VAT on ecommerce sales: what’s changing for eBay, Amazon and Etsy sellers in 2027?

Do you sell goods through eBay, Amazon or Etsy? If so, there are changes to VAT on ecommerce sales coming in October 2027. Under the new rules, the platforms could start collecting VAT on sales that you currently account for yourself.

That might sound like less paperwork, but it could also affect your cash flow and accounts. HMRC estimates that around 100,000 businesses will be affected.

What’s changing to VAT on ecommerce sales?

You may know that online marketplaces already collect VAT on certain sales.

Since January 2021, eBay, Amazon and other online marketplaces have been responsible for collecting VAT on certain sales by overseas businesses. These include goods already in the UK and many imports worth £135 or less.

From October 2027, the rules are set to extend to qualifying sales by UK businesses. This means the marketplace, rather than the seller, will be responsible for collecting and paying the VAT to HMRC.

The changes cover goods that are in the UK when they’re sold to consumers. They don’t cover services or digital downloads.

So, if you sell a new product through eBay, the platform may become responsible for collecting the VAT. Sell the same product through your own website and you’ll still deal with the VAT yourself.

The aim is to tackle VAT evasion and ensure that businesses paying the correct tax aren’t undercut by those that don’t.

Which eBay, Amazon and Etsy sellers will be affected?

The new rules are due to apply to UK businesses that meet either of these conditions:

• You’re registered for VAT. In this case, the marketplace will collect VAT on qualifying sales, even if you sell much less than £90,000 through that particular platform.
• You’re not registered for VAT but sell more than £90,000 a year through an individual marketplace. The marketplace will also collect VAT on sales covered by the new rules.

If you’re not VAT registered and sell less than £90,000 on each platform, the marketplaces won’t collect VAT under these rules. However, you might still need to register for VAT.

Does the £90,000 threshold apply to each marketplace?

Yes. For the new marketplace rules, the £90,000 threshold is measured separately for each platform. But don’t confuse that with the normal VAT registration threshold, which is also £90,000.

The normal threshold looks at your total taxable turnover across all sales channels.

Suppose you sell £50,000 of taxable goods through eBay and £45,000 through Amazon over 12 months. Neither platform reaches £90,000. However, your total taxable turnover is £95,000, so you’d normally need to register for VAT. Once registered, your qualifying marketplace sales would fall within the new rules.

You can check the existing requirements in HMRC’s VAT registration guidance.

What if you’re selling second-hand goods?

Not every sale through a marketplace will be covered.

If you’re selling your own unwanted possessions, the new rules won’t make those personal sales subject to VAT.

Sales of second-hand goods by businesses are also excluded from the new marketplace collection rules. Businesses will continue to deal with any VAT due on those sales in the usual way. Sales of goods from one business to another are excluded too.

These changes are separate from the Digital Platform Reporting rules, which require platforms to report information about sellers and their transactions to HMRC. You can read more in our guide to the reporting rules.

Will the new VAT rules cost your business more?

Not necessarily. The government says the change isn’t intended to increase the VAT that compliant businesses owe. Instead, it changes who collects and pays it to HMRC.

There could still be an impact on cash flow. If a marketplace collects VAT directly, you won’t hold that money until your next VAT payment is due.

Your bookkeeping may also need to distinguish between sales where a marketplace accounts for VAT and those where you’re still responsible.

What should online retailers do before October 2027?

Check your VAT registration position, the marketplaces you use and the types of goods you sell.

If you’re likely to be affected, review your prices, cash flow and accounting software.

There’s no need to change the way you account for VAT just yet. The proposals still need to become law, and HMRC says it will publish detailed guidance before the rules take effect. You can read its official factsheet for more information.

Need help with VAT on ecommerce sales?

If you sell through online marketplaces or your own shop, THP can help you understand the new rules and advise on registration, bookkeeping and VAT returns.

Find out more about our VAT returns service or get in touch with our team today.