How to Reduce Duty Costs Legally: Smart Strategies for UK Importers

Why Reducing Duty Costs Matters

Import duty can significantly increase the landed cost of your goods. For many businesses, duty is one of the largest — and most overlooked — operational expenses. The good news is that there are fully legal, HMRC‑approved ways to reduce or eliminate duty costs, provided you understand the rules and apply them correctly.

This guide outlines the most effective strategies to reduce duty costs without risking penalties, delays, or compliance issues.

1. Use the Correct HS/Commodity Code

Your HS code determines your duty rate. Many businesses overpay simply because their goods are misclassified.

Correct classification can:

• Reduce duty
• Unlock preferential origin benefits
• Avoid unnecessary licensing
• Prevent customs queries

Tip: Always verify supplier codes — they are often wrong or based on another country’s tariff.

2. Check Eligibility for Preferential Duty Rates

Under Free Trade Agreements (FTAs), goods may qualify for reduced or zero duty if they meet the rules of origin.

Key agreements include:

• UK–EU Trade and Cooperation Agreement
• UK–Japan CEPA
• UK–Australia FTA
• UK–New Zealand FTA

To claim preference, you must have:

• A valid statement of origin
• Correct HS classification
• Evidence that origin rules are met

Incorrect claims can lead to duty reclaims and penalties, so accuracy is essential.

3. Use Inward Processing (IP)

If you import goods for:

• Processing
• Repair
• Reworking
• Incorporation into another product

…you may be able to suspend duty and VAT under Inward Processing.

This is one of the most powerful tools for manufacturers and repair centres.

4. Use Outward Processing (OP)

If you send goods abroad for repair or processing, OP allows you to pay duty only on the value added outside the UK when the goods return.

This can dramatically reduce duty on high‑value items.

5. Claim Returned Goods Relief (RGR)

If goods were previously exported from the UK, you may be able to re‑import them without paying duty or VAT, provided:

• They return within three years
• They are in the same condition (unless repaired under OP)
• You can prove they were originally exported

RGR is often overlooked but extremely valuable.

6. Use Temporary Admission (TA)

If goods are only entering the UK temporarily, TA allows you to avoid duty and VAT entirely, provided the goods are:

• Not sold
• Not altered
• Re‑exported within the allowed timeframe

Ideal for exhibitions, professional equipment, and samples.

7. Store Goods in a Customs Warehouse

Customs warehousing allows you to delay duty and VAT payments until the goods enter free circulation.

Benefits include:

• Improved cash flow
• Duty‑free re‑export
• Avoiding duty on unsold stock

Perfect for businesses with long storage periods or uncertain demand.

8. Use Tariff Quotas Where Available

Tariff quotas allow certain goods to be imported at reduced or zero duty up to a set volume.

Common for:

• Agricultural goods
• Raw materials
• Industrial inputs

Quotas are limited and often allocated on a first‑come, first‑served basis.

9. Review Your Valuation Method

Duty is calculated on the customs value, which includes:

• Product cost
• Freight
• Insurance
• Packing
• Certain commissions

Incorrect valuation can lead to overpayment.

Tip: Ensure your invoices reflect the correct Incoterms and cost breakdown.

10. Avoid Common Mistakes That Increase Duty Costs

Many importers pay more duty than necessary because they:

• Use incorrect HS codes
• Fail to claim preference
• Don’t use duty relief schemes
• Misunderstand origin rules
• Don’t keep proper records
• Rely on supplier documentation without checking

A small mistake can cost thousands over a year.

How We Help You Reduce Duty Costs Legally

We support businesses with:

• HS code classification
• Origin and preference checks
• Duty relief applications (IP, OP, RGR, TA, warehousing)
• Supplier documentation reviews
• CDS declaration accuracy
• Compliance and audit preparation
• Ongoing duty optimisation strategies

Our goal is simple: reduce your duty costs while keeping you fully compliant.

Explore More in Our Knowledge Hub

You can also read:

• Understanding Duty Relief Schemes
• Temporary Admission Explained
• Importer Checklists
• HS Code Guides
• Post‑Brexit Customs Advice

If you want help reducing your duty costs legally, our customs specialists are ready to support you.

Get in touch for expert duty optimisation and compliance guidance.