After Brexit, VAT on low value imported goods into the UK is charged at the point of sale rather than at the border in many cases. This change affects how e-commerce sellers and buyers handle tax on parcels valued below certain thresholds.
Understanding the rules helps UK founders avoid unexpected costs, correctly account for tax and stay compliant when selling or sourcing goods from overseas suppliers. Thresholds, schemes and responsibilities can change so always verify the latest details on GOV.UK.
The end of the de minimis relief for low value consignments
Before Brexit, goods valued under a specific amount could enter the UK without VAT being charged at the border. This relief no longer applies to imports from outside the UK. Instead, VAT is generally due on the full value of the goods including shipping and insurance.
The current de minimis level means that for goods below this value, different collection methods apply. Check the exact figure on GOV.UK as it can change. For UK early-stage founders importing stock, this shift often increases the landed cost of products and requires tighter cash-flow planning.
What the £135 de minimis means in practice
Goods valued below the de minimis threshold can be imported without the need for a full customs declaration in many cases. However, VAT is still usually payable. The threshold determines whether simplified procedures can be used and influences who collects the tax.
When importing, calculate the value of the goods plus shipping costs. If the total stays under the threshold, the parcel may clear more quickly but VAT will still apply. For e-commerce sellers testing small batches from overseas suppliers, this means budgeting for VAT on every low-value shipment. Always confirm the current threshold on GOV.UK before ordering stock.
The Import One Stop Shop (IOSS) scheme explained
The IOSS scheme allows overseas sellers and platforms to collect VAT at the point of sale for low value goods destined for the UK and other countries. Once registered, the seller charges VAT to the customer upfront and remits it to the relevant tax authority.
This removes the need for the buyer to pay VAT on delivery. For UK founders running online stores that source directly from non-UK suppliers, encouraging suppliers to use IOSS can simplify the customer experience. Registration is done through the relevant tax portal; requirements and processes change so review the latest HMRC guidance before applying.
Using IOSS can improve conversion rates because customers see the final price including tax at checkout rather than facing unexpected charges later.
Platform collection responsibilities for marketplaces
Many online marketplaces and platforms now have a legal responsibility to collect VAT on low value imported goods sold through their sites. This applies even if the actual seller is based overseas.
When you sell via such a platform, check their current terms to see whether they automatically handle VAT collection for imports. Platforms often deduct and remit the tax, which reduces the administrative burden for small UK sellers but can affect your pricing strategy. Review each platform’s policy regularly because their processes and fees can change.
If you operate your own website, you may need to register for IOSS yourself or work with suppliers who are already registered. Understanding who is responsible prevents double taxation or compliance gaps.
Practical steps for UK e-commerce sellers
1. Determine the origin of your stock and whether it counts as an import from outside the UK. 2. Calculate the combined value of goods, shipping and insurance for each typical order to see which tax collection route applies. 3. Decide whether to register for IOSS or rely on your supplier or platform to handle VAT. 4. Update your pricing and checkout pages to reflect the correct VAT-inclusive amounts. 5. Keep clear records of every import and sale for HMRC audits.
Use accounting software that can track import VAT separately from domestic sales. When cash flow is tight, factor the VAT cost into your margins early. Test small orders first to see how the process works in practice before scaling.
Bookkeeping and cash flow considerations
Import VAT paid at the point of sale or on delivery must be recorded accurately. It is usually recoverable if you are VAT registered, but timing differences can affect your cash position. Reconcile import documents with your bank statements each month.
Build a buffer for VAT on imports when forecasting cash flow. Review your margins after including the full landed cost. If you sell both UK-made and imported goods, keep separate categories in your bookkeeping so you can report them correctly on your VAT return. Regular checks with HMRC guidance help you stay compliant as rules evolve.
Where to get support as an early-stage founder
Loomworks in West Yorkshire offers selected founders free desks, a registered address and mentoring to help navigate these challenges without fees or equity taken. Local resources such as HMRC webinars and GOV.UK tools also provide step-by-step explanations. Join relevant founder communities to share practical experiences of managing import VAT.
Keep up to date by checking official sources regularly rather than relying on social media commentary. Accurate records and conservative cash-flow planning reduce the risk of penalties or surprises.
Frequently asked questions
Do I have to register for IOSS if I sell on a major marketplace?
Not always. Many large platforms handle VAT collection on low value imported goods themselves under their own responsibilities. Check the platform’s current terms carefully. If they do not collect the tax, you or your supplier may need to register for IOSS. The exact requirements change so verify on GOV.UK.
What records do I need to keep for imported low value goods?
Keep commercial invoices, proof of shipping costs, customs declarations if any, and evidence of VAT charged or paid. Record the date, value, supplier and destination for each import. These records support your VAT return and any HMRC enquiries. Store them securely for the required period.
How does the de minimis threshold affect my customer experience?
Below the threshold, simplified procedures often mean faster delivery. Using IOSS or platform collection means the customer pays VAT at checkout and avoids surprise charges on delivery. This transparency can improve trust and reduce refund requests. Always confirm the current threshold on GOV.UK.
Can I reclaim VAT paid on imported goods?
If you are registered for VAT in the UK, you can usually reclaim import VAT as input tax on your return, provided the goods are for business use. Timing of the reclaim and cash flow impact must be considered. Review the latest HMRC rules as eligibility criteria can change.
What happens if my parcel value exceeds the de minimis?
Above the threshold a full customs declaration is usually required. VAT and possibly duty become due. The carrier or courier may collect these on behalf of HMRC. Factor the additional costs into your pricing. Check current thresholds and duty rates on GOV.UK before placing larger orders.
Related reading: What records must side-hustlers keep for tax purposes?, How is corporation tax handled in startup joint ventures?, How should UK startups price products for international customers?. Browse all tax & finance guides or apply to Loomworks.