Example calculation - import taxes for a guitar and amp

Example 2: a Fender Stratocaster guitar ($450) and a SansAmp Programmable Bass Driver ($200), shipped in one parcel from the USA to the UK

Data:
• Let’s buy a Fender Stratocaster electric guitar for $ 450.00 (including sales tax) and a SansAmp Bass Driver DI for $ 400.00 (including sales tax)
• Total Shipping cost: $ 150.00
• The consignment is insured up to $ 500.00 for $ 10.00
• Official exchange rate by customs agencies on June 1st, 2009: 1.56 USD to 1 GBP
• Duty tax rate for electric guitars: 3.20%
• Duty tax rate for amplifiers: 2.00%
• VAT tax rate in the UK: 20.0%

Calculation:
Step 1 of 9 - let’s calculate the customs value
+ $ 600.00 <- price of the Fender Stratocaster electric guitar including sales tax
+ $ 400.00 <- price of the SansAmp Bass Driver DI
+ $ 200.00 <- shipping cost
+ $ 10.00 <- insurance cost
-----------------
= $ 1,210.00

Step 2 of 9 - let’s split the shipping cost and insurance cost between the guitar and the amplifier
The value of the guitar is 60% of the total value of the goods
therefore
• the shipping cost allocated to the guitar equals = $ 200.00 x 60% = $ 120.00
• the insurance cost allocated to the guitar equals = $ 10.00 x 60% = $ 6.00

The value of the amplifier is 40% of the total value of the goods
therefore
• the shipping cost allocated to the amp equals = $ 200.00 x 40% = $ 80.00
• the insurance cost allocated to the amp equals = $10.00 x 40% = $ 4.00

Step 3 of 9 - let’s calculate the customs value
• for the electric guitar
+ $ 600.00 <- price of the electric guitar including sales tax
+ $ 120.00 <- shipping cost
+ $ 6.00 <- insurance cost
-----------------
= $ 726.00

• for the amplifier
+ $ 400.00 <- price of the amplifier including sales tax
+ $ 80.00 <- shipping cost
+ $ 4.00 <- insurance cost
-----------------
= $ 484.00

Step 4 of 9 - let’s convert into £
• the electric guitar
$ 726.00 / 1.56 = £ 463.93

• the amplifier
$ 484.00 / 1.56 = £ 309.28

Step 5 of 9 - let’s calculate the import duty
• for the electric guitar
£ 463.93 x 3.20% = £ 14.85
• for the amplifier
£ 309.28 x 2.00% = £ 6.19

However the duty for the amplifier will default to nil because the amount payable is less than the £9 (€10, or equivalent in local currency) minimum threshold.

Step 6 of 9 - let’s calculate the value on which the VAT will be paid
• for the electric guitar
+ £ 463.93 <- customs value of the electric guitar
+ £ 14.85 <- import duty USA to UK
-----------------
= £ 478.77

• for the amplifier
+ £ 309.28 <- customs value of the amplifier
+ £ 0.00 <- import duty USA to UK
-----------------
= £ 309.28

Step 7 of 9 - let’s calculate the VAT
• for the electric guitar
£ 478.77 x 20.0% = £ 95.75 
• for the amplifier
£ 315.47 x 20.0% = £ 63.09 

Step 8 of 9 - let’s now get the total calculation for import duty and VAT on our Stratocaster guitar and the SansAmp amplifier
• for the electric guitar
+ £ 14.85 <- import duty
+ £ 95.75 <- VAT
-----------------
= $ 110.60 

• for the amplifier
+ £ 0.00 <- import duty
+ £ 63.09 <- VAT
-----------------
= $ 63.09

Step 9 of 9 - let’s sum up
+ £ 110.60 <- import duty and VAT for the Fender Stratocaster electric guitar
+ £ 63.09 <- import duty and VAT for the SansAmp amplifier
------------------
= £ 173.69 

Total import duty and VAT for the guitar and the amplifier is therefore £ 173.69.
The total landed cost equals = £ 946.90, that is:
+ £ 773.21 <- total cost of the guitar, the amplifier, shipping and insurance in £
+ £ 173.69 <- total import duty and VAT on the guitar and the amplifier
------------------
= £ 946.90 

Please note that the shipping provider might charge additional fees.