VAT On UK Sales Through Amazon and eBay Marketplaces 2026/27
- Atlas Tax
- 5 days ago
- 15 min read
Updated: 2 days ago
VAT on UK Sales Through Amazon and eBay Marketplaces 2026
Whether Amazon or eBay collects VAT on your UK sales depends on who holds your stock and where you are established. For a UK-resident seller holding UK-based stock, VAT responsibility stays with you once your taxable turnover exceeds the £90,000 registration threshold. For certain categories of sale, the marketplace itself becomes the deemed supplier and handles the VAT. Understanding which scenario applies is the foundation of getting this right.
How VAT Actually Works When Selling Through Amazon or eBay
The UK's deemed supplier rules for online marketplaces were introduced in 2021 and remain the central mechanism governing marketplace VAT in 2026/27. They apply in two specific situations, and only those two.
The Deemed Supplier Rule: When Amazon or eBay Handles Your VAT
The first situation is goods sold to UK consumers where the value of the consignment is £135 or less and the goods are located outside the UK at the time of sale. When those conditions are met, the marketplace, Amazon or eBay or any other platform, is treated as the deemed supplier for VAT purposes. The marketplace charges and collects VAT from the buyer at checkout and accounts for it directly to HMRC. The underlying seller does not account for UK output VAT on that particular transaction.
The second situation covers goods already located in the UK at the point of sale but sold by a seller who is not established in the UK. Here the £135 cap does not apply. If an overseas seller holds stock in Amazon's UK fulfilment centres under the Fulfilled by Amazon programme, for example, Amazon is the deemed supplier for VAT purposes on every sale from that UK-held stock, regardless of the value of the individual order.
In both scenarios, the marketplace discharges the output VAT obligation. The seller receives payment net of VAT and sees the transaction flagged in their reports as Marketplace Facilitator VAT, or similar labelling depending on the platform.
When the Responsibility Stays With You
If you are established in the UK and your goods are already in the UK at the point of sale, the deemed supplier rules do not apply. Your sales on Amazon or eBay are your own taxable supplies. The marketplace plays no VAT collection role. You are responsible for charging VAT if registered, filing accurate VAT returns, and accounting for output tax on each transaction.
This is the most common position for UK-based small businesses and sole traders selling through these platforms, including those using FBA who are themselves UK-established. The fact that Amazon processes the payment and takes a fee does not make Amazon your VAT agent or deemed supplier in this case. You are the taxable person, and HMRC holds you responsible.
The £90,000 Registration Threshold and Marketplace Sellers
The UK VAT registration threshold remains at £90,000 for 2026/27, measured against taxable turnover on a rolling 12-month basis. For marketplace sellers, this means gross sales of standard-rated and zero-rated goods must be tracked cumulatively across all selling channels, not just one platform.
A seller running a homeware business in Manchester through Amazon, eBay, and their own Shopify store needs to combine the turnover from all three sources when assessing whether they have crossed the threshold. Exceeding £90,000 in a rolling 12-month period creates a mandatory registration obligation. The 30-day rule applies: if you expect to exceed the threshold within the next 30 days based on current trading levels, you must notify HMRC before the end of that 30-day period and begin charging VAT from day one.
One aspect that confuses many marketplace sellers is whether sales on which the marketplace was the deemed supplier count towards their registration threshold. The answer is that sales made under the deemed supplier rules are not your VAT supplies. Amazon collected and accounted for the VAT, not you. Those transactions generally should not be included in your own taxable turnover calculation for registration purposes. However, this does not mean such sales are entirely invisible. They still represent commercial revenue and may affect your business structure decisions even if they do not contribute to the VAT threshold.
What this Widget is About: Navigating the complexities of marketplace VAT can be daunting, but this interactive widget is designed to demystify your 2026/27 tax obligations for UK sales on platforms like Amazon and eBay. It provides up-to-date guidance on HMRC’s £90,000 registration threshold, Making Tax Digital (MTD) compliance, and the crucial deemed supplier rules. By exploring the provided information, you will discover exactly when the marketplace is responsible for collecting output VAT on your behalf and when that legal liability rests firmly with you. To get started, simply click through the navigation tabs at the top to read up on the essential regulations and digital reporting requirements. Finally, use the built-in VAT Responsibility Checker on the first tab by answering a few quick questions about your business establishment and stock location to instantly determine your specific tax responsibilities.
FBA and the Overseas Seller VAT Registration Obligation
A point that catches overseas sellers using FBA off guard is that even where Amazon is the deemed supplier and handles all the output VAT on UK sales, the seller may still have an obligation to register for UK VAT. The reason is that the movement of goods from outside the UK into Amazon's UK fulfilment centres is itself a taxable event. When an overseas seller imports stock into the UK, import VAT arises at the point of entry.
Amazon does not handle that import VAT on the seller's behalf. The seller remains the importer of record and is responsible for import duties and import VAT. To reclaim that import VAT as input tax, the seller needs to be VAT registered in the UK. Without registration, import VAT is an unrecoverable cost that directly reduces margin.
For those registered, Postponed VAT Accounting offers a meaningful benefit. Rather than paying import VAT at the port and then waiting to reclaim it through the next quarterly return, PVA allows the import VAT to be accounted for and simultaneously recovered on the same VAT return through a deferred payment mechanism. This preserves cash flow during the import cycle and is well worth using for any business importing goods into the UK at scale.
The practical outcome is that many overseas FBA sellers operate in the UK as VAT-registered businesses with significant input tax to reclaim, filing returns that show very little or no output tax (because Amazon accounts for it under the deemed supplier rules) and a repayment position most quarters. This is technically correct, but HMRC monitors large and persistent repayment positions and may seek supporting evidence that the transactions are genuine.
The £135 Import Threshold in Practice
The £135 threshold is worth examining carefully because it determines the entire VAT mechanism for a large portion of goods sold by overseas sellers directly to UK consumers.
For a consignment of £135 or less shipped direct from an overseas warehouse to a UK consumer, VAT is collected at the point of sale by the marketplace. The seller invoices at the net price. Amazon or eBay applies UK VAT at the appropriate rate and remits it to HMRC. No import VAT arises because the supply is treated as having taken place inside the UK, with the marketplace as the supplier.
For a consignment over £135, the old rules apply. Import VAT and customs duty are assessed at the UK border on the value of the goods. The consumer either pays these at delivery, or the seller arranges duty and VAT through a customs broker in advance.
This split creates an odd situation for sellers who ship goods of variable value. A seller dispatching individual items mostly under £135 finds that the marketplace handles all UK VAT automatically. The same seller dispatching a higher-value bundle finds they are back in the traditional import VAT regime, with all the administration that entails.
What this Widget is About: This interactive widget provides clear, practical guidance on how VAT works for UK sales made through Amazon and eBay in the 2026/27 tax year, helping you understand whether you or the marketplace is responsible for collecting and accounting for the tax. It explains the key rules on the deemed supplier regime, the £90,000 registration threshold, import VAT for overseas sellers using FBA, Making Tax Digital requirements, and HMRC’s increased visibility through platform reporting. To get started, simply use the quick checker at the top by answering two short questions about where you are established and where your goods are located at the point of sale; the tool will instantly show who handles the VAT in your situation. You can then explore the expandable sections below for more detail on each topic, along with the highlighted key takeaways. Created by Atlas Tax Advisors, the widget is designed to be easy to follow for UK taxpayers and is best used as a starting point before seeking tailored professional advice.
Practical VAT Compliance for UK-Based Marketplace Sellers
MTD for VAT in 2026/27
All VAT-registered businesses must use Making Tax Digital-compatible software for their VAT returns. This has been mandatory since April 2022 for all registrants. For marketplace sellers, this means that sales data from Amazon and eBay needs to flow into accounting software digitally and the VAT return must be submitted through that software's direct API connection to HMRC. Manually rekeying figures from a marketplace settlement report into HMRC's own portal is no longer compliant.
Dedicated bookkeeping tools and accounting software integrations exist specifically for marketplace sellers. They pull settlement data directly from the platform, categorise income by VAT treatment, and flag deemed supplier transactions separately from the seller's own taxable supplies. Getting this infrastructure in place before turnover reaches £90,000 is considerably easier than retrofitting it after VAT registration becomes mandatory.
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Platform Fee Input Tax
An area where registered sellers frequently under-claim is input tax on platform fees. Amazon charges selling fees, FBA fulfilment fees, advertising costs, and subscription fees. eBay charges final value fees and promoted listing fees. All of these attract VAT at 20% for UK-established sellers, and all of it is recoverable as input tax on the seller's VAT return. On a business generating £200,000 of annual Amazon sales with platform fees of 25% of revenue, the recoverable input VAT on fees alone could exceed £8,000 per year. That is not an incidental amount.
The fee invoices or settlement statements should be reconciled each return period and the input VAT extracted and recorded correctly. Accounting software that integrates directly with marketplace data makes this straightforward. Without integration, it is common for sellers to include the gross fee as a cost without separately extracting the VAT component, resulting in a systematic under-claim.
VAT on UK Sales Through Amazon and eBay Marketplaces 2026/27
VAT Provision or Requirement | Applicability Details | Compliance Status in 2026/27 |
UKIMS Authorization for B2B Shipments | UK businesses moving goods from Great Britain into Northern Ireland intended for B2B end-use or internal UK trade. | Mandatory; required for 'not at risk' status to avoid EU duties and access simplified internal market movement procedures. |
Windsor Framework 'Green Lane' Status | Marketplace sellers (B2C) and authorized carriers shipping parcels from Great Britain to private consumers in Northern Ireland. | Fully operational; streamlines customs procedures and eliminates full declarations for qualifying internal UK trade. |
Extension of Platform Liability to Domestic Sellers | Online marketplaces (e.g., Amazon, eBay) facilitating B2C sales by UK-based domestic sellers for goods located in the UK. | Under implementation or review; subject to 2026 HMRC consultation outcomes to treat platforms as the 'deemed supplier'. |
Mandatory Data Quality for Shipping Descriptions | All marketplace sellers and carriers providing digital records, HS codes, and item descriptions for customs and VAT compliance. | Strictly enforced; requires precise, non-generic descriptions (e.g., avoiding terms like 'gift') for automated tax matching and border clearance. |
Digital Platform Reporting and HMRC Visibility
Amazon, eBay, and other UK-registered platforms are required under the UK Digital Platform Information regulations to report seller earnings data to HMRC annually. The UK rules, broadly aligned with the OECD Digital Reporting and Platform regime, have applied from 1 January 2024. From January 2025, HMRC received the first batch of complete seller income data covering 2024 calendar-year activity.
What this means practically is that HMRC holds detailed income data on marketplace sellers regardless of whether those sellers have registered for VAT, self-assessment, or any other tax purpose. A seller generating £95,000 of Amazon sales and failing to register for VAT is visible to HMRC through Amazon's own reporting. HMRC has confirmed that this data feeds risk assessment models that flag potential compliance failures for review. The era in which marketplace income was difficult to trace has ended..
What HMRC Is Currently Watching
HMRC's focus on marketplace VAT has sharpened considerably over the past few years. Overseas sellers holding stock in UK fulfilment centres without VAT registration have been a particular enforcement priority. HMRC has powers to require marketplaces to remove selling privileges from non-compliant sellers, and it has used these powers.
For UK-established sellers, the areas of practical risk are threshold monitoring and correct treatment of mixed sales. A seller who carefully tracks their own direct website sales but overlooks that their Amazon income has pushed combined turnover above £90,000 is a recognisable pattern. HMRC's data now allows it to identify this mismatch computationally.
The proposition from Amazon, discussed during 2025, that the deemed supplier rules should be extended to cover all sellers regardless of UK establishment, has not been legislated for 2026/27. The existing rules apply as described above. However, the debate around this extension is live, and businesses should be aware that the VAT treatment of marketplace sales could change for domestic sellers in future years if legislation follows.
Key Takeaways
The deemed supplier rules make Amazon or eBay responsible for UK VAT only in two specific situations: imports of goods valued at £135 or below, and UK-held goods sold by overseas-established sellers.
UK-established sellers with UK-held stock are responsible for their own VAT, regardless of which marketplace they use.
The VAT registration threshold is £90,000 of taxable turnover in any rolling 12-month period for 2026/27. Sales across all channels, Amazon, eBay, and direct, are combined when assessing this threshold.
Overseas sellers using FBA still need UK VAT registration to reclaim import VAT on stock brought into the UK, even where Amazon accounts for output VAT under the deemed supplier rules.
MTD-compatible software is mandatory for all VAT-registered businesses. Integration with marketplace settlement data is the correct approach, not manual rekeying.
Amazon and eBay report seller earnings to HMRC annually under the UK Digital Platform Information regime. HMRC uses this data to identify unregistered and under-reporting sellers.
FAQs
Q1: Does a UK seller need to charge VAT separately on top of their listed price on Amazon or eBay, or is VAT already built into the price?
A1: Well, this one causes genuine confusion, and the answer depends on whether you are VAT-registered. If you are a VAT-registered UK seller responsible for your own output VAT, your listing price on Amazon or eBay should be VAT-inclusive when selling to UK consumers. The price the buyer pays is the total amount, and you extract the VAT element from that price to account for on your return. So if you list an item at £120, and the standard rate applies, £20 of that is VAT and £100 is your net income for accounting purposes. You do not add 20% on top of a listed price after the buyer has committed to purchase. That would mean the buyer pays more than they expected, which creates both a customer relations problem and a potential pricing misrepresentation issue.
The practical implication for marketplace sellers is that your pricing strategy must absorb VAT within the listed price. A common mistake among newly registered sellers is to simply add 20% to their previous prices, which can make them uncompetitive overnight. The better approach is to model your margin requirements on a VAT-exclusive basis and then set a VAT-inclusive retail price that maintains profitability. For sellers below the £90,000 registration threshold who are not yet VAT-registered, there is no VAT element to include in your prices and no output VAT to account for, which is why registration timing can have a direct effect on your pricing competitiveness.
Q2: If a UK seller uses Fulfilment by Amazon but also sells through their own website, how do they reconcile the different VAT treatments across both channels?
A2: This is a scenario that comes up frequently with growing e-commerce businesses, and the bookkeeping challenge is real. When you sell through Amazon FBA as a UK-established seller, you are responsible for your own output VAT on those sales, and Amazon's settlement reports include gross sale values, fees, and refunds. When you sell through your own website, you are again directly responsible for VAT. In both cases, the VAT treatment of the supply, standard, reduced, or zero-rated, is determined by the nature of the goods being sold, not by which channel processed the order. What differs is the administrative flow. FBA generates settlement reports every two weeks that include all transaction data in a format that needs to be reconciled into your accounting records. Your website platform generates separate transaction records.
Both sets of data need to be captured in your MTD-compatible accounting software, with output VAT extracted from each channel's income and input VAT claimed on all business purchases including platform fees from both channels. The most practical approach is to use accounting software with integrations for both Amazon and your own website platform, so that income flows into the software automatically with the VAT treatment correctly applied. Manual reconciliation across two channels using spreadsheets is time-consuming and prone to error, particularly when refunds, partial returns, and promotional discounts create adjustments in one channel but not the other. Running a single VAT return that covers all channels is entirely correct, but only if the underlying records from each source have been reconciled accurately before the return is submitted.
Q3: Can a VAT-registered marketplace seller reclaim VAT on the cost of goods they purchase to resell, and does it matter whether those goods come from UK or overseas suppliers?
A3: The short answer is yes, a VAT-registered seller can reclaim input VAT on goods purchased for resale, provided the purchases are for business purposes and the seller holds valid VAT invoices from their suppliers. For UK suppliers who are themselves VAT-registered, this is straightforward: the supplier issues a VAT invoice showing the net amount, the VAT charged, and their VAT number, and the buyer includes the VAT amount as input tax on their return. For overseas suppliers, the position is different and depends on how the goods enter the UK. Where goods are imported from outside the UK, import VAT arises at the point of entry rather than on the supplier's invoice.
If Postponed VAT Accounting is used, which it generally should be for regular importers, the import VAT is reported on the VAT return in Box 1 as output tax and simultaneously recovered in Box 4 as input tax, with no cash flowing to HMRC or to the supplier. The monthly postponed VAT accounting statement from HMRC, available through the Customs Declaration Service, is the document needed to support this claim. One common omission among smaller sellers who import through Amazon's supply chain is failing to obtain or retain the import VAT documentation at all. Without that statement, input VAT recovery on imported stock is difficult to substantiate in an HMRC enquiry. Keep the monthly PVA statements as part of your VAT records for the standard six-year retention period.
Q4: What happens to VAT on Amazon or eBay sales if a UK seller's turnover drops below the £90,000 deregistration threshold after they have already registered?
A4: This is a situation that affects more marketplace sellers than you might expect, particularly those whose sales volumes fluctuate seasonally or who have moved away from a high-turnover product line. If your taxable turnover falls below £88,000, you can apply to deregister from VAT. The deregistration threshold is currently £88,000, which is £2,000 below the registration threshold, and this gap exists specifically to prevent businesses from yo-yoing in and out of registration as their turnover hovers around the limit. To deregister, you apply to HMRC using form VAT7, and HMRC will confirm the cancellation date. From that date, you stop charging VAT on your sales, stop filing VAT returns, and lose the right to reclaim input VAT on purchases.
On deregistration, there is a deemed supply of any business assets you hold at that point, including stock, if the VAT on those assets exceeds £1,000. So a seller with £25,000 of stock at the deregistration date would owe output VAT of £5,000 as a final adjustment, which can be a nasty surprise if it has not been planned for. Before applying to deregister, it is worth modelling whether the loss of input tax recovery on stock purchases outweighs the administrative simplicity of being unregistered, particularly if your supplier costs carry significant VAT. For most product-based marketplace sellers buying taxable goods from VAT-registered suppliers, staying registered can remain financially beneficial even below the threshold, through voluntary registration.
Q5: If a UK seller on Amazon or eBay sells a mix of zero-rated and standard-rated goods, how does that affect their VAT return?
A5: This is genuinely more common than it sounds, particularly for sellers dealing in food, children's clothing, printed books, or certain medical products alongside standard-rated items. The key point is that zero-rated sales still count as taxable supplies for the purpose of reaching the VAT registration threshold. A seller generating £60,000 from zero-rated book sales and £35,000 from standard-rated stationery has £95,000 of taxable turnover and is above the £90,000 threshold, even though much of that income attracts no VAT charge. On the VAT return, each sale must be correctly classified. Standard-rated sales go into Box 6 at their VAT-inclusive value, with the output VAT in Box 1. Zero-rated sales also go into Box 6 but contribute nothing to Box 1.
The advantage of zero-rated supplies is that the seller charges no output VAT on those sales but can still recover input VAT on costs related to them, including the proportion of platform fees attributable to zero-rated turnover. For mixed-rate sellers, the input VAT recovery on shared costs such as accounting software, platform fees, and storage needs to be apportioned between standard-rated and zero-rated activity if any of the costs also relate to exempt supplies. Where all supplies are taxable, whether at standard or zero rate, full input tax recovery is generally available without a partial exemption calculation. Correctly classifying each product listing is therefore essential before the VAT return is completed.
Disclaimer
The information published on the above article is provided for general informational and educational purposes only. Although reasonable care is taken to ensure that the content is accurate, current and based on reliable sources at the time of publication, UK tax law, HMRC guidance, rates, thresholds and compliance requirements may change, and their application can vary depending on individual or business circumstances. Nothing on this blog constitutes personalised tax, accounting, financial, legal, immigration, investment or professional advice, and it should not be relied upon as a substitute for advice from a qualified professional adviser. Readers should seek tailored advice before making decisions, submitting returns, claiming reliefs, entering transactions, or taking or refraining from any action based on blog content.
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