Marketplace VAT in 2027: what UK online sellers should plan now

From October 2027, Amazon, eBay and other online marketplaces will collect the VAT on goods that UK businesses sell through them. The rule covers every VAT registered seller, plus unregistered sellers making more than £90,000 a year on any single platform. Prices for shoppers do not change, but the VAT stops passing through your account first, so plan for the cash flow change and use the year ahead to review how much of your trade runs through marketplaces.

What did the Budget change for marketplace sellers?

The 28 October 2026 Budget extended the online marketplace VAT rules to UK sellers. Since 2021, marketplaces have collected VAT on sales by overseas sellers to UK shoppers. From October 2027 the same model applies to UK businesses whose goods are in the UK when they are sold, according to the government's policy paper .

The government's stated reason is that too many UK sellers on these platforms are not paying the VAT they owe. Its consultation estimated that "tens of thousands of businesses" trading through marketplaces are not meeting their VAT obligations, and that this undercuts high street businesses that do.

The policy paper expects the measure to have a significant impact on around 100,000 businesses, and to raise £320 million in its first full year, 2028 to 2029. The Grocer reports that the money is earmarked for business rates relief for pubs, music venues and smaller retail and hospitality businesses.

Which UK sellers are caught by the new rules?

Two groups of UK sellers are caught by the marketplace VAT rules, according to the GOV.UK factsheet .

• VAT registered businesses. All of their qualifying sales on online marketplaces are in scope, whatever the amount.
• Businesses that are not VAT registered but sell more than £90,000 a year on an individual marketplace.

The £90,000 test applies to each platform separately. An unregistered seller doing £60,000 on Amazon and £50,000 on eBay is under the threshold on both, so neither platform collects VAT on those sales.

That seller is not off the hook, though. The normal VAT registration threshold is also £90,000, measured on your total taxable turnover over a rolling 12 months. £110,000 across two platforms means you must register anyway, and once registered, every marketplace sale is in scope. The factsheet is explicit that the change does not affect existing registration obligations.

The policy paper also says the exact threshold, and how it is measured, will be set in secondary legislation. Treat £90,000 as the stated plan rather than a figure in law.

Which sales are left out

Three kinds of sale stay outside the marketplace VAT rules, according to the factsheet and techUK's Budget analysis .

• Second hand goods sold by businesses. You keep charging VAT on these yourself, as you do now, so the margin scheme still works for you.
• Personal sales, such as someone clearing out clothes or household items.
• Business to business sales, where your customer is another business.

Sales through your own website, your own shop or your own app are not touched at all. The consultation states that businesses will continue to account for VAT on their own direct sales exactly as they do today.

How will marketplace VAT work in practice?

Under marketplace VAT, the platform becomes the business that charges and pays the VAT on your sale. The consultation describes the model used for overseas sellers since 2021: the marketplace charges VAT at the relevant rate and declares it on its own VAT return, and your sale to the marketplace is treated as zero rated.

For a VAT registered seller, that changes what your own VAT return looks like. Your marketplace sales still appear, but with no VAT owed on them. You still reclaim the VAT you pay on stock, packaging, software and other costs, as you do now.

The consultation said guidance on the accounting changes would follow, and the factsheet confirms HMRC will publish detailed guidance before October 2027. BKL advises sellers to get familiar with the VAT settlement reports each platform issues, because those reports will be the record of what was collected on your behalf.

What does marketplace VAT do to your cash flow?

Marketplace VAT removes a cash buffer that many sellers rely on without noticing. Today, a VAT registered seller receives the VAT inside the sale price and pays it to HMRC with the quarterly return, which can be weeks or months later. That money sits in the business account in the meantime and often quietly funds stock.

From October 2027, the marketplace collects that VAT at the point of sale. The consultation acknowledged that sellers would face a cash flow impact and asked how significant it would be. On a marketplace turnover of £30,000 a quarter including VAT at 20%, the VAT element is £5,000, which is money that will no longer pass through your account first.

There is a flip side. Because you keep reclaiming input VAT but owe little or no output VAT on marketplace sales, some sellers will receive a refund from HMRC each quarter instead of paying. The policy paper notes that some businesses may move into a repayment position. A refund is welcome, but it arrives after you have paid the supplier, so it does not replace the buffer.

Flat rate scheme users should check their numbers

The Flat Rate Scheme is the group most likely to be caught out. The scheme lets businesses with turnover under £150,000 pay a fixed percentage of turnover to HMRC instead of working out VAT on every sale and cost, and it does not let you reclaim most input VAT.

The consultation flagged that extending marketplace liability could affect the small number of businesses using the scheme, and asked them how. The Budget papers did not set out a final answer. If you use the Flat Rate Scheme and most of your sales go through marketplaces, ask your accountant now whether the scheme still makes sense for you from October 2027.

When does your own online shop start to pay for itself?

Your own online shop starts to pay for itself when the fees and margin you hand to marketplaces are bigger than the cost of running and marketing a shop of your own. The new VAT rules do not change the VAT you owe, but they do make the marketplace share of your trade more visible, and that is a good moment to run the sums.

Marketplace fees are the main cost. Amazon UK charges £25 a month for a Professional selling plan plus a referral fee on each sale, and Amazon says most referral fees fall between 8% and 15%. On £200,000 a year of marketplace sales, a 15% referral fee is £30,000.

A direct shop has costs too: hosting, card fees, and above all the work of bringing customers to it. For most sellers the answer is not to leave marketplaces but to grow a direct channel alongside them, starting with repeat customers. Someone who has bought from you twice through a marketplace is a strong candidate to buy the third time direct, if you give them a reason.

If you want a shop or ordering system that fits how you actually sell, rather than a template, our web app development page explains how we approach it. Sometimes an off the shelf platform is the right call, and we will say so.

What to do before October 2027

Use the year before October 2027 to work out how exposed your business is. Five steps cover most sellers.

1. Work out your marketplace share. Total your sales by platform for the last 12 months, including VAT, and compare each one with the £90,000 threshold and your overall turnover.
2. Check your registration position. If your combined turnover is near £90,000, the registration rules may catch you before the marketplace rules do.
3. Model the cash flow. Estimate the VAT element of your marketplace sales each quarter and decide how you will fund stock without it.
4. Review the Flat Rate Scheme with your accountant if you use it.
5. Watch for HMRC guidance, which is promised before the rules start, and check your platform settlement reports once it lands.

If you are weighing up a direct shop, an ordering system or a tool that pulls your platform reports into one place, book a free 15 minute call and we will give you a straight answer on whether it is worth building.

Frequently asked questions

Will marketplace VAT make my prices go up?

Not necessarily. The VAT rate on your goods does not change, and the government's factsheet says the majority of businesses are already tax compliant and will not need to raise prices. Sellers who were not charging VAT when they should have been are the ones whose margins will feel it.

Does the £90,000 threshold include sales on my own website?

No. The marketplace threshold looks only at your sales on each individual platform. Sales on your own website still count towards the normal VAT registration threshold, which is measured on your total taxable turnover across every channel.

Do I still need to file VAT returns if the marketplace pays the VAT?

Yes, if you are VAT registered. You still report your marketplace sales, account for VAT on any direct sales and reclaim VAT on your costs. HMRC has said it will publish guidance on the accounting changes before October 2027.

Does marketplace VAT apply to Etsy, Vinted and other smaller platforms?

The rules apply to online marketplaces as already defined in VAT law, which covers platforms that facilitate sales between sellers and buyers, not just Amazon and eBay. Personal sales of second hand items by individuals are excluded, so most people clearing a wardrobe on a resale app are not affected.