Every online UK business wants to know when they need to register for VAT. The current VAT registration barrier is £90,000. However, determining whether you have over this limit can be difficult since there are certain criteria governing the calculation of sales and how the 12-month time restriction applies. Whether you sell on Shopify, Amazon, eBay, Etsy, or your own website, this piece will help you comprehend the notion of VAT registration thresholds.
What Is The Current VAT Threshold
The VAT registration threshold in the UK is £90,000 of taxable turnover. HMRC assesses the amount on a rolling 12-month basis, rather than by tax or accounting year. The threshold was increased from £85,000 to £90,000 on April 1, 2024, and has remained there ever since. It makes no difference whether you own a sole proprietorship, a partnership, or a limited liability business, as you can utilise the same VAT threshold. Because the HMRC examines you on a rolling 12-month basis, you cannot merely review your turnover once a year. You should regularly evaluate your taxable turnover, especially during high-volume periods like Black Friday or the Christmas season.
What Counts Towards Taxable Turnover?
E-commerce enterprises frequently make mistakes regarding the parameters that determine the VAT registration threshold. The taxable turnover does not equal the amount you get in your bank account after subtracting fees. This statistic indicates the entire amount of taxable sales before any deductions. Most UK e-commerce businesses have a taxable turnover of:
- Sales can be made on your own website, through Shopify, Amazon, eBay, or Etsy.
- Customers pay for shipping and postage.
- Digital items and online services are taxed under UK VAT legislation.
- Supplies might be classified as standard, reduced, or nil.
Marketplace or payment processor fees do not reduce taxable turnover. For example, if your firm produces £92,000 and Amazon charges £11,000 in referral and fulfilment fees, your taxable turnover for VAT registration will be £92,000 rather than £81,000 as shown in your bank account.
This also applies to other charges that can arise in your firm, such as advertising, fulfilment, and payment gateway fees. All of these are business expenditures that have no bearing on your turnover when applying for VAT registration with HMRC.
Multi-Channel Sales Are Combined
When you sell across many platforms, you just have to register for VAT once, rather than once for each sales channel. When HMRC assesses your VAT registration, they analyse your company’s total taxable turnover across all sales channels.
For example, if you make £40,000 from your own website, £35,000 via Etsy, and £20,000 from eBay, your total taxable turnover may be £95,000. Even if you do not make more than £90,000 on any single platform, you exceed the VAT threshold and must register with HMRC. When selling on many marketplaces, you should keep a single rolling 12-month record of your taxable turnover, as monitoring each sales channel might lead to failure to notice when you reach the VAT registration threshold.
Zero-Rated and International Sales Still Count
Even though VAT can be levied at 0%, the supply counts towards the £90,000 VAT registration limit. It is critical to fully understand the distinction between VAT exemption and zero rating for suppliers. For instance, if your company sells £100,000 worth of children’s apparel, you have met the VAT registration limit and must become a VAT registered dealer. The supply can be zero-rated; therefore, no output VAT is levied.
Your exports outside of the United Kingdom can have an impact on the amount of VAT charged. Exports of products from the UK are typically zero-rated, which means they can contribute to your VAT taxable turnover. However, goods made outside of the purview of UK VAT, such as some services provided to international business clients, do not count towards the limit. It is important to understand how each type of supply can be charged. It depends on the region where your consumers live.
Rules for Overseas Sellers
There are supplementary registration requirements for international enterprises. Where an overseas firm stores its products in the UK before selling them to UK clients, or where it imports its goods into the UK for sale, it must register for UK VAT from the first taxable supply. While VAT registration is based on turnover for UK-established businesses, the VAT registration threshold of £90,000 is unlikely to benefit international suppliers.
Different VAT registration regulations can apply when supplies are made between the EU and Northern Ireland as a result of post-Brexit VAT arrangements. If a corporation makes EU purchases in Northern Ireland, it must register for UK VAT whenever the total value of such acquisitions exceeds £90,000 in any rolling 12-month period. Registration for VAT cannot be avoided if you sell your items through an online marketplace since, depending on the method of supply, the marketplace operator has certain VAT obligations and can require sellers to obtain VAT registration numbers.
When and How to Register for VAT
Your VAT registration date depends on two separate HMRC tests. The first test is a backdated test. At the conclusion of each month, you must determine whether your taxable turnover has exceeded £90,000 in the previous 12 months. If this has occurred, you must tell HMRC within 30 days of the end of this month. In most circumstances, your registration starts on the first day of the second month after you crossed the barrier.
The second test is a prospective test. In this case, if you estimate your taxable turnover to exceed £90,000 during the next 30 days, you must register for VAT within that time frame, regardless of prior months’ sales. Failure to do so can result in high costs. HMRC can backdate your registration to the date you were supposed to register in the first place. This allows you to be charged VAT without billing your consumers.
To reduce the probability of missing the registration deadline, most online businesses check their rolling turnover throughout the year and receive notifications from their accounting software when their sales approach £80,000. This allows you to examine your circumstances and register on your own terms before it becomes necessary.
Non-Compliance and Marketplace Enforcement
HMRC uses a variety of methods to verify firms’ compliance with VAT registration, return submission, and accurate VAT payment. In the case of a failure to pay VAT requirements, HMRC may apply fines and interest on overdue VAT. Depending on the circumstances, HMRC may also be able to advise marketplaces about seller compliance issues. Marketplaces can subsequently take action against such sellers, limiting or removing their capacity to sell items on the site.
For international enterprises, HMRC might ask for the appointment of a VAT representative or offer financial security if it believes it is required to ensure VAT income. In some instances, the VAT representative can be jointly and severally liable for VAT arrears.
Deregistering from VAT
You have the option to use HMRC’s online VAT service to deregister from VAT if your turnover is less than £88,000 and will remain so. Deregistration is optional, though, and you are free to choose whether or not to continue being registered for VAT.
In order to continue enjoying the benefits of being able to recover VAT on certain business costs, several e-commerce businesses that expand and experience a brief drop in turnover nonetheless decide to register for VAT. However, before deciding to deregister, consider your future sales intentions. If your turnover increases to the point where it exceeds the £90,000 VAT level, you will need to re-register for VAT.
Specialist VAT Support for UK Ecommerce Sellers
When the VAT threshold is reached, registration is not the only need for VAT administration. Precise accounting, reporting, and adherence to HMRC VAT laws become essential as your firm expands. Our ecommerce accountants help you with VAT administration by:
- Keeping an eye on the various currencies utilised in transactions and your rolling 12-month taxable turnover across many internet platforms.
- Generating a single overall turnover figure by combining sales data from your Shopify, Amazon, eBay, Etsy, and website accounts.
- Helping you register for VAT and determining whether it is wise for your company to voluntarily register for VAT.
- Timely preparation and filing of VAT returns in compliance with HMRC regulations.
- Assistance in determining whether general UK VAT registration regulations, VAT requirements for companies operating in Northern Ireland, and UK VAT supplier laws apply.
You can avoid any complications with late VAT registration, unforeseen VAT liabilities, and HMRC fines by working with our experts who handle e-commerce VAT concerns.
FAQs
What is the VAT registration threshold in the UK for 2026?
The UK’s VAT registration threshold is set at £90,000 in taxable turnover, which is calculated over 12 months. Since April 1, 2024, the VAT registration cap has remained unchanged.
Do Amazon and Shopify fees reduce my taxable turnover?
Not true. The online marketplace commissions, payment processing fees, and other company expenses are not deducted from the taxable turnover, which accounts for the gross turnover.
Do sales across different marketplaces count separately towards the VAT threshold?
No. Your whole taxable revenue, including sales from your website, Shopify, Amazon, eBay, Etsy, and other product-selling platforms, will be totalled by HMRC when assessing whether you must register for VAT.
Do zero-rated sales count towards the VAT registration threshold?
Yes, it’s correct. These goods are taxable supplies and will be included in the computation of £90,000 in taxable turnover, even if they are eligible for zero-rating.
Is the VAT registration threshold different for overseas sellers?
Yes, the £90,000 registration threshold regulation does not apply to non-UK companies. This is due to the fact that they must register for UK VAT starting with the first taxable transaction, particularly if the items are stored in the UK before being sold.
What happens if I register for VAT late?
HMRC can register your business retroactively beginning on the date you should have registered if you don’t register by the deadline. Any VAT that you failed to collect from your clients may need to be paid. In some situations, fines may even be applied.
Can I deregister from VAT if my sales drop?
Yes. If you predict that your taxable turnover will constantly fall below the £88,000 deregistration level, you can apply for deregistration using HMRC’s VAT service. However, before applying, consider how remaining VAT registered will benefit your business to stay VAT registered.
