Under current UK VAT rules, if you dropship goods to UK customers in consignments worth £135 or less, you must charge UK VAT (currently 20 percent) at the point of sale and register with HMRC, while for consignments over £135, import VAT and customs duty are collected at the border instead.
Dropshipping into the UK stopped being simple after Brexit. The UK now runs its own VAT rules for imported goods, and getting them wrong means HMRC penalties, parcels held at the border and surprise charges landing on your customers. The stakes keep climbing, too. Low-value imports into the UK reached £5.9 billion in the year to April 2025, up 53 percent, which is exactly why the government is now tightening the rules further (HMRC, 2025).
This guide explains the current UK VAT rules for dropshipping in plain terms: the all-important £135 threshold, who charges the VAT, when you need to register and the change arriving in 2028 that every seller shipping to the UK should be watching. It is general information rather than tax advice, so confirm your own position with HMRC or a qualified adviser before acting.
Key Takeaways for UK Dropshipping VAT
- The UK standard VAT rate is 20 percent, and it applies to most goods sold to UK consumers.
- The £135 consignment value is the line that decides everything: at or below it, the seller or marketplace charges UK VAT at checkout, and above it, import VAT and customs duty are collected at the border.
- Overseas sellers have no registration threshold and must register for UK VAT as soon as they sell qualifying goods to UK customers, while UK-based businesses register once taxable turnover passes £90,000.
- If you sell through a marketplace like Amazon or eBay, the marketplace usually collects and accounts for the VAT on consignments of £135 or less, not you.
- A major change is coming: the UK is removing the £135 customs duty relief from October 2028, which adds duty to low-value imports, though import VAT itself stays the same (GOV.UK, 2026).
The UK VAT Rate
The UK has three VAT rates. The standard rate is 20 percent and covers most goods a dropshipping store sells. A reduced rate of 5 percent applies to a small set of items such as home energy and children’s car seats, and a zero rate of 0 percent applies to things like most food and children’s clothing. For the vast majority of dropshipped products, the rate you charge is 20 percent. You can check any product’s rate on the GOV.UK VAT rates page.
The £135 Rule: The Heart of UK Dropshipping VAT
Almost every UK VAT question for dropshippers comes down to one number: the £135 consignment value. It decides who pays the VAT and when.
UK VAT, Import VAT and Customs Duty Compared
| Charge | What It Is | When It Applies |
|---|---|---|
| Supply VAT | UK VAT (20%) charged at the point of sale | Consignments of £135 or less sold to UK consumers |
| Import VAT | VAT collected when goods enter the UK | Consignments over £135, paid at the border |
| Customs duty | A tariff on the imported goods | Over £135 now, and £135 or less from October 2028 |
For consignments of £135 or less sold to UK consumers, the goods are treated as supplied in the UK, so the seller charges UK VAT at the point of sale rather than paying import VAT at the border. In practice, that means:
- Selling directly (your own store): you register for UK VAT, charge 20 percent at checkout and remit it to HMRC through a UK VAT return.
- Selling through an online marketplace: the marketplace, such as Amazon, eBay or Etsy, becomes responsible for collecting and accounting for the VAT, not you.
- Selling to a VAT-registered UK business: if the customer gives you their UK VAT number, you do not charge VAT and they account for it themselves.
For consignments over £135, the old rules apply. Import VAT and any customs duty are collected at the border, usually paid by the customer or the courier on their behalf. The £135 figure is the intrinsic value of the whole consignment, meaning the price of the goods without transport or insurance unless those are baked into the price. The full detail is set out in the GOV.UK guidance on overseas goods sold to UK customers.
One thing that is gone for good: the old Low Value Consignment Relief that exempted goods of £15 or less has been removed, so there is no VAT-free floor anymore.
Do You Need to Register for UK VAT?
This is where overseas and UK-based sellers differ.
If your business is based outside the UK, there is no threshold. You must register for UK VAT as soon as you start selling qualifying goods to UK customers. Most China-based dropshippers fall into this group.
If your business is based in the UK, you register once your VAT taxable turnover passes £90,000 over a rolling 12-month period, or when you expect to pass it within the next 30 days. Registration is free and done through the GOV.UK VAT registration service.
How VAT Works When You Dropship From China to the UK
Put the pieces together and the most common scenario, shipping products directly from China to a UK customer, looks like this. If the consignment is £135 or less and you sell through your own store, you register for UK VAT, add 20 percent to your pricing, collect it at checkout and file it with HMRC. If you sell that same item through a marketplace, the marketplace handles the VAT for you. If the consignment is worth more than £135, it clears customs the traditional way, with import VAT and duty due at the border.
There is a simpler path, though. When you stock proven products in a local warehouse inside the UK or the EU rather than shipping every order individually from China, the sale becomes a domestic one, which removes the per-parcel border friction entirely and gets orders to customers faster. That is where a hybrid fulfillment setup changes the math for sellers scaling in the UK market.
What Is Changing in 2028
The rules above are stable right now, but one shift is confirmed and worth planning for. At the Autumn Budget 2025, the UK announced it would remove the £135 customs duty relief on low-value imports, and in June 2026 it brought the date forward to October 2028, with draft legislation published in July 2026. You can read the details on the GOV.UK low value imports reform page.
Low-Value Imports (£135 or Less): Now vs From October 2028
| Charge | Now (through 2028) | From October 2028 |
|---|---|---|
| Import VAT | Applies, charged at the point of sale | Applies, unchanged |
| Customs duty | Exempt under the £135 relief | Charged, relief removed |
| Net effect for sellers | VAT only on low-value parcels | VAT plus customs duty on low-value parcels |
The key point for dropshippers is what this does and does not change. It removes the customs duty exemption on consignments of £135 or less, so from October 2028 those goods can attract customs duty where they did not before. It does not change the VAT position, since import VAT on low-value goods already applies and will continue to. In short, the VAT rules in this guide hold through 2028, and the thing to watch is added duty on cheap imports after that, which is one more reason to consider holding stock locally.
How to Register and File
Registration is straightforward. You apply online through GOV.UK, receive a VAT number and then charge and account for VAT from your effective registration date. VAT returns are normally filed every quarter through Making Tax Digital software, and the deadline is one month and seven days after the end of each VAT period. Smaller sellers may be able to use the VAT Flat Rate Scheme if turnover is £150,000 or less, though the flat percentage depends on your sector, so check the current rate before opting in.
Simplify UK Fulfillment With Dropship China Pro
UK VAT and the coming duty changes are easier to manage when your goods are not crossing the border one parcel at a time. Dropship China Pro combines vetted product sourcing, quality control and hybrid fulfillment from China and local warehouses, so you can stock proven products closer to your UK customers, ship domestically and keep delivery fast. Connect through our Shopify app to build a UK-ready supply chain while you handle the VAT side with confidence.
FAQs About UK Dropshipping VAT
What is the VAT rate in the UK?
The UK standard VAT rate is 20 percent, which applies to most goods sold to consumers. There is also a 5 percent reduced rate for a small set of items and a 0 percent zero rate for things like most food and children’s clothing, but standard-rated dropshipping products are charged at 20 percent.
Do I need to register for VAT to dropship in the UK?
If your business is based outside the UK, yes, you must register as soon as you sell qualifying goods to UK customers, with no minimum threshold. If your business is UK-based, you register once your VAT taxable turnover passes £90,000 in a rolling 12-month period.
How does VAT work when dropshipping from China to the UK?
For consignments of £135 or less sold through your own store, you charge 20 percent UK VAT at checkout and remit it to HMRC. If you sell through a marketplace, the marketplace collects the VAT instead. For consignments over £135, import VAT and customs duty are collected at the border rather than at the point of sale.
Do I charge VAT if I sell through Amazon or eBay in the UK?
For goods in consignments of £135 or less, the online marketplace is usually responsible for collecting and accounting for the UK VAT, not you. You still need to understand your obligations, but the marketplace handles the VAT collection on those qualifying sales.
Is the UK removing the £135 VAT rule?
No. The UK is removing the customs duty relief on low-value imports from October 2028, which adds duty to consignments of £135 or less. The VAT treatment described here is not changing, so you still charge or account for UK VAT on those goods as normal.
Conclusion
UK VAT for dropshipping looks complicated, but it turns on one number. At or below £135, you or your marketplace charge UK VAT at checkout. Above £135, the border handles it. Overseas sellers register from the first sale, and the standard rate is 20 percent. The one change on the horizon is customs duty returning to low-value imports in 2028, which makes holding stock locally look smarter than ever. Get registered, charge correctly and keep an eye on the 2028 shift, and UK VAT becomes a process rather than a problem.
This article is general information and not tax or legal advice. Rules change and individual circumstances vary, so confirm your position with HMRC or a qualified tax adviser.
References
- HMRC. (2025). Reforming the customs treatment of low value imports into the UK. GOV.UK. gov.uk
- GOV.UK. (2026). VAT and overseas goods sold directly to customers in the UK. gov.uk
- GOV.UK. (2026). VAT rates on different goods and services. gov.uk/vat-rates
Hi, I’m Yavuz. I help e-commerce businesses grow through strategic content. Here, I share insights on fulfillment solutions, 3PL partnerships, and digital marketing strategies based on real data and industry trends.
