Many travellers will not have realised that they are now entitled to bring back more goods free from VAT and duty than ever before.

With effect from the beginning of 2010, travellers are entitled to bring back VAT- and duty-free goods to the value of almost £400 if travelling by air or sea.  This is a modest increase on the prior £340 limit in place but a far cry from the £145 limit that prevailed for many years prior to December 2008.

The new £390 limit applies to any travellers to countries outside the EU, such as the US, Japan and Australia, who wish to bring items, such as electronic goods, perfume, clothes and souvenirs back into the UK. 

This is clearly good news for those who can obtain the latest items at cheaper prices while travelling, particularly as the VAT rate in the UK will increase to 20% from 4 January 2011, making domestic purchases even more expensive.  However, travellers should be warned that as soon as the £390 limit is exceeded, VAT and import duty are due on the entire value of goods brought back into the UK, and not just the excess.  Rates of import duty vary according to item but once VAT and duty are added on, the item may become more expensive than it would have been to buy in the UK.

In contrast, there are no limits on the value of goods that travellers can bring back from EU countries.  This is because VAT is paid in the EU country of purchase with the result that there are no additional taxes or duties to pay on entry into the UK.

However, care should be taken if bringing back alcohol or tobacco from outside the EU.  There are strict limits on the quantity of these items that may be brought back, for example no more than 200 cigarettes and 1 litre of spirits may be imported.  Where cigarettes and alcohol are brought back from other EU countries, there are no limits provided the items are for own consumption.  With this in mind, frequent travellers to the EU should ensure they are not caught out by the different rules and ensure they adhere to the strict import limits when bringing back alcohol and tobacco from further afield.