VAT in 2025: Tax on Online Sales in the UK

When running an online shop, you need to remember your VAT obligations on the goods you sell. Tax matters in the UK are important both for domestic businesses and for foreign entities that treat the United Kingdom as a sales market, because the UK’s exit from the European Union brought changes to the rules governing international trade, including within the e-commerce sector. If you sell online or plan to start doing so, regardless of your sales channel (an online marketplace or your own platform), it is worth familiarising yourself with the regulations in force in 2025. When do you have to be a VAT payer in the United Kingdom? How do you account for it correctly?

Summary & key takeaways

Overseas businesses selling goods to UK customers must register for UK VAT.
Platforms such as Amazon and eBay account for VAT on consignments worth up to £135.
VAT registration is compulsory once taxable turnover exceeds £90,000 over 12 months.
You can sell without registering a business up to £1,000 of income per tax year.
The Flat Rate Scheme is open up to £150,000 turnover, and the standard VAT rate is 20%.

Overseas online shops and VAT in the UK

Under the current rules, you must register for VAT and pay the tax in the United Kingdom if:

Your business is based outside the UK and sells goods to British customers which are then imported into the United Kingdom.
Your business is based outside the UK and the European Union, and you sell goods to customers in Northern Ireland which you then have to import there.
Your business is based outside the UK and sells goods to British customers which are located in and dispatched from the United Kingdom.

Remember that for VAT on online sales in the UK, a company’s place of establishment is considered to be the country where its central administration is located. HMRC takes three aspects into account when determining its location: where the essential decisions concerning the management of the business are made, where management meetings are held, and where the company’s physical registered office is located.

Under the current rules, e-commerce platforms such as Etsy, eBay or Amazon are obliged to collect and account for VAT on transactions made through them. Importantly, however, this obligation only applies to goods that are located in the UK at the point of sale and to overseas consignments with a total value of £135 or less. Above the £135 limit, VAT and customs charges apply under the standard rules for importing goods into the United Kingdom from outside the UK (and into Northern Ireland from outside the UK and the EU).

When do you need an EORI number for online sales?

Obtaining an EORI (Economic Operators Registration and Identification) number is necessary if your business plans to move goods for commercial purposes between:

Great Britain or the Isle of Man and other countries, including the EU,
Great Britain and Northern Ireland/the Channel Islands,
Northern Ireland and countries outside the European Union.

An EORI number is needed to:

appoint someone to deal with customs matters on your behalf,
make customs declarations,
use customs systems,
apply for customs decisions.

Is registering for VAT compulsory for an e-commerce business?

If you run a business registered in the United Kingdom, you are required to register for VAT when your total taxable turnover for the last 12 months exceeds £90,000, or you expect it to exceed this threshold within the next 30 days. If you register late, you must be prepared for the risk of a financial penalty.

You can, however, register voluntarily before you exceed the tax threshold. Such a step can offer benefits in terms of reputation, among other things, as VAT registration makes a business more credible in the eyes of future business partners, and it can also allow you to reclaim tax.

Does selling on marketplace platforms require registering a business in the UK?

Marketplace platforms are a popular way to sell online, as they offer the chance to reach a huge pool of potential customers. These include international sales platforms such as Amazon or eBay, where you can list a wide variety of goods from household appliances to books or clothes. Another example is Etsy, a site whose offering focuses on handicrafts and vintage items, which gives you the chance to turn a creative hobby into an additional source of income. People in the United Kingdom are also keen users of such platforms.

This raises a question, however: does the United Kingdom require you to run a registered business in order to sell on such platforms? You can sell, for example, your handicrafts online without registering a business if, within the tax year (from 6 April to 5 April), your income does not exceed £1,000. Once you exceed this threshold, you must register as a sole trader, which you do through the Self Assessment system on the HM Revenue & Customs website.

How do you register a company for VAT in the United Kingdom?

You can register online as a VAT payer with HM Revenue & Customs via the gov.uk website.

After registering, you will receive a VAT number, which you are required to include on all invoices and provide to the sales platforms you use.

VAT accounting options in the United Kingdom

VAT in e-commerce can be accounted for in two ways, the Flat Rate Scheme or standard VAT.

If you sell online in the United Kingdom, you can use a simplified VAT accounting scheme if your taxable turnover is £150,000 or less (excluding VAT). The Flat Rate Scheme is a simpler form of accounting under which you pay a fixed rate of VAT. For so-called limited cost traders (businesses with low costs) the rate is 16.5%. If you do not fall into this group, the rate depends on the type of business you run, e.g. for retail it is 7.5% (except for sales of products in categories with their own separate rates, e.g. 4% for children’s clothing, 8% for cosmetics). When using this form of accounting, you cannot reclaim VAT on purchases, except for certain capital assets worth over £2,000. To account for VAT correctly, it is recommended that you check carefully which rate applies to your business.

The standard VAT rate in the United Kingdom is 20%. It is accounted for on the basis of the difference between your company’s income from online sales and the business costs you have incurred.

Need help with your tax affairs in the United Kingdom?

Our accounting office in London is a team of specialists with an excellent knowledge of British regulations on running a business and tax matters. We will provide you with full support at every stage of our cooperation, so you can settle your VAT on time and in the way that is most advantageous for you.

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