The India-UK free trade agreement: Key actions for UK businesses

On 6 May 2025, the UK and India finalised the terms of a proposed new free trade agreement.

This agreement will prompt increased trade between the two counties. UK customs duties applied to Indian origin imports and Indian customs duties on UK-origin imports will be reduced or removed for a wide range of items.

The agreement will also provide new opportunities for the UK and Indian service sectors. At the same time, a new double contributions convention will change the rules for temporary Indian workers in the UK and UK workers in India, allowing national insurance/social security to be accounted for solely in the worker’s home country for up to three years.

Key actions for UK businesses

• If you already source goods from India – consider using the Developing Country Trading Scheme if you are not already doing so. This will allow your business to benefit from duty reductions immediately without having to wait for the new agreement to be enacted
• Consider whether adding Indian suppliers to your supply chain will become viable due to decreased UK customs duties
• Consider whether expanding exports to India will become viable due to decreased Indian customs duties
• Ensure you can provide accurate commodity code classifications for the goods you import and export
• Understand the key principles and rules that govern how Free Trade Agreements operate
• Explore new opportunities to provide your services to the Indian market
• Understand how the new UK-Indian Double Contributions Convention may impact the global mobility and tax obligations of your business and employees

When will the agreement be available?

Formal negotiations have taken place since 17 January 2022 and required 15 rounds before the draft was finalised on 6 May 2025.

No final enaction date has been set. It may not be until sometime in 2026 that the agreement becomes available for UK businesses to use.

While certain goods are likely to be eligible for nil duty immediately, other sectors such as dairy and milled rice will remain subject to their current tariffs to protect domestic producers in each country.

Certain goods will be subject to slow reductions in duty over time. For example, UK whisky and gin are currently subject to 150% Indian tariffs. The agreement will initially halve this to 75%, with a final duty rate of 40% expected a decade after enactment.

Other goods may be subject to quotas – where at a national level, a defined quantity can be imported at a lower duty rate – before reverting to a higher rate once exhausted.

Key changes

Goods – UK import duties on Indian-origin goods

For UK importers, the free trade agreement will offer a new way to claim a duty reduction or removal (aka preference) on Indian-origin goods. The agreement is expected to apply duty reductions and removals to a wider range of goods than current arrangements.

UK business may not be aware that Indian origin goods are already entitled to standard preference under the terms of the UK’s DCTS or Developing Country Trading Scheme. This is a unilateral preference arrangement, where the UK offers lower duties, but does not expect equivalent tariff reductions for UK goods sold to India. Standard preferences under DCTS allow a nil duty to be applied to 65% of Indian product lines, while a further 26% of product lines are eligible for reduced tariffs.

Once the India-UK Free Trade Agreement is enacted, duty reductions will be available for 90% of Indian product lines, with 85% of those to be nil duty within a decade.

The final duty rates are yet to be published. However, it has already been announced that the duty reductions or removals will include Indian clothing, footwear, food, jewellery and vehicles.

Indian exports to the UK are expected to increase by 25% / £9.8 billion due to the changes.

Goods – Indian import duties on UK-origin goods

For UK exporters, the free trade agreement will provide a major change. UK-origin goods will for the first time be entitled to duty reductions or removals when imported into India.

Again, the final details are yet to be published, however lower duties are expected for British machinery, aerospace, automative, food and cosmetics. The UK government expects a 59.4% / £15.7 billion increase in the UK’s exports to India

Services and legal guarantees

Measures will be brought in to facilitate Mutual Market access in the service sector, including access to public procurement contracts and comparable opportunities to domestic supplier.

A range of other agreements will be included, such as mutual recognition of qualifications and enhanced copyright protections.

Global mobility

The agreement in principle includes a reciprocal Double Contributions Convention.

This will ensure that national insurance/social security will only be paid in one country at a time. For temporary workers, national insurance/social security will be exempted for up to three years, provided it is being paid in the worker’s home country. This is a major increase from the current arrangement, where the UK offers Indian workers an exemption for 52 weeks.

Using the free trade agreement

Details are yet to be published, however as India and the UK are both members of the World Trade Organization, key principles will apply.

The final agreement will include a schedule of Harmonized System Commodity Codes and corresponding rules of origin.

For goods to qualify for a duty reduction, they must have been deemed to be sufficiently manufactured in the country of export and meet a defined rule of origin – which may be based on the classification of items in a good’s bill of materials, value-added during manufacture or a specific process being performed.

If a UK business were to import items from a third country such as China, repackage them and export them to India, they will not qualify for duty reduction as the goods will remain Chinese origin.

Proof of origin will also be required, most commonly in the form of a statement of preferential origin. The text of this statement will be defined in the free trade agreement and is most often included on the exporter’s commercial invoice.

How we can help

This is an opportune time to review your trading arrangements with India. We have a highly experienced customs and global mobility team that are well positioned to support you with the required analysis and information that will allow you to make informed strategic decisions. If you have any queries or would like any support with the action points mentioned above, please get in touch.