Whether or not you need to register for VAT in the UK is not a matter of where you sell but is decided by what you sell and how much of it you sell.
You could sell on eBay, Amazon or your own e-commerce store but the rules of VAT in the UK apply the same to all.
In each case, however, if you sell less than £85,000 of goods each year, you do not need to register for VAT. You can choose to voluntarily register for VAT if you like, and we cover the reasons why you might want to to do that in our
when to voluntarily register for VAT article.
If you do not voluntarily register and your turnover is less than £85,000 however, then you do not need to register and your sales are pretty straightforward. Buy low; sell high!
If you are not registered for VAT, you cannot reclaim VAT back on purchases you make or charge VAT to customers. A working example of this would be if you buy a product from a UK based supplier who has a turnover of over £85000 for £12 (£10 + £2 VAT).
You cannot claim the £2 VAT back from HMRC or charge any VAT to your customers.
You might decide you want a 30% gross profit (that's profit before you take your expenses off) on your sales which in this case means you'd be selling your product for £15.60 (£12 + 30% = £15.60). Your final
selling price, not including postage of course, would be £16, and no VAT is charged to the customer. If your turnover is more than £85,000, then you do need to register for VAT with HMRC.
In this example, your figures would look a little bit different:
You buy the product for £10 + £2 VAT from your supplier for a total of £12. Because you are vat registered, you can offset the VAT you paid your supplier with the VAT you charge your customer, and settle the difference with HMRC as shown below.
Keeping your 30% gross profit margin, you would still buy your product for £10 + £2 VAT but your 30% gross profit should be applied to the ex VAT amount instead of the total.
For example, £10 + 30% = £13.
Now, because your turnover is over £85,000 and you're registered for VAT, you need to add the VAT onto the price: £13 + 20% VAT (£2.60) = £15.60.
In this example, you can offset the £2 you paid your supplier against the £2.60 you charged your customer, leaving a balance of £0.60p which you will owe to HMRC. If you bought 2 items, and only managed to sell one before the VAT was due, HMRC would owe you £1.40.
To make things even more complicated for you, some items are exempt from VAT. You can find out if your products are exempt from VAT over here. And finally, as if things weren't complicated enough, some items are simply "out of scope" of
UK VAT and no VAT is applicable at all like, for example, if you sell to a country outside the EU.
I hope this helps you but if you're still confused by UK VAT, try our VAT Calculator,
which will do all the hard work for you.