Britain has a VAT threshold. American sellers do not get it

Figures relate to tax year 2025-26 (UK) · 2025 (US)

A British customer orders from your website. It is one order, worth ninety pounds, and it feels like the least significant sale of the week.

Depending on where the goods sit and who sold them, that order can trigger UK VAT registration. The £90,000 threshold everyone talks about belongs to businesses established in Britain. An overseas seller does not get one.

Key takeaways

• VAT registration from £90,000 applies to UK-established businesses, not overseas sellers.
• A business with no UK establishment can need to register from its first sale.
• Consignments of £135 or less shipped from abroad follow a specific rule.
• Online marketplaces often account for the VAT instead of the seller.
• Digital services to UK consumers have their own registration route.
• Goods already stored in Britain almost always trigger registration.

What is UK VAT registration?

VAT registration is enrolment with HMRC to charge value added tax on your sales and to account for it on regular returns. Registration brings a VAT number, quarterly filing, and digital record-keeping obligations. According to HMRC guidance, a business with no establishment in Britain has no VAT registration threshold at all.

That last point is the one American sellers miss.

So the question is not how much you sell. It is whether you have a British establishment.

Who counts as an overseas seller?

A business with no fixed establishment in Britain. No office, no staff, no permanent place from which you trade here. Most American companies selling online fall into this category, however many British customers they have, because the whole operation sits in the United States.

Having a British bank account or a British website domain changes nothing.

Nor does using a British freight forwarder. The test looks at your own presence.

Does storing goods in Britain matter?

Enormously. Once your stock sits in a British warehouse, you are making sales of goods located in Britain, and that almost always forces VAT registration from the first sale. Fulfilment centres count, third party logistics providers count, and a friend's garage counts.

This catches sellers who use a marketplace fulfilment programme without reading where the stock went. Our guide to online sellers and Form 1099-K covers the American reporting side of the same business.

Check which country your inventory actually sits in each quarter. It moves more often than people realise.

What is the £135 rule?

For goods shipped from outside Britain in a consignment worth £135 or less, the VAT is generally charged at the point of sale rather than at the border. So the seller collects it from the customer and accounts for it, instead of the courier collecting it on delivery.

Above £135, import VAT applies at the border in the ordinary way.

The value looks at the consignment rather than each item. Two £80 items shipped together sit above the line.

A worked example

The figures below are illustrative and use round numbers to show the mechanics.

A Colorado company sells kitchenware online. It ships directly from Denver, and British orders average £60 a time, totalling about £40,000 a year.

Because each consignment sits below £135 and the company has no British establishment, it needs UK VAT registration and must charge VAT on those sales. The £90,000 figure never applies to it.

The same company then moves stock into a Midlands warehouse to speed up delivery. Now it is selling goods located in Britain, which confirms the obligation and changes how the VAT is accounted for.

Do marketplaces change the answer?

Often, and helpfully. Where an online marketplace facilitates the sale, the marketplace is generally responsible for accounting for the VAT rather than the seller. That covers a great many American businesses selling into Britain through the large platforms.

But it does not always remove your own obligation, particularly where you also sell direct.

Read the platform terms on VAT. They state plainly which sales they account for and which they leave with you.

Selling through a marketplace and your own site usually means both routes need reviewing.

Which route applies to you

What about selling only to businesses?

That usually helps. Where you supply services to a British business, the customer generally accounts for the VAT themselves under the reverse charge, which removes the need for VAT registration. The position differs for goods and for consumer sales.

Keep evidence that each customer really is a business.

A VAT number on the invoice is the usual proof. Collect it before the first sale, not afterwards.

How do digital services work?

Software, subscriptions, online courses and similar supplies to British consumers are taxed where the customer lives. So an American software company with British subscribers generally needs UK VAT registration, whatever its turnover, and charges VAT at the British rate.

Sales to British businesses again shift the obligation to the customer.

Keep evidence of where each consumer is located. Two pieces of non-contradictory evidence is the usual standard.

What does registration involve?

An online application to HMRC, then quarterly returns filed through compatible software under the digital record-keeping rules. Overseas businesses may be asked for extra identity evidence, and some appoint a British agent to handle the filings. Expect a few weeks before the number arrives.

You can usually recover British VAT on costs once registered.

Keep the online account details safe. Everything from returns to deregistration runs through it.

Our guide to Making Tax Digital for US filers covers the software requirements.

Does it affect your US tax?

Not directly, and this trips people up. VAT is a sales tax you collect on behalf of HMRC rather than a tax on your profits, so it produces no foreign tax credit on an American return. It is money passing through your business, not a cost of it.

Registering for VAT does not by itself create a taxable presence for corporate tax.

Ask the corporate tax question separately. People often assume the two travel together, and they do not.

But a warehouse and staff might. Those are separate questions and they need separate answers, which our guide to US sales tax for UK sellers approaches from the other direction.

What rate do you charge?

Twenty per cent on most goods and services, with reduced and zero rates for particular categories. Children's clothing and most food sit at zero, books at zero, and domestic fuel at a reduced rate. Getting the category wrong is a common and expensive error.

Check your product list against the published categories before the first sale.

Ask before you guess. HMRC publishes the categories, and a wrong rate applied across a year of sales is expensive to unwind.

Zero rated is not the same as exempt. The difference decides whether you can recover VAT on your costs.

When are the returns due?

Usually quarterly, one month and seven days after the period ends, with payment due at the same time. The dates depend on the quarters HMRC allocates you, and they rarely line up with your American reporting calendar.

Late filing and late payment each carry their own points-based penalties.

Set the reminders when the number arrives. The first missed return is the easiest one to miss.

Do you need a UK representative?

Not usually. HMRC can require an overseas business to appoint a representative in certain circumstances, but most American sellers register directly and then file either themselves or through an agent they appoint for convenience rather than by obligation.

An agent is a practical choice rather than a legal requirement for most.

Ask about it during the application. The answer depends on your circumstances.

How to get registered

1. Establish whether you have any fixed establishment in Britain.
2. Identify where your stock physically sits at the point of each sale.
3. Split your sales between marketplace channels and direct ones.
4. Separate business customers from consumers, with evidence for each.
5. Apply to HMRC online and allow several weeks for the number.
6. Choose compatible software for the quarterly digital filings.
7. Review the position whenever your fulfilment arrangements change.

What if you should have registered earlier?

Register now and disclose the earlier period rather than waiting. HMRC can charge penalties and interest on the VAT you should have collected, and that liability falls on you even where you never charged the customer. Coming forward voluntarily reduces the penalty considerably.

The unpaid VAT usually has to come out of your own margin.

Work out the exposure before you make contact. Knowing the number changes how the conversation goes.

So the cost of delay compounds. Earlier is always cheaper here.

Do you need a UK bank account?

Not strictly, though it makes repayments simpler. HMRC can pay refunds to an overseas account in many cases, but the process runs more smoothly with a British one. Many American sellers open an account once volumes justify it.

Currency costs matter too, since you collect in pounds and report in pounds.

Keep the VAT money separate from trading cash. It was never yours.

What records do you have to keep?

Digital records of every sale and purchase, the VAT on each, and the link between your figures and the return you filed. The rules require a digital trail rather than a spreadsheet retyped by hand at quarter end.

Keep them for six years.

Most accounting packages handle this once configured. The configuration is the part worth checking.

Can you deregister later?

Yes, if the obligation genuinely ends. Pulling your stock out of Britain, or stopping direct sales to British consumers, can remove the requirement and let you cancel the registration through the same online account you used to apply.

But deregistering while still making relevant sales creates a bigger problem than it solves.

Take a view on the next two years before cancelling. Re-registering later is more work than staying put.

Mistakes and penalties we see with VAT registration

The first is assuming the £90,000 VAT registration threshold applies. It belongs to British businesses, and overseas sellers have none.

The second is losing track of where stock sits. A fulfilment programme can move inventory into Britain without a decision from you.

The third is assuming a marketplace covers everything. Direct sales usually sit outside that protection.

The fourth is treating collected VAT as revenue. It belongs to HMRC from the moment you charge it.

How US UK Tax Accountants helps

We work out whether you need VAT registration at all, which is the question worth answering first. Then we handle the application, set up the quarterly filings, and review the position each time your fulfilment arrangements change.

Where sales went unreported, we prepare the disclosure. Our UK self assessment service covers the wider British compliance.

If you sell into Britain from America, get in touch. A short review now costs far less than a backdated assessment later.

Last reviewed 25 September 2026. This article is general information and not personal tax advice. Every business turns on its own facts, so take advice on yours before registering.