Do I need to register for VAT if I sell online?

The same £90,000 rolling twelve-month UK threshold applies to online sellers as to any other business, and the rolling test is what catches people — a strong Christmas can put you over without your accounting year showing it. Cross-border sales, marketplace rules and holding stock abroad add further obligations on top, sometimes at much lower thresholds or none at all. Watch your rolling turnover monthly. Registering late means HMRC can charge you VAT you never collected from customers, which on thin e-commerce margins can be genuinely business-threatening.

What are OSS and IOSS?

EU schemes for selling to consumers after Brexit. One Stop Shop lets you report VAT on business-to-consumer sales across the EU through a single return in one member state rather than registering in each. Import One Stop Shop lets you collect EU VAT at the point of sale on consignments up to €150 so parcels clear customs without the customer being charged on delivery — which materially reduces refused deliveries and complaints. Both require registration and ongoing filings, and neither covers everything, so check which of your flows they actually cover.

Does Amazon or eBay handle the VAT for me?

For certain transactions, yes — large marketplaces are deemed supplier for some sales, particularly imports and sales by overseas sellers, and account for the VAT themselves. But you still have to account correctly for everything from their reports, and those reports are easy to misread. The most common error we see is treating the payout figure as revenue: it is net of platform fees, refunds, advertising and sometimes marketplace-collected VAT, so it understates both turnover and costs and produces a VAT return that is wrong in both directions.

Can holding stock abroad create a VAT obligation?

Yes, and it is the most common unexpected registration. Using a fulfilment service that stores your stock in another country — Amazon's pan-European programmes are the usual culprit — generally creates a VAT registration requirement in each country where the stock is held, from the first sale rather than at a threshold. Sellers frequently enrol in a programme that redistributes stock automatically and discover the obligation months later. Check where your inventory physically sits before enabling any cross-border fulfilment option, not after.

How do I handle refunds, fees and shipping correctly?

Gross the transaction up rather than booking the net payout. Record the full sale value including any VAT charged to the customer, then record platform fees, payment processing, advertising and shipping as separate costs — several of those carry their own VAT treatment, and fees from an overseas platform typically fall under the reverse charge. Refunds reduce output VAT in the period they occur rather than being netted against sales. Getting this structure right at setup is the difference between accounts that mean something and a spreadsheet nobody trusts.

What if I have got it wrong for the past two years?

Disclose it rather than waiting to be found. Errors below the reporting threshold and not deliberate can usually be corrected on the next return; larger or deliberate ones must be notified separately to HMRC. Unprompted disclosure attracts substantially lower penalties than an error discovered in an inspection, and for careless rather than deliberate errors the reduction can be large. E-commerce is a known focus area with good data available to HMRC from marketplaces, so "nobody will notice" is a poor strategy. Establish the actual exposure first, then approach them.

VAT for online sellers: Amazon, Shopify, OSS, IOSS

Selling online adds layers to VAT that a local business never has to think about — different countries, marketplaces that collect VAT for you, and post-Brexit rules for selling into the EU. If you sell on Amazon, Shopify, Etsy or your own site, here's what actually matters.

The basics still apply

First, the ordinary UK rules haven't gone away: once your VAT-taxable turnover crosses £90,000, you must register for VAT in the UK, whatever you sell and wherever you sell it. That threshold has applied since 1 April 2024, alongside a deregistration threshold of £88,000. Our guide on when to register for VAT covers it in detail. For online sellers, the extra complexity sits on top of this, mostly around cross-border sales.

The part that catches e-commerce sellers specifically is that the test is a rolling twelve months, not your accounting year. You check every month, looking back at the previous twelve. A strong Q4 can put you over in December while your year-end figures, months later, look perfectly comfortable. Cross it and you must register within 30 days of the end of the month you crossed in, and your registration takes effect from the first day of the second month after that.

What registering actually costs you — a worked example

This is the calculation to run before you get near the threshold, not after. The figures are illustrative; the rates are real.

Marcus sells homeware through Etsy and his own Shopify store at £24 a unit including delivery, and shifts around 4,000 units a year. In the twelve months to 31 October 2026 his taxable turnover reaches £91,400. He has crossed.

Register by 30 November 2026. Effective date: 1 December 2026 — the first day of the second month after the month he went over.
The price problem. His market is price-competitive and £24 is a psychological point, so he holds it. From 1 December, each £24 sale contains VAT at the 20% standard rate — the VAT fraction of a gross price is 1/6, so that's £4.00 per unit handed to HMRC. His net revenue per unit falls from £24.00 to £20.00.
Annualised, that's £16,000 of revenue gone on the same 4,000 units.
What he gets back. Stock costs £34,800 a year including VAT, so he reclaims £5,800. Packaging and materials of £6,000 including VAT give back £1,000. Total input VAT recovered: £6,800.
Net annual cost of crossing the threshold: about £9,200.

Now the decision, which is a pricing decision rather than a tax one. To keep £24 net he'd need to charge £28.80 — a 20% rise his marketplace listings probably won't survive. Splitting the difference at £26.40 recovers half. Absorbing it costs him roughly £9,200 a year of margin.

Note what this means for the business just below the threshold: growing turnover from £89,000 to £95,000 can leave you with less profit than you started with unless prices move. That cliff edge is real, and the time to plan for it is at £75,000, not £91,400.

Marketplaces that collect VAT for you

For many sales through large marketplaces like Amazon and eBay, the marketplace is responsible for collecting and accounting for the VAT on certain transactions — particularly imports and sales by overseas sellers. Consignments of goods valued at £135 or less that are outside the UK when sold are the main category: sold through a marketplace, the marketplace accounts for the VAT rather than the seller. Above £135, normal import VAT and duty rules apply at the border instead.

That simplifies life, but it makes your own bookkeeping harder, not easier, because the money that lands in your bank has been through several deductions.

The payout trap

The single most common e-commerce accounting error is booking the payout as revenue. It isn't. Take a fortnightly payout of £1,000 from a marketplace. Behind it sits:

Gross sales to customers of £1,340
Less platform and referral fees of £185
Less advertising charged to the account of £75
Less refunds issued in the period of £80

Book the £1,000 and your turnover is understated by £340, your costs are missing £260 of deductible expense, and your rolling twelve-month VAT test is running about 25% light — which is exactly how sellers sail past £90,000 without noticing. Record the gross sale, then each deduction as its own line. Refunds reduce your output VAT in the period they're issued rather than being netted off sales.

Watch the fees, too. Where a platform bills you from outside the UK, those fees typically fall under the reverse charge: you account for the VAT yourself as both output and input tax on the same return. Cash-neutral if you're fully taxable, but it belongs in boxes 1, 4, 6 and 7, and leaving it out makes the return wrong even though the tax is nil.

Selling to the EU: OSS and IOSS

Since Brexit, selling goods to consumers in the EU changed significantly. Two schemes exist to make it manageable:

OSS (One Stop Shop) — lets you report VAT on B2C sales across all EU countries through a single return, rather than registering in each country separately.
IOSS (Import One Stop Shop) — for lower-value goods imported into the EU, letting you collect EU VAT at the point of sale so parcels clear customs smoothly and customers aren't hit with surprise charges on delivery.

IOSS covers consignments up to €150. Above that, the parcel goes through normal EU import procedures and your customer can be asked for VAT and a handling fee before the courier will hand it over — which is where refused deliveries and one-star reviews come from.

One point that trips up UK sellers specifically. You'll read about a €10,000 pan-EU threshold below which you can keep charging your home country's VAT on B2C sales. That threshold is only available to sellers established in a single EU member state. A UK business isn't, so it doesn't apply to you: where destination VAT is due on your EU sales, it's due from the first one. Plan on registering rather than on a grace period.

Where stock is held matters

If you use fulfilment services that store your stock in other countries — Amazon's pan-European and multi-country inventory programmes being the usual route — you generally create a VAT registration obligation in each country where the stock physically sits, from the first sale, with no threshold to shelter behind. Holding goods in a country is a taxable presence in a way that shipping to it is not.

The expensive version of this: a seller enables a fulfilment setting that lets the platform redistribute inventory across warehouses to speed up delivery, stock moves to two more countries automatically, and the obligation is discovered a year later along with back-VAT, local penalties and the cost of retrospective registrations in each. Check where your inventory is before you enable cross-border fulfilment, not after. The setting takes one click; unwinding it takes months.

If you think you've already got it wrong

Establish the size of the problem first, because the size determines the route.

Net errors on previous returns can be corrected on your next return if they don't exceed £10,000, or if they're between £10,000 and £50,000 and don't exceed 1% of your box 6 (net outputs) figure for the period you spot them in. Above that — or if the error was deliberate — you must notify HMRC separately rather than quietly adjusting. The general time limit for corrections is four years; deliberate errors have no limit at all.

So on box 6 of £180,000, an error of up to £1,800 stays inside the 1% test and can go on the return. An error of £14,000 can't, and needs a separate disclosure. Coming forward yourself attracts materially lower penalties than the same error found in an inspection, and marketplaces report seller data to HMRC — so waiting to be asked is the expensive option.

The monthly routine that prevents all of this

Pull the gross sales figure — not the payout — from every channel and add them up.
Update a rolling twelve-month total and compare it to £90,000. One line on a spreadsheet.
Reconcile each payout to gross sales, fees, advertising and refunds separately.
Check where your stock is physically held, especially after any change to a fulfilment setting.
At £75,000 rolling, run the pricing calculation above so registration is a plan rather than a shock.

Get e-commerce VAT set up properly

E-commerce VAT is an area where the software, the marketplace reports and the cross-border rules all have to line up — and where mistakes compound quietly across thousands of small transactions. We help online sellers get their VAT set up correctly, reconcile the marketplace reports, and expand internationally without nasty surprises. If you're scaling an online store, talk to us before the complexity gets ahead of you.

VAT for online sellers: Amazon, Shopify, OSS and IOSS