UK's new tax-free shopping rules and charges explained
New post Brexit rules for tax-free shopping were introduced in the UK on 1 January 2021. The VAT Retail Export Scheme, known as VAT RES, has been abolished in Great Britain (England, Scotland, Wales). However, previous tax-free shopping rules still remain unchanged for non-EU residents visiting Northern Ireland, find out more here.
What is VAT-free shopping in the UK
In Great Britain, tax-free shopping now consists of retailers offering VAT-free purchases to all overseas visitors, including EU nationals. The main difference between “traditional” tax-free shopping and VAT-free shopping is that retailers will have to arrange for your purchase in the store to be shipped directly to your overseas home address instead of letting you walk away with the goods.
In this respect VAT-free shopping is closer to on-line cross-border shopping than to tax-free shopping with the only exception that instead of making your purchase online, you do it in the physical store. Think of it as internet shopping done in person while on a visit to the UK!
Retailers do not have to offer VAT-free shopping in store so this option might not be widely available and you should check with the sales staff first. Large luxury retailers, such as Harrods and Selfridges, are more likely to offer the service.
How much is VAT refund in the UK
VAT is charged as a percentage rate of the net price, which is the price before the tax is applied. In the UK VAT is 20% of the net price, which is equal to 16.67% of the gross price (i.e. the price actually paid by you in store).
Hence, if you made a £100 purchase, the VAT amount would actually be £16.67 (and not £20 as commonly mistaken)! Learn more here about how to calculate your VAT refund.
As with all international purchases and deliveries, be sure to understand what costs are involved before making tax-free purchases as the benefit of not paying 20% VAT in the UK may turn out to be less than the overall charges associated with the service.
Below is a list of the main potential charges involved in VAT-free shopping. Be sure to understand each of them before deciding to make purchases while visiting the UK.
Each participating store offering VAT-free shopping may charge an admin fee for providing the service. The process does require extra paperwork and handling so it is understandable that some retailers may require a little compensation for their effort.
Shipping and insurance costs
Retailers may charge additionally for the shipping cost of delivering the VAT-free goods to your overseas address. This cost may vary according to your destination country, goods weight, and value. The retailer should be able to tell you the exact charges at the check out.
Your destination country import taxes and duties
International shipments of goods above a certain official value (formally known as “de minimis threshold'') attract additional import duties and taxes. Even though you are getting a VAT refund in the UK, your VAT-free goods might still incur import charges in your home country if your shipment value is above your destination country’s de minimis thresholds.
A good rule of thumb is to try to keep each individual shipment value below these thresholds in order to actually benefit from a VAT refund in the UK. Otherwise, it might be cheaper to just pay the full price in-store and not bother with the VAT-free option by taking the goods home in your luggage.
De minimis values are calculated in local currency and include the goods price as purchased from a UK store plus the extra cost of shipping and insurance. Some countries such as the USA and Australia have a relatively high de minimis threshold, or as in the case of Hong Kong none at all, making them quite favourable destinations for posting your UK shopping to.
De minimis thresholds vary from country to country and below table shows a few examples. Be sure to understand what your local duties and taxes would be if you exceed the thresholds and who would be responsible for these extra costs.
If the UK retailer does not pay the destination country import costs, your VAT-free goods would be held by the shipping company until you settle them. The courier would also likely apply a further handling fee for settling these customs charges on your behalf before releasing the goods to you.
|Destination Country||Duty De Minimis Threshold||Tax De Minimis Threshold (VAT/GST)|
|EU (Euro area only)||EUR 150||EUR 22|
|Australia||AUD 1000||AUD 1000|
|Canada||CAD 150||CAD 50|
|China||CNY 50||CNY 50|
|Denmark||DKK 1150||DKK 80|
|India||INR 1000||INR 0.00|
|Japan||JPY 10,000||JPY 10,000|
|Mexico||USD 50||USD 50|
|New Zealand||NZD 1000||NZD 1000|
|Norway||NOK 350||NOK 350|
|Russian Federation||EUR 200||EUR 200|
|Saudi Arabia||SAR 1000.00||0|
|Singapore||SGD 400||SGD 400|
|South Korea||KRW 150,000||KRW 150,000|
|Sweden||SEK 1500||SEK 1500|
|Switzerland||CHF 5||CHF 5|
|Taiwan||TWD 2000||TWD 2000|
|Turkey||EUR 30||EUR 30|
|United Arab Emirates||AED 1000||AED 1000|
|United States||USD 800||USD 800|