(2-part post):
The easiest way to explain the system is with a 'worked example'. For the purposes of this example, I'll assume that the item is sent through the post but the same rules apply to Fedex packages:
Let's assume that you purchase goods, worth �100, from any country outside of the EU . (With a few exceptions, such as tobacco and alcohol, you can buy what you like from within the EU, without paying any charges).
Unless the goods are subject to excise duty (such as tobacco products or alcohol), the first thing the customs people work out is Customs Duty. This varies widely depending upon the nature of the goods. For example it's only 2% on MP3 players without a radio built-in but 10% on MP3 players with a radio.
If the Customs Duty comes to less than �7, it's waived. For the purposes of this example, I'll assume that you're importing clothing, most of which carries a 12% rate of duty. So, that's �12 to be paid.