VAT on Online Marketplace Sales: What UK Sellers Need to Know About the New HMRC Consultation

UK-based sellers trading on Amazon, eBay, Etsy and similar platforms could soon find themselves subject to a very different VAT system. A new joint consultation from HM Treasury and HMRC is looking at whether online marketplaces should become liable for VAT on domestic seller sales, not just on sales made by overseas traders.

If this goes ahead, it would be one of the biggest shifts in UK marketplace VAT since the 2021 reforms. Here’s what’s actually being proposed, who it affects, and what sellers should be doing about it now.

What Is the Online Marketplace VAT Liability Consultation?

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.

Why Is the Government Doing This?

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:

sales by overseas sellers with goods already in the UK at the point of sale
low-value imports of £135 or less, where the goods are outside the UK when sold

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

How Does Marketplace VAT Work Right Now?

Before looking at what might change, it helps to understand the current rules.

Scenario	Who accounts for VAT today
Overseas seller, goods already in the UK at sale	The marketplace
Goods outside the UK, consignment value £135 or less	The marketplace
Goods outside the UK, consignment value over £135	Normal import VAT and customs rules apply
UK-established seller, goods in the UK at sale	The seller
Sale to a UK VAT-registered business customer with a valid VAT number	The business customer accounts for VAT in the relevant low-value import scenario

A platform only counts as an “online marketplace” for VAT purposes if it does all three of the following:

sets the terms of sale
processes or enables payment
is involved in ordering, delivery, or facilitating delivery

Platforms that simply run adverts, process payments only, or redirect buyers elsewhere aren’t caught by these rules.

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What Would Actually Change for UK Sellers?

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:

It’s aimed at B2C sales only — business-to-business transactions are out of scope.
It would not change VAT rates on any goods. Zero-rated items stay zero-rated.
Sales through a seller’s own website or physical shop would be unaffected — the seller would keep accounting for VAT on those as normal.
Input tax recovery would continue under the usual rules.

For information on the trading allowance, do read: How to Use the £1,000 Trading Allowance When Selling on Vinted, eBay & Other Platforms

Who Would Be Protected? The Threshold Question

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:

Option 1: A Minimum Platform Threshold

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.

Option 2: A VAT rate relief

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.

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Who’s Excluded From the Proposed Rules?

Private and casual sellers: Individuals selling personal possessions, not operating as a business, aren’t intended to be caught by any of this.
Second-hand goods sellers — possibly: This one is still unresolved. UK businesses using the Second-hand Margin Scheme calculate VAT on the margin between purchase and sale price, which doesn’t fit neatly into a marketplace deemed-supply model. HMRC is weighing up whether to exclude second-hand sales entirely or find another way to handle them.

Takeaway and Food Delivery Platforms Are Explicitly in Scope

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.

What About the Flat Rate Scheme?

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

What Should Sellers and Their Accountants Do Now?

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.

A practical short-term checklist:

List every marketplace the business sells through
Break down turnover by platform, not just as a single total
Separate B2C sales from B2B sales
Check how close turnover is to the £90,000 VAT threshold
Review whether the business uses the Flat Rate Scheme
Flag any second-hand goods activity
Note which sales come through the business’s own website, since these stay outside the marketplace model
Prepare for more marketplace onboarding checks and data requests going forward

Review Area	Why It Matters
VAT registration status	Both the standard threshold and the proposed platform threshold sit at £90,000
Marketplace turnover by platform	The lead proposal is based on sales per platform, not combined turnover
Sales channel split	Website and shop sales stay under the current model; marketplace sales could shift
B2C vs B2B split	Only B2C marketplace sales are in scope of the proposal
Second-hand goods	Treatment is still undecided because of the Margin Scheme
Flat Rate Scheme use	Directly flagged as an area HMRC wants evidence on

How We Help You Deal With the VAT on Online Marketplace Sales and the Proposed Changes

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:

VAT registration reviews for e-commerce and marketplace sellers
Turnover analysis broken down by platform and sales channel
B2C and B2B VAT mapping for mixed-channel businesses
Flat Rate Scheme impact reviews
Second-hand goods and Margin Scheme reviews
Marketplace VAT compliance checks for Amazon, eBay, Etsy and similar platforms
Support with preparing and submitting responses to the HMRC consultation

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.

Get Free Consultation

Call Anytime 0203 883 4777

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Conclusion

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.

Common Questions From UK Marketplace Sellers

Will this affect my Amazon, eBay or Etsy account?

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.

Does this affect sales through my own website?

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.

What if my turnover is under £90,000?

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.

Will marketplaces ask for more information from sellers?

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.

Are business-to-business sales included?

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.