VAT for ecommerce sellers UK is one of the most confusing areas of running an online store, and it affects Amazon, Shopify, eBay, Etsy and TikTok Shop sellers at every stage of growth. Some sellers assume the marketplace automatically deals with VAT, others register too early and lose margin on every sale, and many do not realise they have crossed the threshold until HMRC gets in touch.
This guide explains, in plain English, when you need to register for VAT, which scheme suits an online store, how the marketplace VAT rules actually work, and what Making Tax Digital means for your day to day bookkeeping. Use the quick links below to jump straight to the section you need.
If you want the wider picture on trading and income tax first, our guide to tax on online sales UK is a useful companion read, this article focuses specifically on VAT.
Table of Contents
- What Is VAT for Ecommerce Sellers in the UK
- The VAT Registration Threshold for Amazon, Shopify, eBay, Etsy and TikTok Shop Sellers
- How Marketplace VAT Rules Affect Amazon, eBay, Etsy and TikTok Shop Sellers
- Choosing the Right VAT Scheme for Your Online Store
- Making Tax Digital for VAT, What It Means for Your Ecommerce Bookkeeping
- VAT Considerations When You Sell Beyond the UK
- Common VAT Mistakes Ecommerce Sellers Make
- How NS Accounting Helps with VAT for Ecommerce Sellers UK
What Is VAT for Ecommerce Sellers in the UK?
VAT, or Value Added Tax, is a tax charged on most goods and services sold in the UK. Once you are VAT registered, you must add VAT, usually at 20 percent, to the price of standard rated goods you sell, and you can generally reclaim the VAT you have paid on business costs such as stock, packaging, marketplace fees and software. Before registration, you simply keep your full selling price, but you also cannot reclaim any VAT on what you buy. For a growing Amazon, Shopify, eBay, Etsy or TikTok Shop seller, understanding VAT for ecommerce sellers UK correctly starts with this trade off. Our VAT service covers registration, returns and scheme selection for online sellers at every stage.
The VAT Registration Threshold for Amazon, Shopify, eBay, Etsy and TikTok Shop Sellers
The current VAT registration threshold is £90,000 of taxable turnover. This is not measured against a calendar year or your accounting year, it is checked on a rolling 12 month basis, meaning you need to look back at any point and add up your sales from the previous twelve months, not simply from January to December. You can check the current figure directly on the GOV.UK VAT registration threshold guidance. This threshold question is one of the most common VAT for ecommerce sellers UK queries we hear from growing Amazon and Shopify stores.
Crucially, this figure covers every platform and channel combined. If you sell through Amazon and TikTok Shop at the same time, or run a Shopify store alongside an Etsy shop, HMRC expects you to add every channel together when checking whether you have crossed £90,000, not to treat each marketplace separately.
Once you cross the threshold, you must register within 30 days of the end of the month in which you went over it, and your VAT registration date will usually be the first day of the second month after that. Missing this deadline can lead to penalties and a backdated VAT liability, so it is worth tracking your combined turnover closely as your store grows.
Some sellers choose to register voluntarily before reaching the threshold, often to reclaim VAT on stock and equipment, or to appear more established when working with wholesalers and private label manufacturers. This is a decision worth discussing with an accountant first, since adding VAT to your prices can affect how competitive you are with customers who are not VAT registered themselves.
How Marketplace VAT Rules Affect Amazon, eBay, Etsy and TikTok Shop Sellers
One of the biggest sources of confusion in VAT for ecommerce sellers UK is working out who is actually responsible for the VAT, you or the marketplace. Since 2021, online marketplaces have been treated as the deemed supplier for VAT purposes in two specific situations.
The first is when an overseas seller sells goods that are already located in the UK to a UK customer. The second is when goods valued at £135 or less are imported from abroad and sold through the marketplace. In these cases, the marketplace itself charges and accounts for the VAT, not the individual seller.
For sellers established in the UK who hold their own stock in the UK, this deemed supplier rule generally does not apply, which means you remain personally responsible for registering for VAT once your turnover crosses the threshold, and for charging, collecting and paying VAT yourself. This distinction catches out a lot of Amazon FBA, eBay and TikTok Shop sellers who assume the platform always handles VAT on their behalf.
It is worth checking your VAT settings within Seller Central or your marketplace dashboard, and confirming with an accountant exactly where your responsibility starts. Our specialist tax advice team can review your setup across every platform you sell on.
Choosing the Right VAT Scheme for Your Online Store
Picking the right scheme is a key part of managing VAT for ecommerce sellers UK effectively, and the options include:
- Standard VAT Accounting. You charge 20 percent output VAT on sales and reclaim input VAT on your purchases. This usually suits product based sellers who hold significant stock, since it lets you recover VAT on inventory, packaging and fees.
- Flat Rate Scheme. You pay a fixed percentage of your gross turnover to HMRC and keep the administration simpler, but you generally cannot reclaim VAT on most purchases. This scheme tends to suit service based businesses better than stock heavy Amazon, Shopify, eBay, Etsy or TikTok Shop stores.
- VAT Margin Scheme. If you buy and resell secondhand, vintage or antique items, common among Etsy and eBay sellers, this scheme charges VAT only on your profit margin rather than the full sale price. We cover this in detail in our guide to the UK VAT margin scheme.
- Annual Accounting Scheme. Instead of quarterly returns, you file one VAT return a year and make payments on account throughout the year, which can help smooth cash flow for stable, predictable stores.
Choosing the wrong scheme can cost a growing seller thousands of pounds a year, so it is worth reviewing your figures with an accountant before you register. Our VAT service includes scheme selection as standard for every ecommerce client.
Making Tax Digital for VAT, What It Means for Your Ecommerce Bookkeeping
Making Tax Digital for VAT has applied to every VAT registered business since April 2022, regardless of turnover. In practice, this means you must keep your VAT records digitally and submit your VAT returns using compatible software, rather than typing figures directly into HMRC’s old online portal, which is central to staying compliant with VAT for ecommerce sellers UK requirements.
For an Amazon, Shopify, eBay, Etsy or TikTok Shop seller, this is more complicated than it sounds, because marketplace settlement reports mix sales, refunds, fees and advertising costs together in ways that standard accounting software cannot always read directly. Many sellers use tools that summarise marketplace data into a Making Tax Digital compliant format before it reaches their bookkeeping software.
Getting this set up correctly from the start avoids errors that can distort your VAT return and your true profit figures. Our bookkeeping service handles this integration for online sellers, and our guide to ecommerce bookkeeping for Amazon and Shopify sellers looks at the wider record keeping challenges multi platform sellers face.Can I register for VAT before I reach the £90,000 threshold?
VAT Considerations When You Sell Beyond the UK
Once your Amazon, Shopify, eBay, Etsy or TikTok Shop store starts selling to customers outside the UK, or you use fulfilment centres based in the EU or elsewhere, VAT for ecommerce sellers UK becomes only part of the picture. Sales to overseas customers are often outside the scope of UK VAT, but you may face import VAT, customs duty, or a requirement to register for VAT in another country depending on where your stock is held and how it is shipped.
These rules are genuinely complex and depend heavily on your specific setup, so it is worth taking specialist advice before scaling internationally rather than after a problem arises. Our specialist tax advice team and CFO service both support ecommerce sellers who are planning international growth.
Common VAT Mistakes Ecommerce Sellers Make
We regularly see the same VAT for ecommerce sellers UK mistakes among Amazon, eBay, Etsy and TikTok Shop sellers who come to us after HMRC has already been in touch, including:
- Only counting sales from one marketplace when checking the £90,000 threshold, rather than combining every platform and channel you sell through.
- Assuming the marketplace always collects and pays VAT on their behalf, when in many cases the seller remains responsible.
- Choosing the Flat Rate Scheme without checking whether it actually suits a stock heavy ecommerce business.
- Forgetting to reclaim VAT on marketplace fees, advertising spend and software subscriptions.
- Not keeping records in a Making Tax Digital compliant format from the start.
- Leaving VAT registration too late and facing penalties or a backdated VAT bill.
Each of these is straightforward to avoid with the right advice early on, and far more costly and stressful to fix once HMRC has flagged your account.
How NS Accounting Helps with VAT for Ecommerce Sellers UK
Getting VAT for ecommerce sellers UK right from the start protects your margin and keeps HMRC off your back as your store grows. At NS Accounting, we work with Amazon, Shopify, eBay, Etsy and TikTok Shop sellers to handle VAT registration, choose the right scheme, prepare Making Tax Digital compliant VAT returns and manage ongoing bookkeeping, so you can focus on running and growing your store.
We also support ecommerce sellers with statutory accounts, Self Assessment, company formation, payroll management and wider ecommerce and content creator accounting.
Our articles on limited companies for ecommerce sellers and expert ecommerce accountants cover the wider picture if you are still deciding how to structure your business. If you would like a clear, practical answer on where your store stands with VAT, book a free consultation with our team today.
