs and risks. They do not, by themselves, settle every question about ownership, payment or VAT recovery.

Under EXW (Ex Works – Incoterms rule), the buyer generally takes on much of the transport and clearance work, including arranging collection. Under DDP, the seller generally takes responsibility for delivery and import clearance, including relevant import duties and taxes. DAP generally leaves import clearance and import charges with the buyer. The precise contract and location matter.

A delivered price can make planning easier. Before accepting it, ask who will be named as importer, whose details appear on the declaration and what evidence you will receive. If the supplier imports in its own name and then supplies you with goods in the UK, the VAT treatment needs checking as that transaction, rather than assuming the supplier’s import VAT belongs to you.

For a growing brand, I would want those answers before paying the deposit. “Tax included” is reassuring wording until your accountant asks which tax, paid by whom, and where the paperwork is.

Get a freight quote that reaches your warehouse

Compare quotes using the same collection point, delivery address, shipment size and service. Ask what is excluded, how long the price remains valid and whether the final charge depends on actual weight, volume or other adjustments.

The quote should make clear how origin charges, international transport, insurance, destination handling, customs clearance and UK delivery are dealt with. Check for potential examination charges and storage or container charges if clearance or collection is delayed. A low headline freight rate can leave a surprisingly long list of extras.

Ask about the full lead time, including collection and clearance. The advertised sailing time is not necessarily the time between your supplier finishing production and stock being available for customers.

Sea freight may reduce the cost per unit, while faster freight can protect sales if you are close to running out. Compare the extra freight cost with the contribution you expect to lose during a stockout. Paying £800 more to preserve £3,000 of expected contribution deserves consideration. Paying it because the stock forecast was ignored deserves a better process.

Do not order twice as much simply to reduce the shipping cost per unit. Saving 50p on 2,000 additional units saves £1,000 on freight, but the extra stock still needs buying, storing and selling.

Work out Customs Duty using the right product and origin

There is no single duty rate for ecommerce stock. The commodity code, origin, applicable trade arrangements and any additional measures determine the treatment. Some products have no Customs Duty; others attract percentage-based or different charges.

Use the UK Trade Tariff with your customs agent to establish the code and treatment for your product. Check a supplier’s suggested code rather than assuming the overseas classification is sufficient for the UK declaration.

Where duty is a percentage of value, it is generally calculated on the customs value. Under the usual transaction-value method, that starts with the relevant price paid or payable and includes transport, insurance and related delivery costs to the UK border, where not already included. Other adjustments can apply, including certain tooling or royalty costs. It is not necessarily just the goods invoice.

The country a shipment leaves is not automatically its origin. A product made in China and stored in the Netherlands does not become EU-origin merely because it is dispatched from there.

A preferential duty rate requires the goods to meet the relevant origin rules and the claim to have the required support. Check that before assuming duty-free treatment.

Once the goods and rate are established, build the duty into every order forecast. Unless a specific relief or repayment applies, it is a cost you need the selling price to cover, rather than VAT you expect to reclaim.

A worked example of the real cost per unit

Suppose you import 1,000 units costing £10 each. The example uses an illustrative 6% duty rate and standard-rated goods. These are assumptions, not rates to use without checking your own product.

The £1,200 freight and insurance covers delivery to the UK border. The £328 destination handling and clearance, and £300 UK delivery, are separately identified post-border costs. All listed incidental charges qualify for inclusion in the import VAT value up to the warehouse destination. For simplicity, assume those import-related services are zero-rated, with no additional VAT on their invoices and no other charges.

Your supplier’s £10 price has become £12.50. That is a 25% increase in product cost before spending anything on acquiring a customer.

At a £60 selling price including 20% VAT, net revenue is £50. Using the supplier price alone suggests an 80% gross margin. Using the £12.50 landed cost gives 75%. The missing £2.50 per sale is £50,000 across 20,000 units, assuming the same costs. It is worth finding it before the annual accounts do.

For this shipment, the customs value is £11,200. The import VAT value is £12,500 after duty and the relevant additional charges, giving import VAT of £2,500 at 20%. The VAT value happens to match landed cost in this simplified example; the two figures are not interchangeable in every transaction.

Import VAT is calculated on more than the product price

Import VAT generally starts with the customs value, then includes duty and relevant incidental expenses to the first UK destination, plus transport-related expenses to a further UK destination known at importation. Do not simply apply 20% to the supplier invoice. Use the rate applicable to the goods, which may differ from 20%.

Our example therefore includes VAT on the duty and relevant delivery costs as well as the goods.

Whether that VAT becomes a lasting cost is a separate question. A VAT-registered business importing stock for fully taxable business sales will normally be able to recover qualifying import VAT, subject to the normal rules and evidence. A business not registered for VAT cannot ordinarily reclaim it through a VAT Return. Restrictions can also apply where recovery is only partial.

Ownership and the import arrangements matter. Paying a courier’s bill does not by itself establish entitlement to reclaim the VAT. Make sure the business entitled to recover it is correctly identified and has the supporting documents.

For our fully recovering business, the product cost remains £12.50 per unit. If the £2,500 import VAT is entirely irrecoverable, the example’s cost becomes £15 per unit. That difference belongs in the pricing model from the outset.

Use postponed VAT accounting to avoid funding recoverable VAT upfront

Postponed VAT accounting, usually called PVA, allows an eligible UK VAT-registered business to account for import VAT on its VAT Return instead of paying it upfront on import and recovering it later.

For a business entitled to full recovery, the import VAT is declared and reclaimed on the same return. This avoids temporarily funding the tax, it does not remove the declaration.

You do not need separate HMRC approval to use PVA. You do need eligible business imports, the correct declaration details and instructions to the person handling customs. Give your agent written instructions before the declaration is submitted, including the correct VAT and EORI details, and retain the record. Where your supplier arranges the import on your behalf, agree the treatment with them too.

In the example, paying import VAT upfront means finding another £2,500 alongside the £12,500 shipment costs, until the VAT is recovered or offset. With PVA and full recovery, you avoid that additional VAT funding requirement. You still need to pay the goods, transport, duty and other agreed charges on their due dates.

That is meaningful cash for the next order or marketing budget. It improves the funding position without pretending the product is any more profitable.

Make sure PVA reaches the VAT Return correctly

Download and reconcile your monthly postponed import VAT statements. Match them to the shipments and declarations, investigate unexpected entries and give your accountant access to the information needed for the return. Supplier and freight invoices alone do not show the complete PVA position.

For the £2,500 example, with full recovery, the VAT Return treatment includes:

• Box 1: £2,500 import VAT due under PVA.
• Box 4: £2,500 recoverable import VAT.
• Box 7: the relevant import value excluding VAT, included once.

The entries must cover the correct VAT period. Check the bookkeeping workflow so recording the supplier invoice and processing the PVA statement do not duplicate the purchase value.

If import VAT was paid rather than postponed, obtain the appropriate C79 import VAT certificate and reconcile it to the import records. Do not reclaim the same VAT through both the C79 route and PVA, or assume every amount described as “VAT” on an agent’s invoice is VAT on that agent’s own fee.

PVA can produce no net VAT payable for a fully recovering importer, but the entries still need making. A zero net result is not permission to leave the import out.

Allow for currency movements and the time before sales

A supplier may quote in dollars while your customers pay in pounds. The sterling cost can change between agreeing an order, paying a deposit and settling the balance. Payment fees and the exchange rate offered by your provider also affect what leaves the bank.

If the outstanding supplier balance costs £7,000 at today’s rate, test what happens if its sterling cost rises by 5%. That is another £350 before considering any effect on duty and import VAT. On a tight order budget, it needs somewhere to come from.

The currency conversion used for customs must follow HMRC’s valuation rules; it need not match the sterling amount your bank paid. Keep the customs calculation, accounting treatment and actual cash forecast clear rather than forcing them to agree through an unexplained adjustment.

Map the deposit, production balance, freight, duty, clearance and warehouse charges by date. Add import VAT if you will fund it upfront, and allow for its recovery timing. A duty deferment arrangement can change payment timing; it does not remove the cost.

Finally, leave room for delays and disappointing sales. Stock arriving a fortnight late can mean both extra charges and later customer receipts. PVA helps with the VAT funding, but cannot fund three months of stock that has not sold.

Get the cost into your accounts and pricing

For normal bought-in stock, directly attributable purchase, freight, duty and handling costs generally form part of inventory cost. Recoverable VAT does not. As stock sells, its cost moves into cost of sales; unsold stock remains an asset, subject to appropriate valuation and any write-downs.

That matters for monthly reporting. Expensing the whole shipment’s freight immediately while leaving the goods in stock can distort the month’s margin. Recording only the supplier price in stock creates the opposite problem. Agree a consistent allocation method with your accountant and apply it to the actual shipment costs.

Separate later storage, customer fulfilment, advertising and finance costs in the wider profit analysis rather than putting every cost the business incurs into the inventory figure. The accounting treatment should follow the applicable rules, while your commercial forecast should still capture all the cash you need.

Reconcile the estimate to the completed shipment. Did £12.50 become £13.20 after extra charges? Update the next order and the pricing model. At 1,000 units, another 70p is £700 less gross profit if the selling price stays the same.

Also check quality and quantity on receipt. Missing or defective units need investigating, appropriate accounting and any supplier or insurance claim. Recovering losses is useful; preventing the same problem on the next, larger order is better.

What I would confirm before paying the deposit

You do not need to become a customs specialist to place a sensible stock order. You do need enough information to know what you are committing to. Before proceeding, I would want clear answers to these questions:

• What is included in the supplier price, and where do our responsibilities begin?
• What are the confirmed commodity code, origin, duty treatment and product requirements?
• Who is importing, are the GB EORI and VAT details correct, and who is making the declaration?
• What is the complete transport and clearance quote, including exclusions and potential delay charges?
• Will import VAT be postponed or paid, and who will obtain and check the evidence?
• What is the estimated landed cost per unit, the payment timetable and the cash buffer if costs rise or sales are slower?

Then ask the commercial question: does the product still leave enough after advertising, fulfilment and overheads to justify the money tied up? A shipment can clear customs perfectly and still be a poor investment.

Know the margin before the stock arrives

The benefit of calculating import costs properly is that you can make the decision while it is still a decision. You can compare suppliers on the same basis, challenge an incomplete freight quote, plan VAT funding and decide whether a larger order is worth backing.

For a growing ecommerce brand, I would rather see a slightly higher supplier price with reliable quality, transparent delivery costs and manageable order sizes than an apparently cheap product whose true cost only becomes clear at the warehouse.

At COPA, we help ecommerce founders understand landed costs, account for import VAT and connect stock purchasing with margins and cash forecasts. Your customs agent handles the declaration and classification work; we help make sure the financial consequences are understood and reflected in the accounts. Speak to us about your ecommerce business.