Introduction
If you import, export, or manufacture goods, you’ve probably come across the terms excise and customs duties UK, but what exactly do they mean, and why do they matter?
Simply put, customs duty is a tax on goods imported into the UK, while excise duty applies to specific products such as alcohol, tobacco, and fuel that are either produced or sold within the country. These taxes are vital tools for regulating trade, generating government revenue, and influencing consumer behaviour.
Understanding these duties is essential for anyone involved in trade, manufacturing, or logistics. Whether you’re learning how UK customs duty on imports works, calculating UK excise duty on alcohol and tobacco, or trying to grasp the difference between excise duty and customs duty UK, this guide by Finsoul Network explains everything you need to know clearly and practically.
What Are Excise Duties?
Excise duties are indirect taxes applied to certain goods that are seen as harmful, environmentally impactful, or in need of regulation. In the UK, excise duty applies to:
- Alcoholic beverages (beer, wine, spirits, cider)
- Tobacco and vaping products
- Hydrocarbon oils (petrol, diesel, biofuels)
For example, UK excise duty on alcohol and tobacco varies based on product type and strength. Higher alcohol content or more tobacco typically means higher duty. Similarly, fuel duty UK adds to the cost per litre of fuel, promoting energy efficiency and environmental awareness.
Excise duties serve two main purposes: to generate revenue and to shape public behaviour, discouraging over consumption and supporting health or environmental goals. Businesses involved in producing or handling excise goods must register with HMRC, maintain proper records, and file regular returns.
What Are Customs Duties?
Customs duties are taxes applied when goods enter the UK from another country. The amount payable depends on factors such as the product’s classification, value, and origin.
These duties protect UK industries from unfair competition, ensure compliance with trade laws, and raise government revenue from international trade.
When importing, businesses must accurately declare goods to HMRC and pay the applicable UK customs duty on imports before the goods are released for free circulation. To do this correctly, traders need to use UK commodity codes, which categorise goods and determine duty rates, VAT, and any import restrictions.
Difference Between Excise Duty and Customs Duty UK
How Are Customs Duties Calculated in the UK?
The amount of customs duty payable is based on three key elements:
- Customs Value: The total value of the goods, including cost, insurance, and freight (CIF).
- Commodity Code: The correct classification of the goods using the UK Trade Tariff.
- Country of Origin: Determines whether preferential rates apply under trade agreements.
HMRC provides an online tariff lookup tool that helps importers find the correct rates. Incorrect classification can lead to underpayment, overpayment, or even penalties, so accuracy is essential.
How Is Excise Duty Calculated in the UK?
Excise duty rates depend on the product type. Here’s a simplified guide:
- Alcohol: Charged per litre based on alcohol by volume (ABV).
- Tobacco: Based on weight or number of cigarettes.
- Fuel: Charged per litre of hydrocarbon oil used for vehicles.
For example, stronger spirits attract higher duty rates, while lower-strength beers or ciders are taxed less. The government reviews and adjusts these rates annually to reflect inflation and policy changes.
Do I Need to Pay Both Excise and Customs Duty?
Sometimes, yes. Imported excise goods like alcohol, tobacco, or fuel are subject to both customs and excise duties.
- Customs duty is paid when the goods enter the UK.
- Excise duty is paid when the goods are released for consumption (sold or used).
Businesses can defer excise payments by storing goods in bonded warehouses, helping improve cash flow. HMRC also provides reliefs or refunds for goods that are re-exported or destroyed under customs supervision.
What Is an EORI Number and Why Do UK Importers Need It?
An EORI number (Economic Operator Registration and Identification) is required for all UK businesses that import or export goods. It links your company to customs declarations and HMRC records.
Without an EORI number, goods cannot clear customs, potentially leading to costly delays or storage fees. You can apply online via HMRC, and most applications are processed within a few working days.
Finsoul Network advises every new importer to obtain an EORI before their first shipment to avoid compliance risks.
What Are UK Commodity Codes and Why Do They Matter?
Each imported or exported product needs a UK commodity code, a 10-digit identifier that determines:
- Duty and VAT rates
- Licensing or control requirements
- Any restrictions or additional taxes
Using incorrect codes can result in overpaying or underpaying duties and, in some cases, breaching trade regulations. Importers can find accurate codes through the UK Integrated Online Tariff service.
What Goods Are Banned or Restricted for UK Imports?
Not all goods can enter the UK freely. Commonly banned and restricted goods UK imports include:
- Controlled drugs and chemicals
- Weapons and firearms
- Endangered species and ivory products
- Counterfeit or pirated goods
- Certain agricultural products and live animals
- Hazardous waste materials
Some restricted items can be imported with an import licence or UK goods approval, depending on their type and intended use. Always verify requirements with HMRC or Border Force before shipping.
Can Businesses Claim Duty Relief or Exemptions?
Businesses that export goods from the UK can benefit from various duty relief schemes designed to reduce costs and improve cash flow. These reliefs apply when goods are temporarily imported, processed, stored, or returned. Understanding these options helps you stay compliant with export compliance UK rules while making your exporting processes UK more cost-efficient.
Who Needs an EORI Number?
Inward Processing Relief allows businesses to import goods for processing or repair without paying import duties or VAT, provided those goods are later exported from Great Britain or exported from Northern Ireland.
It’s ideal for manufacturers who temporarily bring materials into the UK, add value through processing, and then move goods internationally back to their destination.
To qualify, businesses must maintain accurate customs declaration UK exports and records showing how and when the goods were re-exported.
Temporary Import Relief
Temporary Import Relief is available for goods brought into the UK for short-term use, such as exhibitions, testing, or demonstrations and later exported in the same condition.
This relief suspends import duties and taxes for a defined period, helping companies avoid unnecessary costs during short projects. It’s particularly useful for businesses participating in trade shows or servicing international clients while maintaining export compliance in the UK.
Customs Warehousing
Customs Warehousing allows businesses to store imported goods without paying customs duties or VAT until the goods are released for sale or exported from the UK.
This is beneficial for companies that hold stock for international clients, as duties are only paid once goods leave the warehouse for domestic use.
It simplifies cash flow management and aligns with efficient exporting processes in the UK, especially for traders with large inventories or multiple markets.
Returned Goods Relief
Returned Goods Relief (RGR) applies when goods that were previously exported from the UK are brought back without being altered.
Under this scheme, you don’t have to pay import duty or VAT again when re-importing your own products.
This is especially valuable for items sent abroad for exhibition, testing, or repair, ensuring compliance with customs declaration UK exports while avoiding double taxation.
How These Improve Cash Flow and Competitiveness?
Duty reliefs and exemptions help UK businesses remain globally competitive by reducing upfront costs and improving liquidity.
By deferring or eliminating duties through schemes like IPR or Customs Warehousing, exporters can reinvest capital into operations, logistics, or freight insurance export UK coverage.
Ultimately, these reliefs streamline exporting processes UK, support export compliance UK, and make it easier to move goods internationally at lower financial risk.
Post-Brexit Changes to UK Customs and Excise Rules
Since Brexit, trade between the UK and the EU is treated as international trade, meaning customs declarations and possible duties now apply.
Northern Ireland operates under slightly different rules via the Windsor Framework, maintaining partial alignment with EU customs procedures.
Importers must stay informed about evolving trade agreements, updated tariff codes, and new documentation requirements to remain compliant.
Tips for Managing Excise and Customs Compliance
Practical steps to stay compliant and efficient include:
- Apply for an EORI number before trading internationally.
- Use correct commodity codes to prevent classification errors.
- Hire a licensed customs agent for complex declarations.
- Check import restrictions and licensing requirements regularly.
- Keep detailed records for all import/export transactions.
- Review duty rates annually.
- Explore duty relief schemes to reduce costs.
Related Duties: Fuel and Vehicle Excise
Besides customs and excise duties on goods, the UK also applies:
- Fuel duty UK: Charged per litre of petrol, diesel, and other fuels.
- Vehicle excise duty UK: Commonly called road tax, based on CO₂ emissions and vehicle type.
These taxes help fund transport infrastructure and environmental initiatives.
Why These Duties Matter?
For businesses, understanding excise and customs duties UK is about more than compliance, it’s about control. Proper classification, documentation, and awareness of relief schemes can prevent costly errors and improve profitability.
For consumers, these taxes directly affect the prices of daily goods from fuel and cigarettes to imported wine and electronics.
Conclusion
Excise and customs duties are key elements of the UK’s trade and tax system: customs duty applies when goods enter the UK, while excise duty covers specific products like alcohol, tobacco and fuel. For businesses, mastering registration (such as an EORI number), accurate classification and valuation, and taking advantage of relief schemes is essential. For consumers, these charges influence prices and availability. In today’s evolving trade environment, especially post-Brexit , staying informed is vital. With the right approach, these duties become more than compliance obligations: they become strategic levers for cost-control and competitive advantage.
Frequently Asked Questions (FAQs)
1. What is the difference between excise duty and customs duty in the UK?
Customs duty applies to goods imported into the UK, while excise duty is charged on specific products like alcohol, tobacco, and fuel made or sold in the UK.
2. How is customs duty calculated in the UK?
It’s based on the product’s customs value, UK commodity code, and country of origin. HMRC’s tariff tool shows the exact UK customs duty rate on imports.
3. Do I need an EORI number to import goods into the UK?
Yes. All importers must have an EORI number. UK importers use it for customs declarations. Without it, goods can’t clear customs.
4. Which goods are subject to UK excise duty?
Alcohol, tobacco, and fuel are the main categories. Rates vary by product type and strength under UK excise duty on alcohol and tobacco rules.
5. What goods are banned or restricted from import into the UK?
Controlled drugs, weapons, endangered species, counterfeit goods, and certain food items are restricted. Some require an import licence for UK goods.