Healey to make Amazon and eBay collect sellers’ VAT: what the Budget means

Online marketplaces such as Amazon, eBay and Temu are expected to be told to collect VAT on behalf of the businesses that sell through them, in what would be one of the biggest changes to UK online selling since the 2021 import reforms. Chancellor John Healey delivers his first Budget on Wednesday 28 October, and reports since mid-October say the measure will be in it, with the money earmarked for business rates cuts on the high street.

Nothing has been confirmed. The Treasury has said only that “decisions on tax are a matter for the chancellor to set out at fiscal events”. But the policy has a published consultation behind it, support from the two largest marketplaces, and a political logic that ties online tax to the future of town centres. This guide sets out what is on the table, who would be caught, what it means for sellers and shoppers, and what to watch for on Budget day.

What is the Budget expected to announce on marketplace VAT?

The Times reported on 14 October that the Chancellor plans to make online marketplaces responsible for collecting the VAT owed by third-party sellers. The report, since repeated by Retail Insight Network, TheIndustry.fashion and Business Matters, says platforms would collect VAT at source for every retailer with annual turnover above £90,000, the current VAT registration threshold.

Amazon, eBay and Temu are the platforms named in coverage. The stated target is overseas sellers who have avoided VAT by exploiting weak rules and enforcement. According to the reports, the measures could raise up to £1bn for the Treasury.

The second half of the package matters as much as the first. Business Matters and Retail Insight Network both report that the Chancellor is expected to say the proceeds will pay for cuts to business rates for high street shops. In other words, the government would present the change as a transfer from online tax gaps to bricks-and-mortar relief.

Why this is not a new tax

It is worth being precise about what is being proposed. The VAT rate (20% standard) would not change, and no new levy would be created. The change is about who hands the money to HMRC. Instead of the seller charging VAT and paying it over on a quarterly return, the marketplace would charge and account for the VAT itself at the point of sale.

For a seller who already pays every penny of VAT due, the total tax bill is unchanged. For a seller who has been under-declaring, splitting accounts or dissolving companies before VAT falls due, the change closes the gap, because the platform collects the tax before the seller ever touches the money.

HMRC and HM Treasury published a consultation on 23 June 2026, as part of the government’s Tax Update 2026 package, on extending marketplace VAT liability to UK-based businesses. It closed on 18 August. The government has not yet published its response, and if it proceeds, HMRC has said it will publish a technical consultation on draft legislation. That means a Budget announcement would set the direction and probably a start date, but the detailed rules could still move.

How would the new rules work for UK sellers?

The consultation proposes extending the online marketplace (OMP) rules to sales by UK-based businesses where the goods are in the UK at the point of sale, and where the buyer is a consumer rather than another business. According to law firm Osborne Clarke’s summary of the consultation, the mechanism would create a “deemed zero-rated supply” between the seller and the marketplace. The marketplace would then be treated as making the sale to the consumer and would charge and account for VAT on its own return.

Non-business sellers, such as individuals selling unwanted items, would be outside the rules. The consultation also covers food delivery platforms, meaning restaurants and takeaways selling through apps would be in scope as well as goods sellers. Osborne Clarke notes that online food delivery is singled out as a particularly persistent area of non-compliance.

The £90,000 minimum platform threshold

The lead option in the consultation is a minimum platform threshold (MPT) of £90,000, matching the VAT registration threshold. A marketplace would only become liable for a UK business’s VAT where that business’s annual sales on that specific platform exceed £90,000. The threshold is per platform, so a seller turning over £60,000 on Amazon and £60,000 on eBay would, on that design, sit below the line on both, even though its total business is over the registration threshold.

The government also asked for views on a lower threshold, because sellers can split sales across multiple accounts on the same platform. Retail Insight Network reports that critics urged the Treasury to lower the threshold, warning that £90,000 could still be open to abuse, but that ministers rejected this after lobbying from the Federation of Small Businesses. eBay has said publicly that any change should protect UK small businesses below the £90,000 threshold.

Second-hand goods and the margin scheme

One technical problem could affect a large group of UK online sellers. Marketplaces cannot use the Second-hand Margin Scheme, under which dealers pay VAT only on their profit margin rather than the full selling price. Osborne Clarke notes that, without a fix, UK businesses selling second-hand goods through a platform would face VAT on the full sale price, which would be a severe increase for vintage clothing dealers, used phone refurbishers and secondhand book sellers.

The consultation sets out two possible remedies: excluding second-hand goods sold by VAT-registered UK businesses from the new rules, or allowing platform sellers to continue using the margin scheme. Which one the government picks will matter a great deal to the resale economy on eBay, Vinted’s business sellers and specialist marketplaces.

Issue	Rules today	Reported Budget proposal
Overseas seller, goods already in the UK	Marketplace collects and pays VAT (since 2021)	No change
Imports of £135 or less sold via a marketplace	Marketplace collects and pays VAT (since 2021)	No change
UK-based business seller, sales on a platform above £90,000	Seller charges VAT and pays HMRC on its own return	Marketplace collects VAT at point of sale
UK-based business seller below £90,000 on a platform	Seller responsible; registration required above £90,000 total turnover	Lead option: outside marketplace collection
Private individual selling unwanted items	No VAT	Outside the rules
Restaurants and takeaways on delivery apps	Business accounts for its own VAT	In scope of the consultation
Second-hand goods under the margin scheme	VAT on the dealer’s margin only	Unresolved: exclusion or continued scheme access

Why is the government targeting marketplace sellers now?

The short answer is a tax gap HMRC can measure and a political need to fund high street relief. According to Business Matters’ reading of the consultation, HMRC estimated that tens of thousands of UK-based marketplace sellers are not meeting their VAT obligations, at a possible cost of hundreds of millions of pounds a year.

HMRC identified three patterns of non-compliance, as summarised by Osborne Clarke: overseas businesses posing as UK-established sellers; UK businesses splitting sales across platforms or accounts to stay under the threshold; and UK businesses under-accounting for VAT or dissolving before paying it.

The shell company problem

The Times report, as summarised by Retail Insight Network, describes government concern over Chinese retailers undercutting British competitors on price while avoiding the 20% VAT charge. Tens of thousands of UK shell companies have reportedly been set up by Chinese citizens and given VAT numbers, then used to register sellers on Amazon and eBay before being closed down before VAT fell due. The report adds that there is no suggestion the marketplaces themselves acted improperly.

The mechanism matters because the 2021 reforms only made marketplaces liable for sales by overseas businesses. A seller that can present itself as a UK company falls outside that net, which is precisely the loophole a UK shell company exploits. Extending liability to UK-based businesses removes the incentive to pose as one.

Cross-border platforms have grown fast in Britain. Our coverage of Shein’s UK revenue reaching £2.58bn showed how quickly Chinese-owned retail has scaled here. The new measure is aimed at a different group: business sellers trading on marketplaces through UK-registered companies.

The existing rules give the Treasury its precedent. Since January 2021, marketplaces have been liable for VAT on imported goods worth £135 or less, and on goods held in the UK when overseas businesses sell them. Business Matters reports that those rules, together with the removal of low value consignment relief, were estimated to have raised more than £8bn and to be raising £1.8bn a year. Osborne Clarke describes the 2021 reforms as “broadly successful”.

That record is why the Treasury believes the same lever, pointed at UK-based sellers, can raise serious money. It also explains why the platforms are relaxed: Amazon, eBay and others have already built the systems to calculate, collect and remit VAT for overseas sellers since 2021.

How much money would it raise, and where would it go?

Reported estimates vary. The Times put the potential yield at up to £1bn. Amazon, which welcomed the plan, estimated it could raise about £700m, and an Amazon spokesman said closing the loophole “will raise significant revenue for the exchequer”. The official costing, if the measure appears, will be in the Budget’s policy costings document and the Office for Budget Responsibility’s assessment on the day.

The use of the money is the politically important part. Reports say the Chancellor will tie the revenue to business rates cuts for high street shops. The government has committed that any revenue raised from the consultation would go towards improving business rates for pubs, restaurants, hotels and other high street businesses, according to Business Matters.

Prime Minister Andy Burnham committed during the Makerfield by-election campaign to raise the business rates threshold, removing about 140,000 small high street retailers from the tax, at an estimated cost of about £880m, according to Retail Insight Network. In July, the Press Association reported his plan to raise the threshold for 100% small business rates relief in England from a £12,000 rateable value to £18,000, and the upper limit for tapered relief from £15,000 to £21,000.

Business Matters reported in September that simply uprating the £12,000 threshold for inflation would take it to £17,096. It also noted that bills rose for many ratepayers in April after the revaluation, in some cases by up to 80%, with increases being phased in through transitional relief that caps smaller firms’ increases at 5% this year, 10% next year and 25% in 2028–29, plus inflation. Our report on the ACS Local Shop Report showing rates bills doubling set out what that meant for convenience stores.

The arithmetic is neat on paper. A £700m to £1bn yield from marketplace VAT would roughly match the reported £880m cost of the threshold pledge. Whether the Budget presents it that way, or folds the money into general receipts, is one of the main things to watch on Wednesday.

Is this the online sales tax the high street wanted?

Not quite. Many high street campaigners have argued for years that online retailers should pay a dedicated levy to balance the business rates paid by shops. The marketplace VAT change does something narrower: it makes existing tax harder to dodge. It does not add a new charge on online sales.

The pressure for something bigger has grown this week. Former Bank of England chief economist Andy Haldane has urged the Prime Minister and the Chancellor to rebalance the tax system towards physical retail to revive high streets, according to InternetRetailing, which cited his interview with the Guardian published on 22 October. Haldane argued the tax system favours online sellers and needs realigning to “level the playing field”, and also called for a review of business tax and measures to boost devolution.

The competing proposals

Three broader ideas are circulating alongside the marketplace VAT measure. The Real Rates Reform Alliance, a coalition chaired by Ros Morgan of the Heart of London Business Alliance and including UKHospitality, the Institute of Directors and the British Independent Retailers Association, has called for a 2% tax on all online sales, which it says would allow a 37% cut in business rates for bricks-and-mortar firms, according to the Press Association.

Separately, Andy Burnham had floated higher property taxes on large warehouses aimed at online giants, the so-called warehouse tax. Retail Insight Network reports that representatives of several of Britain’s largest businesses urged the Chancellor and Prime Minister not to introduce it, and that ministers are understood to have rejected the idea. The Retail Jobs Alliance, whose members include M&S, Tesco, Sainsbury’s, Primark, Morrisons and Kingfisher, wants all bricks-and-mortar retailers exempted from the highest business rates multiplier, currently 50.8p, according to TheIndustry.fashion.

Proposal	Who backs it	Who pays	Reported scale	Status before 28 October
Marketplace VAT collection	Treasury (reported), Amazon, eBay	Non-compliant business sellers	Up to £1bn (Times); about £700m (Amazon)	Consulted on; expected in Budget
2% online sales tax	Real Rates Reform Alliance	All online sales	Funds a 37% rates cut (alliance estimate)	Campaign proposal
Warehouse tax on large distribution sites	Floated by Andy Burnham	Large online and multichannel retailers	Not costed in reports	Reportedly rejected by ministers
Higher small business rates threshold	Prime Minister, FSB, Bira	Funded by the Exchequer	About £880m; 140,000 retailers removed	Pledged; detail expected
Exemption from the 50.8p top multiplier	Retail Jobs Alliance	Funded by the Exchequer	Not costed in reports	Lobbying ask

Smaller retailers’ own wish list is broader still. The British Independent Retailers Association set out its demands in September, covered in our piece on Bira’s six asks for the 28 October Budget.

The numbers explain the political temperature. According to InternetRetailing, online sales nearly tripled in the decade to 2024, growing 199%, and now account for around 30% of retail sales. Research by NHSA and Health Equity North, cited in the same report, found that high streets have lost from roughly 10% to more than 20% of footfall and physical retail presence over the past decade. The Press Association reported the alliance’s estimate that digital firms pay 9% of total business rates despite making up a fifth of economic activity, while retail and hospitality pay 34% of rates but make up about 9% of the economy.

What does it mean for Amazon, eBay, Temu and Vinted sellers?

For most compliant UK sellers, the change would be administrative rather than financial. Their customers would pay the same VAT-inclusive price; the difference is that the marketplace would deduct the VAT before paying out, rather than the seller paying it to HMRC later. But the practical consequences are real, and they fall unevenly.

Sellers that already account for VAT would lose a working-capital benefit. Today, a VAT-registered seller collects VAT on each sale and pays it over at the end of its VAT quarter, typically a month and a week after the quarter ends. In the meantime, that money sits in the business’s bank account. Under marketplace collection, the platform would hold it instead. Osborne Clarke flags that sellers would also need to change how they account for VAT, because their sales to the platform would become deemed zero-rated supplies.

The table below gives an illustrative example. It uses round numbers and the 20% standard rate to show the mechanics; it is not drawn from any official costing.

Illustrative seller: £150,000 a year VAT-inclusive sales on one platform	Today	Under marketplace collection
VAT included in sales (one-sixth of the gross at 20%)	£25,000	£25,000
Who collects it from the buyer	Seller, via platform payout	Marketplace, deducted before payout
Who pays HMRC	Seller, on its quarterly return	Marketplace, on its own return
Average VAT held by seller between returns (roughly one quarter plus one month)	About £8,000 to £9,000	£0
Input VAT on stock and costs	Reclaimed on seller’s return	Still reclaimed; seller may move into regular repayment
Total VAT paid over the year	£25,000 less input VAT	Unchanged in total

The last line is the important one: the tax bill does not change. What changes is timing, and for a small seller running on thin margins, losing a buffer of several thousand pounds can matter. Sellers whose input VAT on stock is large relative to their output VAT could find themselves waiting for regular VAT repayments from HMRC instead.

Osborne Clarke notes that non-VAT-registered businesses would be hit hardest if they were brought in, because they cannot recover input VAT. That is why the threshold design is so sensitive. With the lead option of £90,000 per platform, a business below the registration threshold should, in principle, stay outside marketplace collection. A lower threshold, which ministers have reportedly rejected, would have dragged small unregistered traders into charging VAT for the first time.

Sellers trading on several marketplaces will also need to watch how the per-platform threshold works, and how platforms check it. Marketplaces would need enhanced due diligence to establish whether a sale is made in the course of business, the seller’s turnover for the threshold, and whether goods are new or second-hand. Expect more verification requests in seller dashboards if the measure goes ahead.

How the main platforms line up:

• Amazon: has welcomed the plan and already runs VAT collection for overseas sellers. The bulk of its UK third-party sellers above £90,000 are likely to be in scope.
• eBay: supports action on overseas sellers but wants protection for UK small businesses under £90,000. Its business sellers of used goods are most exposed to the margin scheme question.
• Temu: named in reports as one of the platforms that would collect. Its marketplace model with third-party sellers would bring it into the new duty for UK-based sellers.
• Vinted and other resale apps: private sellers are outside the rules, so ordinary users clearing out wardrobes should see no change. Business sellers on such apps could be caught if they cross the threshold.
• Food delivery apps: restaurants and takeaways are in the consultation’s scope, which would bring delivery apps into VAT collection for their larger restaurant and takeaway partners.

Will online shoppers pay more?

For most purchases, no. If a seller is already charging and paying VAT correctly, the price a shopper pays should not change, because VAT is already included in the price. The marketplace simply becomes the collector.

The price effect falls on goods sold by sellers who have not been paying VAT. Those sellers have, in effect, enjoyed a price advantage of up to the full 20% VAT over compliant competitors. If the platform collects VAT at source, that advantage disappears. Some of those sellers will absorb the cost, some will raise prices, and some will leave the UK market. Shoppers who have been buying from the cheapest listings on marketplaces could see some of those listings rise in price or vanish.

For honest UK sellers, and for high street shops competing on price with marketplace listings, that is the point of the policy. A retailer paying VAT, business rates and employer National Insurance has been competing against sellers paying none of the first. British Retail Consortium analysis, cited by TheIndustry.fashion, found that retail had an effective tax rate of 71.5% in 2025/26, the highest of 11 sectors examined, with retailers paying £39.1bn in business taxes. M&S chief executive Stuart Machin has said the sector already pays a disproportionate share of business rates, according to Retail Insight Network.

Shoppers buying low-value goods shipped directly from abroad are already covered by the existing £135 import rules, which our earlier report on Temu’s UK sales and the end of £135 duty relief explored in detail. The Budget measure is aimed at a different leak: goods already sitting in UK warehouses and sold through UK-registered companies.

What would it mean for high street shops?

If the reported package lands as described, the high street benefits twice. First, competing marketplace sellers that have been undercutting shops by avoiding VAT would lose that advantage. Second, the revenue would, according to reports, fund business rates cuts aimed at small shops.

The pressures on small retailers are well documented. TheIndustry.fashion reports ONS figures published in September showing UK retail jobs fell to a record-low four-quarter average of 2.78 million in the year to the second quarter of 2026, down 62,000 year on year. In September, the Prime Minister also announced a £210m package for high streets, including £125m for restoring dilapidated buildings and £65m to rescue businesses and buildings at risk of closure, according to InternetRetailing.

VAT itself is a burden many small shops raise. Our report on the Enterprise Nation survey finding three in ten small shops weighed closing found VAT topping the cost list. The marketplace measure does not cut VAT for shops; it ensures the competitors they face online pay it. Small business groups will also be looking at whether the Budget touches the £90,000 VAT registration threshold itself.

Even the upper estimate of £1bn is small next to the £34bn a year that business rates raise, a figure cited by the Real Rates Reform Alliance. A threshold rise would take the smallest shops out of rates altogether, but larger high street chains paying the 50.8p top multiplier would gain little. That is why the Retail Jobs Alliance and the alliance behind the 2% online sales tax are pushing for wider reform, and why Haldane’s intervention this week framed the issue as a structural imbalance rather than a compliance gap.

The wider Budget backdrop for retailers

The marketplace measure sits within a tight fiscal backdrop. Business Matters reports that the Institute for Fiscal Studies warned the Budget risked being a “work of fiction” unless the Chancellor set out plans to cover £35bn of spending pressures. The International Monetary Fund raised its UK growth forecast for this year to 1.3% and urged the Chancellor to “stay the course” on repairing the public finances.

Retail measures reported or pledged ahead of the Budget include:

• A higher small business rates relief threshold, with a possible taper extended to a rateable value of about £20,000 to £21,000.
• Possible changes to transitional relief, raising or extending the cap on bill increases following the April revaluation, according to Business Matters.
• A 20% business rates cut for pubs, clubs and live music venues from April 2027, which Andy Burnham has promised, according to Business Matters.
• An extension of the high value council tax surcharge to homes worth over £1.5m, which Business Matters reports the Chancellor is looking at.

Any of these could change before Wednesday, and the Treasury has declined to comment on what is reported. Retailers and sellers should treat all pre-Budget details as provisional until the Chancellor sits down and the documents are published on gov.uk.

What should sellers and retailers do before and after the Budget?

Nothing changes on 28 October itself. Even if the Chancellor confirms the measure, HMRC has said a technical consultation on draft legislation would follow, and the start date is likely to be some way off. But sellers can prepare now.

1. Know your per-platform turnover. Pull 12-month sales figures from each marketplace account. If you are near £90,000 on any one platform, model both sides of the line.
2. Model the cash-flow change. Estimate how much VAT you typically hold between collecting it and paying HMRC. That is the working capital you would lose.
3. Check your second-hand stock. If you use the margin scheme, watch closely for how the Budget documents treat second-hand goods. The difference between VAT on margin and VAT on full price is large.
4. Talk to your accountant about accounting changes. Sales to a platform would become deemed zero-rated supplies, which changes your VAT return and may move you into regular repayment.
5. Read the Budget documents, not the headlines. The detail sits in the Overview of Tax Legislation and Rates and the policy costings, published on gov.uk on Budget day.

Five details will decide how much the measure matters: whether the threshold stays at £90,000 per platform; the start date; the treatment of second-hand goods; whether food delivery platforms are included; and whether the revenue is formally tied to business rates relief. The Office for Budget Responsibility’s costing will also show whether the Treasury agrees with the £700m to £1bn range in circulation.

Frequently asked questions

Is the Budget introducing a new online sales tax?

No, based on current reports. The expected measure changes who collects VAT, not the rate. Marketplaces would collect the standard 20% VAT at source for larger business sellers. A separate 2% online sales tax has been proposed by the Real Rates Reform Alliance, but there is no report that the Budget will adopt it.

When is the Budget?

Chancellor John Healey delivers his first Budget on Wednesday 28 October 2026. The measures and costings will be published on gov.uk on the day.

Will I pay VAT on things I sell on Vinted or eBay?

Not if you are a private individual selling your own unwanted items. The consultation states that non-business sellers are outside the proposed rules. The change targets businesses selling through marketplaces.

What is the £90,000 threshold?

It is the lead option in the HMRC consultation: a marketplace would only collect VAT for a UK business whose annual sales on that specific platform exceed £90,000, the current VAT registration threshold. It is measured per platform, not across all of a seller’s channels.

Will prices on Amazon and eBay go up?

For most products sold by compliant sellers, prices should not change, because VAT is already included. Listings from sellers who have not been paying VAT could rise or disappear once the platform collects the tax at source.

How much money could it raise?

The Times reported up to £1bn. Amazon estimated about £700m. The official estimate, if the measure is announced, will appear in the Budget policy costings.

Does this affect sellers based outside the UK?

Overseas sellers are already covered: since 2021, marketplaces have collected VAT on their sales of goods held in the UK and on imports worth £135 or less. The new measure extends the same approach to UK-based businesses, which closes the route of setting up UK shell companies.

When would the change take effect?

No start date has been confirmed. HMRC has said that if the government proceeds, it will publish a technical consultation on draft legislation first, so implementation is likely to be some months after the Budget.

Will the money really go to the high street?

The government has committed that revenue from the consultation would go towards improving business rates for pubs, restaurants, hotels and other high street businesses, according to Business Matters. Whether the Budget formally ties the two together is one of the key details to watch.