Although it’s been several years since the referendum where the UK voted to leave the EU it was only a few days before actually leaving that a deal was struck. And so you’d be forgiven for not realising that the rules about buying from EU countries have changed.
In short, if you buy a product from France, Germany, Italy, Spain, the Netherlands, Belgium or any EU country and have it delivered to the UK, the seller will have to fill out a Customs Declaration form with a description of the goods, their weight and value. Similarly, if you send items from the UK to the EU, you’ll have to fill in a CN 22 form with the same details, unless it’s a letter, document or postcard.
This means the days of spotting a bargain on Amazon Germany, say, are over, because the import charges are likely to make it more expensive than if you purchased the same item, even if a bit more expensive, from Amazon UK.
Of course, this shouldn't come as a surprise. The same rules apply when buying things from the US, China and other countries.
How much can an item cost before import duty is charged?
The Royal Mail says “When receiving goods from abroad, recipients may have to pay VAT and duties. The VAT and duties will be applied depending on the type and value of the goods. For gifts over £39 and goods over £135, Royal Mail may collect the VAT and customs duties on behalf of HM Revenue & Customs (HMRC). from the recipient prior to delivery. Letters, postcards and documents are usually exempt.”
Note that the duty and VAT is charged on the whole value of the item, not just the amount above the threshold.
The value is higher if you’re bringing goods into the UK yourself when, for example, returning from holiday or a business trip. Your purchases can be worth up to £390 before you have to pay tax on them.
This means that electric bikes, scooters and other expensive tech just got a whole lot more expensive to buy from the EU.
How much duty will I have to pay?
The amount of duty can be between 0 and 25% of the total value of the goods, unless the seller pays it in advance.
For example, if you bought an electric bike that cost £1800 (including delivery), you may have to pay duty and VAT on top. If it was charged at 25%, you’d pay:
£1800 + £450 duty = £2250.
£2250 + VAT (at 20%) = £2700.
That’s £900 than the bike cost before Brexit.
However, you may not be charged any extra at all. Brussels-based electric bike manufacturer Cowboy told Tech Advisor, “As we use registration-based taxes and have a UK VAT registration, the VAT and import duty costs don't apply to our customers in the UK.”
Meanwhile, other companies are simply having to absorb the extra costs in order to maintain the same prices for UK customers. VanMoof, for example says that it is taking the hit for now to keep its S3 and X3 electric bikes at the pre-Brexit price. Obviously, you're still paying VAT, but this is factored into the price anyway.
Who should I pay customs duty and VAT to?
If that sounds bad, it can get a bit worse. The government relies on Royal Mail and other carriers (such as DHL and UPS) to collect the duty and they may charge their own handling fee on top to cover the extra work of filling out the paperwork.
DHL charges a minimum of £11, Royal Mail £8 and TNT £4.31.
They’ll invoice you at the time of delivery (or before) and you won’t get the goods until you’ve paid in most cases.
Because of the confusion and the fact it’s very difficult to work out the exact amount of duty and VAT you’ll have to pay, it’s worth speaking to the seller first to establish whether it will pay any of these charges, or make a contribution towards them before you order.
What about the 400% mastercard fee increase?
Just recently, payment providers have started to announce increases in transaction fees for EU purchases by UK cardholders. First reported by the Financial Times, Mastercard is raising the 'interchange rates' which were previously capped at 0.3% for credit cards and 0.2% for debit.
When you buy goods from the EU with your UK card, those caps no longer apply and Mastercard has said in a statement "As a result of the UK leaving the European Economic Area, Mastercard will adapt interchange rates on UK cards to the commitments it gave the European commission in 2019 for non-EEA card transactions."
However, though the increase to 1.5% for credit cards and 1.15% for debit cards is an increase of at least 400%, the fees are (theoretically) paid by the seller, not the buyer: "In practice, only EEA merchants making e-commerce sales to UK cardholders will see a change. Interchange is not a consumer-facing cost but the fees paid between merchants and banks for the provision of payments. Consumers should not feel any impact of changes in interchange fees.”
We wouldn't be surprised to see those costs passed onto UK buyers though, just as sellers currently add a processing fee at the checkout depending on whether you choose to pay by credit or debit card. So watch out for a percentage of the sale being added to the total when you click on the Mastercard button.
Note that these fee increases don't apply to UK Mastercard customers buying products in the UK, or face to face in the EU.