Post-Brexit Customs Duty: What UK Businesses Must Know in 2026

More than five years since the UK left the EU’s customs union, the post-Brexit customs duty landscape is still catching businesses out. What many assumed would settle into a predictable new normal has instead continued to evolve, with 2026 bringing further HMRC enforcement activity, changes to reporting systems, and a renewed focus on whether businesses have been getting their customs declarations right since January 2021.

If your business imports or exports goods, the cost of getting customs duty wrong is not abstract. Penalties range from £250 to £2,500 per error, HMRC post-clearance audits are increasing, and the financial exposure from incorrectly claimed preferential duty rates can be significant. This guide sets out what UK businesses need to understand about post-Brexit customs duty in 2026 and where the risks are highest.

What Post-Brexit Customs Duty Actually Changed

Before Brexit, goods moved freely between the UK and EU member states without customs formalities. There were no import declarations, no duty calculations, and no border checks on commercial consignments. That frictionless trade ended on 1 January 2021.

From that date, the UK became a third country in relation to the EU. Every movement of goods between Great Britain and the EU, in either direction, now requires a customs declaration, a commodity code classification, a duty calculation, and compliance with the UK’s own regulatory framework. Customs declarations in the UK have since surged to approximately 250 million annually, a transformation that has tested businesses and HMRC infrastructure alike.

The UK now operates its own tariff schedule, the UK Global Tariff (UKGT), entirely separate from the EU’s TARIC system. Duty rates vary by commodity code, and the UKGT applies to imports from all countries unless a preferential rate applies under a specific trade agreement. For many UK businesses still referencing EU duty rates or applying pre-Brexit thinking, this is the first and most important correction to make.

The UK-EU Trade and Cooperation Agreement: Zero Tariffs Are Not Automatic

The UK-EU Trade and Cooperation Agreement (TCA), signed in December 2020, provides for zero-tariff, zero-quota trade on goods moving between the UK and EU. But this preferential treatment is not automatic, and it is one of the most widely misunderstood aspects of post-Brexit customs duty.

To qualify for the 0% duty rate under the TCA, goods must originate in the UK or EU, meaning they must be sufficiently manufactured or processed there. Simply shipping goods from the EU does not make them of EU origin. A product assembled in China and shipped through Germany remains a Chinese-origin good, and standard UK global tariff rates apply.

To claim preferential duty rates under the TCA, businesses must:

• Confirm that the goods meet the product-specific Rules of Origin set out in the TCA
• Obtain a supplier declaration or statement on origin from their EU supplier
• Declare the preference correctly on the customs declaration using the appropriate document codes
• Retain all supporting documentation to evidence the origin claim

HMRC is currently conducting post-clearance audits specifically targeting TCA preference claims made since 2021. Businesses that claimed 0% duty without adequate evidence of origin face retrospective duty assessments, with interest. If your business has been claiming EU preference without maintaining robust supplier documentation, this is an area requiring urgent attention.

EORI Numbers and the Customs Declaration Service

Every business importing into or exporting from the UK requires an Economic Operator Registration and Identification (EORI) number. UK EORI numbers are prefixed with “GB” and are linked to the business’s VAT registration. Applications are typically processed within five working days.

For businesses also trading into the EU, managing EU inventory, clearing goods through EU customs themselves, or selling DDP (Delivered Duty Paid) to EU customers, a separate EU EORI number issued by an EU member state is also required. The two systems are independent; a UK EORI does not function within EU customs procedures.

All UK import declarations must now be submitted through HMRC’s Customs Declaration Service (CDS), which fully replaced the older CHIEF system in November 2023. From 31 March 2026, HMRC has also transitioned all customs reporting to the new Trade Reporting and Extracting (TRE) service, replacing the previous MSS and CDS contract reports. Businesses managing significant import volumes need to ensure their teams have Government Gateway access to TRE and understand how to use the new system.

Import VAT and Postponed VAT Accounting

Import VAT is charged at the standard rate of 20% on most goods imported into the UK. For VAT-registered businesses, this is generally recoverable as input tax on the VAT return, but the timing of that recovery matters for cash flow.

Under Postponed VAT Accounting (PVA), VAT-registered importers can account for import VAT on their periodic VAT return rather than paying it at the point of import. This avoids the cash flow impact of paying VAT upfront and waiting to recover it in the next return cycle. PVA is available to all UK VAT-registered businesses and requires no separate application; it is selected at the point of making the customs declaration. HMRC provides a Monthly Postponed Import VAT Statement via CDS to support VAT return completion.

It is worth noting that customs duty and import VAT are separate charges. PVA defers the VAT payment, but customs duty is still due at the point of import unless a relief or suspension applies.

Customs Duty Relief Schemes: Are You Using Them?

Many UK businesses are paying more customs duty than they need to because they are unaware of, or have not properly implemented, the relief schemes available to them. The most commercially significant include the following:

Inward Processing Relief (IPR)

Where goods are imported, processed or manufactured in the UK and then re-exported, IPR allows the duty on the imported materials to be suspended rather than paid. This is a major benefit for manufacturers, processors, and businesses with complex supply chains that run through the UK. Correctly implemented, IPR can eliminate the duty liability on qualifying inputs.

Customs Warehousing

Goods can be stored in an HMRC-approved customs warehouse without duty being paid until they are released into free circulation in the UK. For businesses holding stock before onwards distribution or export, this is a valuable cash flow and duty deferral tool.

Duty Drawback and Defective Goods Relief

Since the Customs (Miscellaneous Amendments) Regulations 2025 came into force in July 2025, UK importers now have a formal mechanism to apply to HMRC for repayment or remission of duty on defective goods, aligning UK law with the EU’s equivalent provision. Businesses in sectors such as electronics, automotive components, and textiles with recurring quality issues should review whether retrospective reclaim opportunities exist.

What’s Changing in 2026: Key Developments to Act On

The customs compliance environment continues to develop. The most important 2026 developments for UK businesses are:

• HMRC TCA origin audits. HMRC is actively reviewing post-2021 declarations where preferential origin was claimed under the UK-EU TCA. If your customs duty position has relied on 0% TCA rates, ensure your supplier declarations and origin documentation are complete and retained.
• TRE reporting transition. From 31 March 2026, the Trade Reporting and Extracting service is the only route to access HMRC customs data. Businesses previously relying on MSS or CDS contract reports must transition now.
• Entry Summary Declarations for EU imports. Introduced on 31 January 2025, ENS declarations are now required for all EU goods arriving in the UK, aligning EU imports with the process already applied to rest-of-world trade. Non-compliance risks goods being refused at the border.
• End of de minimis relief (by March 2029). The Chancellor has confirmed the £135 customs duty relief threshold for low-value imports will be removed by March 2029. A consultation is shaping how this transition will work. Businesses with high volumes of low-value consignments should begin planning now.
• New EU €3 customs duty on low-value imports. From 1 July 2026, the EU introduced a temporary €3 customs duty on low-value consignments imported from outside the EU with an intrinsic value of no more than €150. The €3 charge applies per item category contained in the consignment, rather than simply per parcel, meaning that a shipment containing goods falling within different customs classifications can attract multiple €3 charges. The measure applies to goods where the non-EU seller uses the EU’s Import One Stop Shop (IOSS) arrangements. Existing IOSS VAT accounting and reporting obligations remain in place. For retailers making high volumes of low-value direct-to-consumer sales into the EU, the additional customs cost may make direct shipment models less commercially attractive and could encourage greater use of bulk importation followed by intra-EU distribution. The temporary measure is currently intended to operate until 1 July 2028, when wider EU customs reforms are due to take effect.
• Border Target Operating Model (BTOM). Full implementation is in place. Agrifood importers must ensure SPS documentation is correct, and pre-notification via IPAFFS is made well in advance; physical checks at border control posts are ongoing.

Northern Ireland: The Windsor Framework

Northern Ireland operates under different rules from Great Britain under the Windsor Framework. Businesses moving goods into Northern Ireland require an EORI. Starting with “XI” and comply with EU customs procedures for goods entering from outside the EU. A new £1,000 penalty power introduced in July 2025 enables HMRC to enforce Windsor Framework compliance, targeting incorrect “Not for EU” labelling and trader registration failures. If your business has a Northern Ireland supply chain, the specific requirements warrant separate, specialist advice.

The Most Costly Post-Brexit Customs Duty Errors

These are the errors we encounter most frequently and most expensively in practice:

• Incorrect commodity codes. Mis-coding goods leads to the wrong duty rate being applied, triggering back-duty assessments with interest. Also, HMRC penalties for inaccurate declarations start at £300 and can escalate. A proactive commodity code review is one of the highest-return compliance investments a business can make.
• Unsupported TCA preference claims. Claiming 0% TCA duty without a valid supplier declaration or statement of origin means the preference can be disallowed on audit, triggering back-duty assessments with interest and penalties.
• Failure to update EORI registrations. Changes to business structure, VAT registration, or trading entities need to be reflected in EORI records. An invalid or mismatched EORI causes declarations to be rejected and goods to be held.
• Not using available duty reliefs. Paying full UKGT rates when IPR, customs warehousing, or Tariff-Rate Quotas (TRQs) are available is a direct and avoidable cost. Many businesses have never reviewed their position against available relief.
• Under-declared customs value. The customs value must include the cost of goods, freight, and insurance (CIF value). Under-declaring value, even unintentionally, triggers VAT and customs assessments and penalties.

Get Specialist Customs Duty Advice for Your Business

Post-Brexit customs duty is not an area to manage on instinct or historical practice. The rules have changed, HMRC’s scrutiny has increased, and the financial cost of getting it wrong continues to grow. Whether you need a customs duty audit to review your existing declarations, advice on claiming available duty reliefs, or support navigating the 2026 compliance changes, getting specialist input now is far less expensive than resolving a problem later.

At Deeks VAT Consultancy, our customs duty services cover everything from customs duty audits and recovery to planning, compliance, and HMRC investigation support. We also advise on the interaction between customs duty and VAT, an area where misalignment between the two can create compounding exposure.

You can also explore our dedicated customs duty planning and compliance service or our customs duty audit service. If you’d prefer to speak directly with our team, get in touch here.