UK-based sellers trading on Amazon, eBay, Etsy and similar platforms could soon see a very different VAT system. The government consulted this summer on making online marketplaces responsible for the VAT on sales made through their platforms, and reports in October now say the Chancellor will confirm a crackdown at the Autumn Budget on 28 October 2026: marketplaces such as Amazon, eBay and Temu would collect VAT at the source for business sellers with turnover above £90,000, closing a loophole that lets some sellers avoid UK VAT.
This matters for VAT on online marketplace sales because it would be one of the biggest shifts in UK marketplace VAT since the 2021 reforms. Nothing is confirmed yet: the October reports describe a plan, not a law. This guide explains what is being proposed, who it affects, and what sellers should do now, with the July consultation detail below the latest developments.
On 13-14 October 2026, Guardian reports indicated that the Chancellor is preparing to make online marketplaces responsible for collecting VAT at the source on sales by platform retailers with turnover above £90,000. The move aims to address VAT avoidance by sellers using the deemed reseller loophole. Reports suggest the proposal could raise up to £1 billion, potentially funding business rates relief announced at the same budget. However, the reported plan should not be treated as confirmed law until the government publishes its final position.
For UK sellers, the practical effect would be a shift in who collects the VAT. Today, a VAT-registered seller charges VAT on their marketplace sales and accounts for it on their VAT return. Under the reported plan, the marketplace itself would collect the VAT when the buyer pays, leaving the seller to reconcile those amounts in their records. Sellers trading below the £90,000 VAT registration threshold would not be pulled in by the reported plan, and consumers would simply see VAT collected consistently at the point of sale.
This is the second chapter of a story that began with the formal consultation. HM Treasury and HMRC consulted from 23 June to 18 August 2026 on extending online marketplace VAT liability to sales by UK-based businesses when their goods are in the UK. If the budget confirms the crackdown, the consultation proposal moves from an open question to government policy, and draft legislation would follow.
Until the budget and any subsequent legislation, the 2021 marketplace VAT rules continue to apply. Marketplaces are already liable for VAT on certain sales by overseas sellers and low-value imports, while UK sellers remain responsible for their VAT registration, invoicing and returns under the existing rules. HMRC has also been increasing scrutiny of online sellers. Businesses trading internationally should read our guide to UK VAT and cross-border fashion e-commerce in 2026 to understand the additional considerations when selling goods across borders. Our e-commerce accountant services can also help online retailers review their VAT obligations and maintain accurate records as the rules evolve.
The consultation, titled Extending VAT Online Marketplace Liability to Combat Non-Compliance, opened on 23 June 2026 and runs for eight weeks, closing at 11:59pm on 18 August 2026. It’s a joint project between HMRC and HM Treasury, and it sits within a wider package of 40 tax measures announced by the Exchequer Secretary to the Treasury on the same date.
At its core, the proposal would extend online marketplace VAT liability rules beyond overseas sellers and low-value imports, making platforms responsible for accounting for VAT on certain sales made by UK-established businesses too.
No implementation date has been set. If the government decides to proceed, a further technical consultation on draft legislation would follow before anything becomes law.
The short answer: money and fairness.
HMRC estimates that tens of thousands of UK-based businesses trading through online marketplaces aren’t meeting their VAT obligations, with the resulting non-compliance running into the hundreds of millions of pounds each year.
The concern isn’t really about VAT rates or new taxes. It’s about levelling the playing field. Sellers who dodge VAT can undercut competitors who charge it correctly, whether those competitors trade online or from a high street shop. The government has said any additional revenue raised would be channelled back into support for high street businesses through changes to the business rates system.
This builds on the 2021 reforms, which made marketplaces liable for VAT on:
Those changes worked well for overseas non-compliance. What they didn’t fix was VAT leakage among UK-based sellers, and that’s the gap this new consultation is trying to close.
Read: The Complete Tax Guide for Online Sellers in the UK – Amazon, Vinted, eBay, and Etsy
Before looking at what might change, it helps to understand the current rules.
A platform only counts as an “online marketplace” for VAT purposes if it does all three of the following:
Platforms that simply run adverts, process payments only, or redirect buyers elsewhere aren’t caught by these rules.
This is the part that matters most to domestic sellers. Under the proposal, marketplaces would become liable for VAT on business-to-consumer sales made by UK-established sellers, where the goods are already in the UK at the point of sale.
Technically, this would work through a deemed supply structure: the seller would make a zero-rated supply to the marketplace, and the marketplace would then charge VAT to the end customer and account for it on its own VAT return.
A few things the proposal makes clear:The proposed deemed-supply model would make the marketplace responsible for accounting for VAT on qualifying sales, effectively treating the platform as a VAT reseller under the proposed rules.
For information on the trading allowance, do read: How to Use the £1,000 Trading Allowance When Selling on Vinted, eBay & Other Platforms
HMRC faces one of the trickiest challenges in this proposal: preventing the rules from affecting small sellers who do not need to register for VAT. HMRC is consulting on two main options:
A marketplace would only become liable for a seller’s VAT once that seller’s sales on that specific platform pass a set value. The lead suggestion is £90,000 — the same as the standard UK VAT registration threshold — though a lower figure is also being considered, since £90,000 per platform could still leave gaps for sellers who spread sales across several marketplaces.
Instead of a threshold, smaller UK businesses below the VAT registration threshold could get some form of rate relief on their marketplace sales.
Neither option is confirmed. The consultation is genuinely asking for input on which approach works better in practice, and it’s a question sellers close to the threshold should watch closely.
It’s also worth being clear about what stays the same: the standard UK VAT registration threshold remains more than £90,000 of taxable turnover across all sales channels combined. A platform-specific threshold, if introduced, wouldn’t replace that underlying obligation.
This isn’t just an e-commerce goods story. The consultation specifically names takeaway food delivery platforms, restaurants, fast food kitchens and takeaway outlets as relevant businesses.
For platforms that only operate within the UK and haven’t previously had to deal with the overseas-seller marketplace rules, this could be a much bigger operational shift than for the likes of Amazon or eBay, which already run complex VAT logic for international sellers.
The consultation directly asks about the impact on businesses using the VAT Flat Rate Scheme. If marketplace sales move to a deemed-supply model where the platform accounts for VAT, sellers on the Flat Rate Scheme could effectively lose the ability to apply their flat rate percentage to that portion of turnover.
Businesses using the Flat Rate Scheme with a significant share of marketplace sales should review the impact early, as this remains an open issue rather than a confirmed rule.
A detailed tax guide for eBay sellers: eBay HMRC UK Tax Rules Every Seller Should Know
There’s no new law yet — this is still a consultation, and the response period runs until 18 August 2026. But that’s exactly why now is the sensible time to check exposure, rather than waiting for the outcome.
Businesses selling through online marketplace platforms such as Amazon, eBay and Etsy should review their taxable turnover, sales channels and VAT registration status to prepare for any confirmed changes.
A practical short-term checklist:
At Apex Accountants, we work with online sellers, e-commerce businesses and marketplace traders across Amazon, eBay, Etsy and food delivery platforms to keep their VAT position under control — including ahead of policy changes like this one.
Our support covers:
If you sell through an online marketplace, the sensible move isn’t to wait for the final rules — it’s to understand exactly where your VAT exposure sits today.
This is still a consultation, not a finished piece of legislation, and the final shape of any changes won’t be clear until after 18 August 2026. But the direction of travel is unmistakable: HMRC wants marketplaces to take on more VAT responsibility for UK-based sellers, not just overseas ones and low-value imports.
VAT-registered sellers may find that platforms, rather than sellers themselves, account for VAT on marketplace sales. Smaller sellers need to assess whether the final rules introduce a suitable threshold or relief. Sellers can strengthen their position by reviewing VAT registration status, platform-by-platform turnover, sales channel mix and Flat Rate Scheme use before the rules take effect.
Potentially, yes. The proposal applies to qualifying online marketplaces that facilitate B2C goods sales. It is not limited to specific platforms and could affect sellers using major marketplace channels.
No. The proposal currently focuses on marketplace sales only. VAT obligations for sales made through your own website, physical shop or direct channels would continue under existing rules.
This remains an important area under consultation. Possible protections include a Minimum Platform Threshold or VAT rate relief, but the final approach has not been confirmed.
Yes, sellers may need to provide more details. Platforms could review business location, marketplace turnover, seller status, and whether goods are new or second-hand.
No. The proposed changes focus on business-to-consumer sales of goods. B2B transactions are outside the main scope of the proposed marketplace VAT liability rules.
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