How to Calculate Landed Costs When Importing into the UK
If you're importing goods into the UK, understanding your landed cost is essential for pricing, profitability, and avoiding unexpected expenses. Landed cost is the total cost of getting a product from a foreign supplier to your doorstep, including shipping, taxes, duties, and fees.
In this article, we’ll break down what’s included in landed cost and how to calculate it step by step.
💡 What Is Landed Cost?
Landed cost refers to the total price of a product once it has “landed” at your location—that means everything from manufacturing to delivery, including:
- Product cost
- Shipping & freight
- Insurance
- Import duties
- VAT (Value Added Tax)
- Customs fees
- Handling or brokerage charges
It’s the true cost of your imported goods.
🧾 Why It Matters
Knowing your landed cost helps you:
- Set accurate retail or wholesale prices
- Avoid margin-killing surprises
- Make smarter purchasing decisions
- Compare supplier quotes fairly
🔢 Components of Landed Cost in the UK
Here’s what you need to factor in:
1. Product Cost
This is the invoice price you pay to the supplier.
Example: £10 per unit x 100 units = £1,000
2. Shipping and Freight
Covers the cost of transporting the goods to the UK via sea, air, or courier.
Example: £300 (freight) + £50 (handling) = £350
3. Insurance
Optional but recommended. Protects your goods during transit.
Example: £50 for full-value coverage
4. Import Duty
Duty rates depend on the product’s commodity code (HS code). You can find it using the UK Trade Tariff tool.
Formula:
Duty = (Product Cost + Shipping + Insurance) × Duty Rate
Example:
Duty rate = 3%
Duty = (£1,000 + £350 + £50) × 0.03 = £42
5. Import VAT
Typically charged at 20% on the total value, including duty.
Formula:
VAT = (Product Cost + Shipping + Insurance + Duty) × 20%
Example:
VAT = (£1,000 + £350 + £50 + £42) × 0.20 = £288.40
6. Customs Clearance Fees
Charged by your freight forwarder or customs broker. These vary but often range from £25–£100.
Example: £40
Final Thoughts
Calculating landed costs gives you the full picture of what your imports really cost—and lets you price your products for success. Use this method every time you place a new order, and consider using a landed cost calculator or software as your import volume grows.
