The VAT Threshold Trap: It Is Your Gross Sales, Not the Money That Lands in Your Bank

Most marketplace sellers receive a bank payout from Amazon, eBay or Etsy after the platform has deducted its fees. Many sellers then use that deposit figure to estimate whether they are near the VAT registration threshold. That is the mistake that causes late registration, back-dated VAT liability, and sometimes surcharges.

The £90,000 VAT registration threshold is applied to your gross taxable sales: the full price the buyer pays before the platform takes its cut. Your payout is a different (smaller) number and it is not your turnover.

The short answer: the £90,000 test is on gross sales, not your bank deposit

The VAT registration threshold applies to your taxable turnover for any rolling 12-month period. For a marketplace seller, taxable turnover is the full value of goods sold to buyers, including the portion that the platform retains as fees. There is also a second, less-known test: if you expect your taxable turnover to exceed £90,000 in the next 30 days alone, you must register immediately.

Neither test uses your net payout. Both use gross sales values.

Why your payout is not your turnover

When a buyer pays £100 for a product on a marketplace, the platform typically deducts a selling fee (often 8 to 15 percent), a fulfilment fee if the platform handles shipping, and any refund provisions or advertising credits. You might receive £75 or £80. Your taxable turnover for VAT purposes is £100, not £75.

The table below shows the components the platform strips out before paying you, and which column the VAT threshold uses.

A seller with £82,000 in annual bank deposits could have £100,000 of taxable turnover and be already past the registration threshold without realising it.

The two registration trigger tests

There are two separate tests under the VAT registration rules. Both require you to monitor gross sales, not payouts.

The 30-day forward-look catches sellers who win a large wholesale order, launch on a new platform with strong early sales, or run a promotion that drives a sudden volume spike. It is not an annual projection test; it looks only at the next 30 days.

The overseas-fees twist: reverse-charge value also counts toward £90,000

There is a second, less well-known route to triggering the threshold. When you buy marketplace services, advertising, or software from a supplier established outside the UK (Amazon's advertising platform, Google Ads, Meta Ads, Shopify's fee infrastructure), you are required to self-account for UK VAT under the reverse charge. The authority for this is HMRC Notice 741A.

Crucially, the value of those reverse-charge services counts toward your £90,000 VAT registration threshold. This is the standard surprise trigger for a seller whose product sales are below £90,000 but who spends heavily on overseas ad platforms.

A seller with £75,000 of gross product sales and £20,000 of overseas ad spend may already be over the threshold on a combined basis, even before their product sales alone would have triggered registration.

For more on how marketplace fees are treated under the reverse charge, see our guide to VAT on marketplace fees.

Worked example: under threshold on payouts, over it on gross plus reverse-charge fees

Consider a UK-established seller on Amazon and eBay in the 12 months to 30 June 2026.

• Amazon gross sales (buyer-paid prices): £61,000
• eBay gross sales (buyer-paid prices): £14,000
• Overseas ad spend (Amazon Ads, Google Ads): £18,000
• Total bank deposits received after all marketplace deductions: approximately £56,000

The payout figure of £56,000 looks safely below the threshold. But the VAT calculation runs differently.

• Gross taxable sales: £61,000 + £14,000 = £75,000
• Reverse-charge services: £18,000
• Total taxable turnover for threshold purposes: £93,000

This seller passed the £90,000 threshold at some point during the year and should have registered once the rolling 12-month total crossed £90,000. Late registration means HMRC can assess for VAT on sales from the point registration should have applied, with interest.

A note on establishment status and marketplace-collected VAT

If you are a UK-established seller, you are responsible for your own VAT on your marketplace sales. The analysis above applies to you in full.

The position is different for sellers who are not established in the UK. Where an overseas-established seller sells through an online marketplace to UK customers, the marketplace becomes the deemed supplier and accounts for the UK VAT instead. That mechanism does not apply to UK-established sellers. For an explanation of how establishment status is determined and why it is the most consequential VAT fact for a marketplace seller, see our deemed supplier and establishment guide.

How to actually track your gross rolling turnover

The key discipline is to record gross sales values, not bank deposits, in your bookkeeping records. Most marketplace seller dashboards make gross sales data available in their reports section. Your monthly or quarterly figure from the report, not your bank statement, is the number to accumulate for threshold monitoring.

Use the VAT threshold tracker to enter your monthly gross sales and see your rolling 12-month total against the £90,000 limit. It also shows how many months remain before you hit the threshold at your current run-rate, so you can plan a voluntary early registration if that suits your business.

For a fuller service covering registration, returns, and ongoing compliance, see ecommerce VAT compliance.

What to do once you cross the threshold: the generic mechanics

The mechanics of VAT registration itself (completing VAT1, choosing an effective date, understanding your first return period) are covered in detail by our generalist partners at Holloway Davies: VAT threshold guide. We do not re-explain those mechanics here because they apply to any VAT-registered business and are not specific to marketplace sellers.

What is specific to marketplace sellers is making sure that the gross figures (not the payout figures) feed your VAT returns from day one, and that your settlement reconciliation correctly strips out the fees rather than treating the payout as the supply value. Our settlement and payout reconciliation service covers exactly that.

Common failure modes

• Tracking deposits, not gross sales. The most common error. Your bookkeeping software should be pulling gross sales from marketplace reports, not your bank feed, for threshold monitoring.
• Ignoring reverse-charge fees. Overseas ad and platform spend counts toward the threshold. Record it as a separate category and add it to your rolling total.
• Missing the 30-day forward-look test. A spike month or a large pending order can trigger immediate registration, not a 30-day grace period from the end of the month.
• Assuming the marketplace handles it. If you are UK-established, the marketplace's deemed-supplier rules do not apply to your sales. You remain responsible for your own VAT registration and returns.
• Registering late and absorbing the back-VAT. Late registration means VAT was due from the date registration should have applied. HMRC can assess for that period. The liability does not disappear.

For help with Amazon, eBay, Etsy or Shopify VAT compliance, see the relevant seller guides: Amazon sellers, marketplace sellers.