Import VAT for Ecommerce Businesses: What UK Sellers Need to Know

Selling goods online across borders sounds simple until the words “import VAT” appear on a customs invoice. For UK ecommerce sellers, understanding import VAT is not optional, it is a core part of running a compliant, profitable business. Whether you import stock from China, the EU, or the US, HMRC expects you to know exactly when VAT is due, who pays it, and how to reclaim it correctly.

This guide breaks down import VAT rules in plain English, from the £135 threshold to postponed VAT accounting, so you can avoid unexpected bills, cash flow strain, and HMRC penalties.

What Is Import VAT and Why Does It Matter for Ecommerce Sellers

Import VAT is the VAT charged on goods brought into the UK from overseas, regardless of whether they arrive from the EU or further afield since Brexit. Unlike supply VAT, which is charged to the end customer at checkout, import VAT is generally the responsibility of the importer of record, the business or individual named on the customs declaration. For ecommerce sellers who source stock from overseas suppliers or dropship internationally, this distinction is critical because it determines who pays VAT, when, and how it can be recovered.

Since January 2021, import VAT applies to goods entering the UK from anywhere in the world, not just non EU countries. This changed the compliance landscape significantly for online sellers who previously only worried about VAT on non EU imports.

The £135 Threshold: Supply VAT vs Import VAT

The £135 consignment value threshold is the single most important rule ecommerce sellers must understand

• Goods valued at £135 or less: supply VAT (also called sales VAT) is charged at the point of sale, meaning the seller or the marketplace collects VAT directly from the customer at checkout
• Goods valued above £135: standard import VAT and customs duty rules apply, meaning VAT and duty are calculated and settled when the goods clear customs
• The £135 limit applies to the total value of the consignment, not the value of each individual item within it
• If you sell through Amazon, eBay, Etsy, or a similar online marketplace, the marketplace may become the deemed supplier and take on responsibility for charging and remitting VAT on your behalf for low value consignments

Sellers should not assume the marketplace always handles this correctly. Reconciling marketplace VAT reports against your own accounting records regularly is essential, since HMRC is now proposing to widen marketplace VAT liability further to certain UK based sellers too.

How Import VAT Is Calculated

Import VAT is charged on the customs value of goods, which typically includes the price paid for the goods, shipping and insurance costs, and any applicable customs duty [cite:12][cite:13]. The standard UK VAT rate of 20 percent usually applies. For sellers importing higher value stock in bulk, this can create a significant cash flow gap between paying VAT at the border and recovering it later, which is exactly the problem postponed VAT accounting was designed to solve.

Postponed VAT Accounting: The Cash Flow Lifeline

Postponed VAT accounting, known as PVA, allows VAT registered UK businesses to account for import VAT on their VAT return instead of paying it upfront at the border. Rather than physically handing over cash at the point of import and waiting to reclaim it, businesses declare and recover the same VAT amount within the same VAT return period.

To use postponed VAT accounting, sellers must meet a few conditions:

• Your business must be VAT registered in the UK
• The imported goods must be for use in your business
• Your customs declaration must show both your VAT registration number and your EORI number
• There is no application or approval process required, though you must inform your customs agent that you intend to use it
• PVA is optional in most cases, but becomes mandatory if you defer your customs declarations under simplified procedures

On your VAT return, import VAT accounted for through PVA is included in Box 1 (VAT due on sales and other outputs) and reclaimed in Box 4 (VAT reclaimed on purchases), provided normal input VAT recovery rules are met. To complete this correctly, sellers must download their monthly postponed import VAT statement from HMRC, which is accessible through a Government Gateway account linked to their EORI number. These statements are only available for six months from the date they are published, so timely retrieval matters.

Common Mistakes Ecommerce Sellers Make

Import VAT errors are among the most common triggers for HMRC scrutiny, particularly now that Making Tax Digital cross references VAT returns against customs import and export data. Frequent mistakes include:

• Confusing supply VAT with import VAT and charging customers twice or not at all
• Failing to reconcile marketplace collected VAT with internal accounting records
• Missing or losing postponed VAT statements before the six month access window closes
• Incorrectly completing Box 1 and Box 4 entries on the VAT return
• Assuming the marketplace has fully discharged all VAT obligations when it has not
• Overlooking the EORI number requirement on customs declarations, which blocks PVA eligibility entirely

Registration and Compliance Obligations

Overseas and UK based ecommerce sellers may need to register for UK VAT if they sell goods directly to UK customers, hold stock in the UK, or import goods that will be sold to UK consumers. A practical compliance checklist includes confirming whether sales are taxable in the UK, registering for VAT and obtaining a VAT number, collecting VAT correctly at the point of sale where required, accounting for import VAT when goods enter the UK, and submitting accurate VAT returns on time.

Sellers should also monitor regulatory changes closely. HMRC and HM Treasury have proposed extending online marketplace VAT liability to certain UK based sellers, building on existing rules for overseas sellers, with a consultation that closed in August 2026 [cite:6]. This could shift where inventory is held at the point of sale and how VAT exposure is assessed, making proactive review essential for any seller trading through marketplaces.

Northern Ireland: A Different Set of Rules

Northern Ireland remains part of the EU VAT area for goods movements, meaning goods arriving from the EU are not treated as imports and do not incur import VAT in the same way as goods arriving in Great Britain. Sellers trading into Northern Ireland need a separate compliance approach, since consignments from outside the UK and EU sold to Northern Ireland customers are subject to import VAT rather than supply VAT.

How UK Ecommerce Accountants Can Help

Import VAT rules are full of nuance, and getting them wrong can mean overpaying tax, missing recoverable VAT, or facing HMRC penalties. Our team at UK Ecommerce Accountants specialises in helping online sellers navigate exactly these challenges with confidence and accuracy.

• We review your supply chains and sales channels to determine your exact VAT registration obligations across the UK, EU, and Northern Ireland
• We set up and manage postponed VAT accounting on your behalf, ensuring your customs declarations correctly show your VAT and EORI numbers
• We reconcile marketplace collected VAT reports against your accounting records every period to catch discrepancies before HMRC does
• We retrieve and file your monthly postponed import VAT statements before the six month access window closes
• We prepare and submit accurate VAT returns with correct Box 1 and Box 4 entries, minimising the risk of Making Tax Digital cross reference flags
• We monitor regulatory changes, including proposed marketplace VAT reforms, and advise you on how upcoming rules affect your business model
• We help structure your cash flow around import VAT timing so unexpected border charges never catch your business off guard
• We provide clear, jargon free guidance so you understand exactly what you owe, what you can reclaim, and why.

Frequently Asked Questions

Do I have to pay import VAT on every parcel I bring into the UK?
Not necessarily. Consignments valued at £135 or less usually attract supply VAT at checkout rather than import VAT at the border.

Who is responsible for paying import VAT, the seller or the marketplace?
It depends. For low value consignments sold through a facilitating marketplace, the marketplace often becomes the deemed supplier responsible for VAT, while for higher value goods the importer of record is responsible.

Can I recover import VAT I have already paid?
Yes, VAT registered businesses can reclaim import VAT as input tax on their VAT return, subject to normal recovery rules, or use postponed VAT accounting to avoid paying it upfront altogether.

Is postponed VAT accounting mandatory?
No, it is optional in most cases, but it becomes mandatory if you use deferred customs declarations under simplified procedures.

What happens if I do not have an EORI number?
Without an EORI number on your customs declaration, you cannot use postponed VAT accounting and may face delays or additional costs at the border.

Does Making Tax Digital affect how import VAT is reported?
Yes, HMRC now cross references VAT returns against customs import and export data under Making Tax Digital, so inaccurate Box 1 or Box 4 entries are more likely to be flagged.