VAT on eBay prices once you are registered: VAT-inclusive pricing, your VAT number and invoices

How does VAT on eBay prices work after you register?

Once you are VAT registered, VAT on eBay prices stops being a background worry and becomes part of every sale. On eBay.co.uk, the price a UK buyer sees already includes VAT. Your job is to make sure that price still leaves you the margin you want after you hand the VAT part to HMRC, and that your listings show the details eBay and the law require.

This guide covers the price you enter, the VAT fields in a listing, your VAT number, invoices, the orders where eBay collects VAT instead of you, and a simple way to reprice when you first register.

When do you have to register for VAT?

A UK business must register for VAT if its VAT taxable turnover for the last 12 months goes over £90,000, or if it expects taxable turnover to go over £90,000 in the next 30 days alone. The rule and the steps are on the gov.uk VAT registration page. Some sellers register voluntarily below that level, usually because they buy a lot of VAT-charged stock or sell mostly to VAT-registered businesses.

Our guide to the VAT threshold for eBay sellers shows how to track turnover month by month so the registration date does not surprise you. This article starts from the day you are registered.

What price do you enter on eBay when you are VAT registered?

eBay's VAT obligations page says all prices on eBay.co.uk are displayed inclusive of UK VAT, and UK buyers see VAT-inclusive prices in search and on the listing page. So the number you type in the price box is the gross price: the item plus VAT.

eBay also gives VAT-registered sellers the option to provide the gross price and a separate VAT rate. eBay uses these to work out the net price and the VAT. Filling in the rate helps business buyers who need to see the VAT on their order, and it keeps your own records consistent.

Which rate applies?

Most goods are standard rated at 20%. Some are reduced rated at 5%, such as child car seats, and some are zero rated, such as most books and children's clothes. The gov.uk page on charging and recording VAT lists the rates and links to the detailed guidance by product. If you sell a mix, set the rate per listing, not once for the whole store. Our article on zero-rated goods in the UK covers books, children's clothing and food.

How do you work out the VAT inside an eBay price?

HMRC's method is simple. To add standard-rate VAT to a net price, multiply by 1.2. To find the net price inside a VAT-inclusive price, divide by 1.2. The VAT is the difference, which is the same as one sixth of the gross price at 20%.

For reduced-rate goods use 1.05 instead of 1.2. For zero-rated goods there is no VAT in the price, but the sale still goes on your VAT return at 0%.

Should you raise your prices when you register?

Nothing on eBay changes your prices automatically on the day you register. If you leave them as they are, the VAT comes out of your margin. Whether you raise them, and by how much, is a business decision.

A worked example

Example: suppose you sell a standard-rated item at £24 and, before registering, you kept the whole £24 apart from your costs and fees. After registering, £4 of that £24 is VAT you owe HMRC, so you keep £20. To keep the same £24 net, you would need to charge £28.80. In practice many sellers meet in the middle, because a 20% rise can cost sales against sellers who are not VAT registered.

Two things soften the change:

• Input VAT. As a registered business you can usually reclaim VAT you pay on business purchases, such as stock bought from VAT-registered suppliers, packaging and the VAT on eBay's own fees. Our guide to VAT on eBay fees shows how it appears on your invoice.
• Your product mix. Zero-rated and reduced-rate items change much less than standard-rated ones.

Work the numbers per product line. A price change that is fine on a £150 item with a strong margin can sink a £9 item that already sells on price.

Repricing at scale

If you set prices with a formula, the cleanest way is to add VAT as its own step rather than inflating your markup. That keeps your margin figure honest and lets you switch the step off for zero-rated listings. Check a sample of listings by hand after any bulk change.

What must a VAT-registered seller show on eBay?

eBay says it is mandatory to display your VAT identification number on the eBay site in connection with your listings. You add it through your business seller information page or your account preferences. eBay's business seller policy also requires full business contact details and a returns policy, with the VAT number shown where applicable.

• Add your VAT number to your business seller details as soon as HMRC confirms it.
• For Northern Ireland VAT IDs, eBay says to use the XI prefix.
• Check one live listing as a buyer would see it to confirm the number shows.

When does eBay collect the VAT instead of you?

For some orders eBay, not the seller, collects and pays the VAT. eBay's VAT page names two UK cases: goods imported into the UK with a parcel value of up to £135, and goods of any value sold by a non-UK seller and shipped from stock held in the UK. On those orders eBay issues the tax invoice to the buyer, and eBay says sellers should not issue a separate VAT invoice or change the price after checkout.

eBay also says that if a buyer is UK VAT registered and gives a valid VAT registration number, eBay does not collect UK VAT on those orders and the buyer accounts for it. If you are a UK seller posting from stock in the UK, these marketplace rules usually do not apply to your sales, and VAT on your sales is yours to account for. Check how each of your order types is treated before you file your first return.

VAT invoices for your own sales

When a business buyer asks for a VAT invoice on a sale where you account for the VAT, gov.uk says the invoice must include your VAT number and show the VAT separately. eBay lets UK business sellers add their VAT ID and VAT details to the invoice or packing slip, and only verified VAT IDs are shown.

Which VAT mistakes do new registrants make on eBay?

The same few slips come up again and again in the first months after registration:

• Charging VAT on postage incorrectly. The postage you charge the buyer is usually part of the same supply as the item, so it normally follows the item's VAT rate. Check the gov.uk guidance for your case rather than leaving postage out.
• One rate for everything. A store that mixes books and gadgets cannot use a single 20% setting. Each listing needs its own rate.
• Forgetting old listings. Good-til-cancelled listings created before registration keep their old prices. Include them in your repricing, not just new listings.
• Treating the whole price as income. Your bank balance includes VAT that belongs to HMRC. Set it aside each month so the VAT bill does not come out of next quarter's stock money.
• No proof of input VAT. You need valid VAT invoices from suppliers to reclaim the VAT you paid. Ask for them at the time of purchase.

A checklist for your first month as a VAT-registered eBay seller

1. Add your VAT number to your eBay business seller details.
2. Set the correct VAT rate on each listing: standard, reduced or zero.
3. Decide your pricing policy per product line, using the divide by 1.2 rule to see the VAT in each price.
4. Change prices in a small batch first, then check sales and margin before the rest.
5. Start keeping VAT records for every sale and every business purchase.
6. Download your eBay invoices so you can reclaim VAT on fees where you are entitled to.
7. Ask HMRC or a qualified accountant about the right VAT scheme and your first return.

VAT rules depend on your products and how you trade, so check your own situation with HMRC or an accountant before you settle your prices.