If what you are importing is over the personal import limit of £18, then you have to pay both VAT & Import Duty (Customs Duty).
Import Duty varies depending on what it is that you are importing. It is charged on the *total* value (the value of the goods plus the shipping). I think it may be around 3-5%, but I am not sure (it's something like that for DVDs, anyway, IIRC).
VAT is 17.5%, & is charged on the value of the goods plus any duty charged.
There is also usually a "clearance fee", which is paid to the post office (well, "Consignia PLC"), as they charge you for clearing the package through customs & for handling it, and, if necessary, opening & repacking it.
Payment depends, I think, on how you have the goods shipped. If it comes to you by Royal Mail (so was just sent by AirMail), you pay on delivery. If it is sent by a courier, the courier may pay the charges for you, to speed things up, & then issue you with a seperate bill for it. (I bought some DVDs from the US, & had them sent by DHL - DHL paid the customs charges, & I then paid DHL).
Have a look at these links for more detail:
http://www.customs.gov.uk/
http://www.customs.gov.uk/public/shopping/shopping.htm
http://www.customs.gov.uk/forms/notices/143.htm