IOSS for low-value parcels
IOSS lets you charge EU VAT at checkout on consignments up to €150, so customers are not hit with VAT and fees on delivery. Businesses in Great Britain must use an EU intermediary.
VAT returns and Making Tax Digital
VAT Returns and Making Tax Digital for Online Sellers
A VAT return service built for multi-channel sellers. We prepare your VAT returns from reconciled Amazon, Shopify, eBay and Etsy data, handle import VAT and postponed VAT accounting, and file through Making Tax Digital compatible software.
Book a discovery call 
MTD-compliant filing in Xero or QuickBooks- Marketplace, import and EU VAT handled
- Led by an ICAEW chartered accountant
In short
eCounts prepares and files VAT returns for UK online sellers using Making Tax Digital compatible software, working from reconciled marketplace and payment data rather than bank deposits. That covers marketplace VAT, import VAT and postponed VAT accounting, VAT schemes and EU sales through OSS or IOSS, plus readiness for MTD for Income Tax.
Works with the platforms and software you already use
-
Amazon -
Shopify -
-
Etsy -
TikTok Shop -
-
Xero -
QuickBooks - A2X
-
PayPal -
Stripe -
Klarna
Trademarks belong to their owners. eCounts is independent and not endorsed by these platforms.
Our VAT return service
What a VAT accountant does for you each quarter
- 01
Reconcile every channel
Marketplace settlements and processor payouts are reconciled first, so sales, refunds and fees carry the right VAT codes.
- 02
Sort the VAT by type
Your sales, marketplace-collected sales, zero and reduced-rate goods and EU sales are separated so nothing is double counted.
- 03
Bring in import VAT
PVA statements or C79 certificates are matched to your imports, so boxes 1, 4 and 7 are supported.
- 04
Approve and file
We review it against prior periods and query anything unusual, then you approve and we submit through MTD compatible software.
Ecommerce VAT basics
Ecommerce VAT for online sellers: rates, charging VAT and voluntary registration
Value added tax is charged on most goods sold in the UK. The standard rate is 20%, there is a 5% reduced rate, and some goods, such as most children's clothing and books, are zero-rated. Ecommerce businesses that sell goods at different rates need each product set up correctly on every channel, or the VAT return will be wrong.
You can only charge VAT once you are registered. Before that, your prices simply have no VAT in them. Once registered, you charge VAT on your sales (output VAT), reclaim the VAT on your business purchases and fees (input VAT), and pay HMRC the difference each quarter.
Voluntary VAT registration below the £90,000 VAT threshold can make sense if most customers are VAT-registered businesses, or if you import large volumes and want to recover import VAT. For sellers to consumers it usually means raising prices or accepting a lower margin. Our VAT threshold checker shows how close you are, and our guide to when online sellers must register for VAT covers your VAT obligations in full.
Registration
The VAT registration threshold and the rolling 12-month test
You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone. The 12 months are rolling, checked at the end of every month. They are not the tax year, which is the most common misunderstanding we see.
If you go over on the rolling test, you must register within 30 days of the end of that month, and you are registered from the first day of the second month after you went over. Register late and you still owe VAT on sales from the date you should have registered, usually out of margin. You can cancel your registration if taxable turnover falls below £88,000.
Taxable turnover means gross sales, not the net payouts that reach your bank. If your accounts are built from deposits, your turnover is understated, which is why multi-platform reconciliation matters here too. Full rules are on GOV.UK: register for VAT.
Multi-channel VAT
Marketplace VAT rules: who accounts for what
Marketplaces are responsible for VAT in some situations and not others. Getting this wrong is how multi-channel returns end up misstated.
| Situation | Who accounts for the VAT | What it means for your return |
|---|---|---|
| UK-established seller, goods in the UK, sold via a marketplace | You, the seller | Sales go on your return as normal |
| Overseas seller, goods in the UK, sold via a marketplace | The online marketplace | Marketplace collects and pays the VAT on the sale |
| Goods outside the UK, consignment of £135 or less, sold via a marketplace | The online marketplace, at the point of sale | No import VAT at the border for the consumer sale |
| Goods imported by you for resale | You, as import VAT | Use postponed VAT accounting or recover via C79 |
Simplified summary. Northern Ireland has its own rules, and sales to VAT-registered business customers can be treated differently.
VAT schemes
VAT schemes: flat rate, the cash accounting scheme and annual accounting
For ecommerce sellers the standard scheme is often right, but not always.
| Scheme | Who can join | The ecommerce catch |
|---|---|---|
| Flat rate scheme | VAT turnover of £150,000 or less; leave above £230,000 including VAT | Most resellers are 'limited cost businesses' paying 16.5% |
| Cash accounting | Taxable turnover of £1.35 million or less; leave above £1.6 million | Can help when payouts lag sales |
| Annual accounting | Taxable turnover of £1.35 million or less | One return a year, with advance payments |
Under the flat rate scheme you are a limited cost business if spending on relevant goods is under 2% of flat rate turnover, or over 2% but under £1,000 a year (£250 a quarter). Goods for resale do not count as relevant goods.
Selling into the EU
Distance selling to the EU: One Stop Shop VAT and IOSS
Goods sent from Great Britain to EU consumers are exports from the UK and imports into the EU, which decides which scheme applies.
OSS and stock held in the EU
OSS reports EU distance sales through one return. From the UK it is only available for Northern Ireland goods trade. Sellers holding stock in EU warehouses usually need local VAT registrations.
When marketplaces handle it
Marketplaces collect EU VAT on many low-value sales into the EU. Through your own store, the obligation usually falls on you or your customer.
Making Tax Digital
Making Tax Digital: VAT and Income Tax timeline
MTD for Income Tax is being phased in for sole traders and landlords by income level.
| Who | From | Based on |
|---|---|---|
| All VAT-registered businesses: MTD for VAT | Already in force | Being VAT-registered |
| Sole traders and landlords: MTD for Income Tax | 6 April 2026 | Qualifying income over £50,000 in 2024 to 2025 |
| Sole traders and landlords: MTD for Income Tax | 6 April 2027 | Qualifying income over £30,000 in 2025 to 2026 |
| Sole traders and landlords: MTD for Income Tax | 6 April 2028 | Qualifying income over £20,000 in 2026 to 2027 |
Qualifying income is self-employment and property income before expenses (turnover, not profit).
MTD for Income Tax
What MTD for Income Tax and digital links mean in practice
Under MTD for Income Tax you keep digital records and send quarterly updates from compatible software. Each update is a set of category totals for the tax year so far, not individual receipts, and the deadlines are 7 August, 7 November, 7 February and 7 May. You still submit a tax return by 31 January after the end of the tax year.
For VAT and Income Tax alike, MTD requires digital links between your records and the return. Copying and pasting figures from one spreadsheet into another does not count as a digital link. Spreadsheets can still be used with bridging software, but every step has to be digital.
We set up Xero or QuickBooks so records and submissions sit in one place, with the subscription included in every eCounts plan. Check HMRC's rules on whether MTD for Income Tax applies to you.
Getting it wrong
Historic VAT errors, penalties and putting it right
Finding a past VAT mistake is common, and usually less bad than sellers fear. Net errors up to £10,000, or up to £50,000 if no more than 1% of that period's box 6 figure, can normally be corrected on your next return. Anything larger, or deliberate, must be disclosed to HMRC separately. The time limit is generally 4 years.
Late returns attract penalty points under the points-based system. Once you reach the threshold (2 points for annual returns, 4 for quarterly, 5 for monthly) each further late return costs £200. Late payment penalties start if VAT is still unpaid 15 days after the due date, increase at 30 days, and keep accruing after that, on top of interest.
Telling HMRC before they find an error is materially better than waiting. Importers should also read about import VAT and landed costs and postponed VAT accounting, and Amazon sellers our Amazon accountants page.
Example dashboards
Your VAT return, traced back to every transaction
Each box on the return links back to reconciled sales, purchases and import statements, so nothing is a guess.
eCounts client dashboard Sample data
VAT return & imports
Quarter June to August 2026 · Making Tax Digital
Box 1 · VAT due
£66,100
incl. £14,860 PVA
Box 4 · reclaimed
£24,590
incl. £14,860 PVA
Box 5 · to pay
£41,510
Box 6 · sales
£275,500
Box 7 · purchases
£118,400
| Shipment | Arrived | Customs value | Duty | Import VAT (PVA) | Checked |
|---|---|---|---|---|---|
| SHP-0612 | 12 Jun | £22,400 | £896 | £4,790 |  PVA statement |
| SHP-0718 | 18 Jul | £24,800 | £992 | £5,300 | PVA statement |
| SHP-0822 | 22 Aug | £22,300 | £892 | £4,770 | PVA statement |
| Quarter total | £69,500 | £2,780 | £14,860 | ||
Postponed import VAT appears in Box 1 and Box 4, so for a fully taxable business it nets to nil. Duty is a cost and goes into landed cost.
Example figures for illustration. Your dashboards are built from your own reconciled data. See it with your numbers.
Top tips
Five VAT tips for online sellers
- 01
Check the threshold every month
The £90,000 VAT registration threshold is tested on a rolling 12 months. A strong quarter can take you over it mid-year.
- 02
Know who accounts for VAT on each channel
Marketplaces account for VAT on some sales and not others. Get a clear answer for each channel you sell on.
- 03
Reclaim VAT on marketplace fees
Download the VAT invoices for your marketplace and app fees. Without them, you cannot support the VAT you reclaim.
- 04
Reconcile import VAT to your statements
Import VAT on your return should match your postponed import VAT statements or C79 certificates, and be claimed once.
- 05
Correct errors quickly
Smaller errors can often be corrected on your next return. Larger ones must be reported to HMRC separately, so spotting them early matters.
From the accountant
“The VAT mistakes we see most often come from treating a marketplace payout as a sale. Build the return from the underlying transactions and most of them disappear.”
Key facts for 2026
Ecommerce VAT: key facts for 2026
-
£90,000 is the UK VAT registration threshold, tested on taxable turnover over any rolling 12 months.
2026/27, unchanged since 1 April 2024. Source: GOV.UK, Register for VAT
-
£88,000 is the VAT deregistration threshold: below it, a registered business can ask to cancel its registration.
2026/27, unchanged since 1 April 2024. Source: GOV.UK, Register for VAT
-
30 days after the end of the month you go over the threshold is the deadline to register for VAT.
2026/27 rules. Source: GOV.UK, Register for VAT
-
20% is the UK standard rate of VAT, with a 5% reduced rate and 0% for zero-rated goods such as most children's clothing and books.
2026/27. Source: GOV.UK, VAT rates
-
£135 or less per consignment: imported goods sold through online marketplaces at this value have VAT collected at the point of sale.
2026. Source: GOV.UK, VAT and overseas goods sold directly to customers in the UK
-
6 months is how long each monthly postponed import VAT statement can be downloaded from the Customs Declaration Service, so importers need to save every one.
2026. Source: GOV.UK, Get your postponed import VAT statement
Figures checked 9 October 2026. Rates and thresholds change, so check the source before relying on them.
Coming up
VAT and MTD changes coming up
E-invoicing, falling MTD thresholds and new import rules, with the official source for each.
-
MTD for Income Tax threshold falls to £30,000
Sole traders and landlords with qualifying income over £30,000 in 2025/26 must keep digital records and send quarterly updates. Online sellers should check their gross sales, not profit, against the threshold.
Source: GOV.UK, Find out if and when you need to use MTD for Income Tax
-
Penalty points for late MTD quarterly updates begin
From the 2027/28 tax year, each late quarterly update earns a penalty point, and four points means a £200 penalty. 2026/27 is the year to get the routine right.
-
MTD for Income Tax threshold falls to £20,000
The threshold drops again, based on 2026/27 income, bringing many smaller Etsy, eBay and side-business sellers into quarterly digital reporting.
Source: GOV.UK, Find out if and when you need to use MTD for Income Tax
-
EU ends its temporary €3 duty on low-value parcels
Since 1 July 2026 the EU has charged a flat €3 customs duty per item on parcels worth up to €150. From July 2028 normal duty rates apply, so UK sellers shipping to EU consumers should expect landed costs to change again.
Source: European Commission, Temporary flat fee on low-value imports
-
Mandatory e-invoicing for all VAT invoices
The government will require all VAT invoices to be issued and received electronically from 2029, with a roadmap due at Budget 2026. Accounting software choices made now should support it.
Source: GOV.UK, Promoting electronic invoicing: consultation response
Pricing
VAT returns and MTD filing are in every plan
From Compliance upwards, every eCounts plan includes VAT returns, MTD filing and your Xero or QuickBooks subscription.
- Usual fit
Compliance
£250/mo
Sole trader. £590/mo ltd company.
Basic
£350/mo
Single platform, up to 500 orders.
Growth
£700/mo
Multi-platform.
Scale
£2,500+/mo
Seven-figure operations.
Fractional FD
£4,500+/mo
Everything included.
What is input VAT? 
Input VAT is the VAT you pay on business purchases, such as stock, marketplace fees and import VAT. A VAT-registered business can usually reclaim it on its VAT return, as long as it holds valid VAT invoices or import evidence.
Can I charge VAT without being registered?
No. Only VAT-registered businesses can charge VAT. Charging it without being registered is not allowed, and any amount collected as VAT would still have to be paid to HMRC.
Is it worth a small business registering for VAT voluntarily?
It can be if your customers are mostly VAT-registered businesses or you have large VAT bills on imports and costs. If you sell mainly to consumers, voluntary VAT registration usually reduces your margin.
What is the VAT registration threshold?
The VAT registration threshold is £90,000 of taxable turnover. You must register if your total for the last 12 months goes over it, checked on a rolling basis at each month end, or if you expect to go over it in the next 30 days alone. The deregistration threshold is £88,000.
Does Amazon pay my VAT?
Not if you are a UK-established seller with goods in the UK. In that case you account for VAT on your sales yourself. Marketplaces account for VAT on sales by overseas sellers with goods in the UK, and on consignments of £135 or less sent from outside the UK.
Does MTD for Income Tax apply to me?
It applies from 6 April 2026 if you are a sole trader or landlord with qualifying income over £50,000 in 2024 to 2025. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Qualifying income is self-employment and property turnover before expenses, not profit.
What happens if I registered for VAT late?
You owe VAT on sales from the date you should have been registered, and may face a penalty depending on how late you are and how much is owed. Registering as soon as you realise usually limits the damage.
Do I need IOSS to sell to EU customers?
Not always. IOSS lets you collect EU VAT at checkout on consignments up to €150. If a marketplace collects the VAT, or your parcels are above that value, IOSS may not be relevant.
Is the flat rate scheme worth it for an online seller?
Rarely, for a reseller. Goods for resale do not count towards the limited cost test, so most sellers pay the 16.5% flat rate, which is usually worse than the standard scheme.
Keep reading
