VAT on online sales
- Value added tax charged on goods and services sold online, which a business must add to its prices, collect and pay over to HMRC once it is VAT registered.
- In the UK you must register for VAT once your taxable turnover passes the threshold set by HMRC, and you may choose to register earlier. Prices shown to consumers must include VAT, while trade customers often prefer to see prices without it. Selling abroad brings extra rules, so it is worth asking an accountant before you begin.
Example The shop shows prices with VAT included, and the invoice lists the VAT separately.
Registering
A UK business must register for VAT when its taxable turnover goes over the registration threshold, which HMRC sets and reviews, so check the current figure on gov.uk. Many businesses below the threshold register voluntarily so that they can reclaim the VAT on what they buy. Once registered you charge VAT on most sales, keep VAT records and file returns, normally using accounting software.
Showing prices
Shops selling to the public normally show prices including VAT, because that is what the customer will pay. Trade customers often prefer prices without it, so some shops offer a switch. Either way, the order confirmation and invoice should show the VAT separately. Delivery charges usually carry VAT as well, so check how that applies to you, and make sure your checkout shows the full total before payment.
Selling abroad
The rules for selling to customers in other countries changed when the UK left the EU, and they depend on what you sell, where it goes and how much of it there is. This is where it genuinely pays to ask an accountant before you start, because a shop that is set up wrongly can be expensive to put right later.
See also Checkout Ecommerce Online shop