Trade in e-commerce between the UK and the rest of the world has been subject to completely new VAT and customs duty rules since 2021. The £135 threshold changed the rules for collecting tax on small parcels, and the obligations for e-commerce sellers outside the UK have increased significantly. In this article, we explain how these regulations work, what online shops must do, and what consequences non-compliance with the new rules brings.

The £135 threshold — how does the parcel value threshold work?

Since 1 January 2021, the UK has had a new system for VAT taxation of parcels imported from abroad. According to HMRC guidelines on VAT for goods sold from overseas to customers in the UK, the £135 threshold refers to the intrinsic value of the goods — excluding transport and insurance costs:

• Parcels up to £135 — no import customs duty; VAT (20%) must be collected at the point of sale by the seller or platform;
• Parcels above £135 — full customs clearance with import customs duty and VAT levied upon import into the UK.

This rule means that e-commerce sellers selling goods up to £135 must register for VAT in the UK and account for this tax regardless of where they operate. This applies to businesses from the EU, Asia, the USA and every other country in the world.

Obligations for foreign e-commerce sellers in the UK

A foreign online shop selling goods to customers in the UK is required to:

1. Register for VAT in the UK — there is no turnover threshold for overseas sellers selling goods up to £135 directly to UK consumers;
2. Charge VAT at 20% on each transaction and report it in the VAT return filed with HMRC;
3. Issue VAT invoices in accordance with HMRC requirements;
4. File VAT returns with HMRC (usually quarterly).

Polish e-commerce companies selling to the UK market can benefit from specialist support — customs clearance services for e-commerce ensure compliance with both customs regulations and UK VAT requirements.

The role of marketplaces — the deemed supplier rule

E-commerce platforms (marketplaces) such as Amazon, eBay, Etsy and ASOS Marketplace are subject to special tax liability rules. When foreign sellers sell goods up to £135 through these platforms, the marketplace becomes an “intermediary supplier” (deemed supplier) responsible for charging and remitting UK VAT to HMRC. The seller does not then need to register separately for VAT for these transactions, but must provide the marketplace with information about the price of the goods.

Customs clearance procedure for parcels above £135

Shipments valued above £135 require full import clearance in the UK. This involves the need to lodge a customs declaration with the commodity code of the goods, their value, country of origin and sender/recipient details. Import customs duty is calculated according to the UK Global Tariff, and VAT (20%) is collected upon clearance or accounted for by the importer in a VAT return (Postponed VAT Accounting).

When importing courier parcels, the operator (e.g. DHL, FedEx, UPS) often acts as a customs agent and collects customs duties and VAT from the recipient upon parcel delivery. It is advisable to configure customs clearances for online shops in advance so that customs costs are incorporated into the product price visible to the customer — this will avoid unpleasant surprises upon receipt.

Changes to regulations and updates 2025–2026

HMRC regularly updates VAT rules for e-commerce. The UK Government has announced plans to review the £135 system and potentially adapt it to new e-commerce market realities, including combating abuse involving artificially undervaluing parcels. Current information is always available on the GOV.UK — VAT on goods from overseas page and in HMRC communications.

Penalties for non-compliance with UK VAT regulations in e-commerce

HMRC actively verifies foreign online shops selling to the UK without VAT registration. Penalties for non-compliance include: financial penalties for late registration, outstanding VAT payments with interest, blocking of sales platforms (HMRC can instruct a marketplace to block a seller), and confiscation of goods imported without proper customs clearance.

Practical tips for Polish e-commerce sellers

Polish shops selling to the UK should: register for UK VAT through the GOV.UK website (available online), adapt their sales systems to automatically calculate UK VAT at 20%, update product prices to include customs costs for shipments above £135, and regularly check for changes in regulations on the HMRC website.

Frequently Asked Questions (FAQ)

What does the £135 threshold mean when importing goods into the UK?

For parcels up to £135, no import customs duty is charged, but VAT (20%) must be collected at the point of sale by the seller or marketplace. For parcels above £135, full import customs duty and VAT are charged upon customs clearance.

Who must register for VAT in the UK as an e-commerce shop?

Foreign shops selling goods up to £135 directly to customers in the UK must register for UK VAT. This obligation applies to sellers from all over the world without a minimum turnover threshold.

What obligations do marketplaces have when selling to the UK?

Marketplaces are responsible for collecting UK VAT on the sale of goods up to £135 by foreign sellers on their platforms — the deemed supplier rule. The marketplace becomes responsible for VAT instead of the seller.

Need help with UK customs clearance? Contact Plutos Team — our licensed customs brokers handle all aspects of UK import and export declarations, BTOM compliance, and T1 transit documents.