VAT, customs, and duty-free shopping

The difference between customs, VAT taxes, and duty-free shopping

Customs and VAT are two entirely separate things that tourists often confuse. Both have to do with shopping and apply (mostly) for large purchases only.

VAT refers to taxes the U.K. charges you on all purchases. (Duty-free is when you can buy something without paying that tax.)

Customs refers to taxes (import duties) the U.S. will charge you on anything you bring home—but only if you go over the allowable limits.

In brief:

• VAT: V.A.T. stands for "Value Added Tax" and is the tax that the British government charges you on just about everything. It is kind of like a federal sales tax, only it is already included in the sticker price (no doing math at the register, as with state sales taxes back at home, to figure out how much, say, 6.25% of something is). In the U.K., the price you see if the price you pay—only it includes an invisible tax of 20%. If you spend more than £25 at a single store, you can get this money refunded. Here's how: » more
• Duty-free shops: Stores in airports and at ship ports (and from catalogs on the plane) that sell you items—often luxury goods—without charging the local national sales tax (in the U.K., 20%), but in practice not always a great bargain anymore. » more
• Customs: Assuming you're a tourist who is only bringing to the U.K. personal items for your trip (as opposed to, say, merchandise for sale), the only customs regulations you have to worry about are the U.S. Customs limits, which are imposed when you return from your trip. In brief, you are allowed to take home $800 worth of stuff per person, among which only a single bottle of any kind of alcohol. Here are more details: » more