Do you pay VAT on eBay fees?

Many e-commerce entrepreneurs use eBay as a way to sell their products to mass audiences, in all corners of the globe. The myriad of fees associated with eBay can be challenging enough for a business owner, without having to worry about paying VAT too.

But do you pay VAT on eBay fees? We have created a helpful guide outlining everything that you need to know.

What is VAT?

VAT is a consumption tax that’s charged at 20% on the vast majority of services and goods in the UK, with some items charged at a reduced rate of either 5% or zero VAT.

All businesses that exceed £85,000 VAT taxable turnover within a 12-month period, must register for VAT with HMRC by law. The main benefit of becoming VAT registered is that you can reclaim any VAT that you pay for business related goods and services, including VAT that you pay on your eBay business seller fees.

Business eBay account

If you are purchasing goods with the intent to resell, then you must register for a business eBay account. During the sign-up process, you will be prompted to enter your business’ VAT number if you are registered, even if you are selling goods that are VAT exempt.

If your e-commerce business isn’t VAT registered when you create your eBay account but you later register for VAT, you must ensure you update your business profile once

Do you pay VAT on eBay fees?

Yes. As a UK-based e-commerce business on eBay, you must pay VAT on eBay fees of 20% if you are VAT registered. The VAT can be added to your VAT claim when you complete your quarterly return.

If you’re using eBay Managed Payments then the following fees apply:

Listing fees – VAT rate: 20%

Final value fees – VAT rate: 20%

Fees for optional listing upgrades – VAT rate: 20%

Fees for Basic eBay Shops – VAT rate: 20%

Dispute fee – VAT rate: 20%

International fee – VAT rate: 20%

Seller currency conversion charge – VAT rate: 20%

Do you pay VAT on eBay sales?

Yes. As you are aware, eBay is most prominently a place for B2C and C2C transactions. As such, most customers will not be VAT registered, which means you must include VAT in all your pricing, as you will not be able to add it on afterwards and will still have to pay the amount due.

The amount of VAT charged is in line with standard VAT legislation, with most e-commerce products falling under the 20% bracket. Sports good are exempt, however, and children’s clothes (another e-commerce favourite) are listed at 0%. If you are unsure which tax bracket your e-commerce products fall under, please read this guidance and/or speak to a qualified e-commerce accountant.

Income Tax on eBay Sales

By law, eBay sellers must also declare and pay income tax on income earned from eBay sales. If this is done outside of the scope of your business, for example, because you were testing out a business idea but hadn’t formally created a business, you will need to adjust for this when you submit your tax return. If your sales were completed as part of the activities of your e-commerce business, you will include all relevant sales when you submit your tax return if you are a sole trader.

Which eBay fees are zero rated?

The only fees that are zero rated are postage services such as those from Packlink and Royal Mail which both have a VAT rate of 0%.

 Complete Guide to VAT

If you are struggling with a VAT issue or are unsure on the VAT position on any other fees your e-commerce business incurs, check out our Complete Guide to VAT

Setting up VAT on eBay

If you’re a VAT registered business selling your products on eBay, you will need to make sure that you add your VAT number to your eBay account.

If you are unsure about the VAT rate for your e-commerce goods, you should always seek help from a qualified eCommerce accountant.

 What are the new HMRC rules on eBay?

In January 2024, HMRC announced plans to implement a ‘side hustle tax.’ But  what does this mean?

 The new side hustle tax requires platforms such as  eBay to report detailed seller income and transaction data, in a bid to identify and prevent potential tax evasion, which is becoming an increasing issue in the UK. For example, eBay sellers earning  over £1,000 per year will now need to declare that income by registering as self-employed and filing a tax return.

Martin Lewis has been quoted on his website stating: “The platforms will have to start automatically sharing this information with HMRC by 31 January 2025 – the first lot of data-sharing will cover the current 2023/24 tax year, which is why it’s worth getting on top of it now.

“Previously, HMRC was able to access sellers’ information from UK-based online platforms when required. The new, automatic data-sharing process, which also covers overseas platforms, is being implemented after the UK signed up to rules by the international Organisation for Economic Co-operation and Development, which aim to tackle tax evasion globally.

However, the new tax rules only apply to those that are actively “trading” on ebay rather than ebay users that utilise the platform to sell their old belongings. 

Get in touch!

Here at Unicorn Accounting, our team of specialist e-commerce accountants is happy to chat about all of your eCommerce accounting needs. So, what are you waiting for? Let’s talk and maximise the growth of your e-commerce store.