Intro: UK VAT trips up Indian D2C brands in a way UAE VAT never does. The rate is four times higher, the rules treat overseas sellers differently from local ones, and a single number — £135 — quietly decides who charges the tax and when. Here's what you actually owe selling into the UK, and the one threshold that does not work the way you think.
The 20% standard rate
The UK charges a standard 20% Value Added Tax on most goods. It's a consumption tax — charged at the point of sale, paid by the end customer, remitted to HMRC by whoever issued the invoice.
Coming from UAE's gentle 5%, 20% is a shock to your pricing. UK shoppers expect VAT-inclusive display pricing — a product listed at £30 means the customer pays £30, of which £5 is VAT. You absorb the rate into your retail price; you do not add it at checkout.
Not everything is 20%. Some categories are zero-rated or reduced:
- Zero-rated (0%): most food, children's clothing and footwear, books, and printed matter. A children's-wear brand pays no VAT on its core range — a genuine advantage worth knowing.
- Reduced (5%): domestic energy, child car seats, and a short list of other items — rarely relevant to D2C.
- Standard (20%): everything else — adult apparel, beauty, homeware, accessories, electronics.
Check your category before you model margins. A beauty brand and a kids'-wear brand have completely different VAT positions on the same storefront.
The £135 rule — the one that catches everyone
Since January 2021, the UK splits imports at a consignment value of £135. Which side of that line you're on changes who charges VAT and where.
- Consignment ≤ £135: no import VAT at the border. Instead, the overseas seller (or the marketplace) must charge UK VAT at the point of sale and remit it to HMRC. Most direct-to-consumer parcels from India fall here.
- Consignment > £135: import VAT is charged at the border in the normal way, alongside any customs duty. The £135 point-of-sale mechanism does not apply.
The £135 figure is the value of the goods in the consignment — excluding shipping and insurance. Get it wrong in either direction and you either under-collect VAT (a liability) or double-charge the customer (a refund and a complaint).
£135 is per consignment, not per item
A parcel with three £50 items is a £150 consignment — over the line, import VAT at the border. Three separate £50 parcels are three sub-£135 consignments — VAT at point of sale. How you pack and split orders changes your VAT treatment. Decide it deliberately, not by accident.
Why the £90,000 threshold doesn't apply to you
Every guide to UK VAT mentions the £90,000 registration threshold — the turnover level at which a UK business must register. Indian founders read that and assume they can sell up to £90,000 before registering.
You can't. That threshold is for UK-established businesses. An Indian-domiciled brand selling into the UK is a Non-Established Taxable Person (NETP), and HMRC requires an NETP to register for UK VAT from its very first taxable sale. There is no tax-free runway.
This is the single most common UK VAT mistake we see. A brand runs a £300,000 first year assuming it was under the threshold, then discovers it owed VAT from sale number one — plus penalties and interest.
Marketplaces collect VAT for you
There is one important exception that simplifies life. For goods sold through an online marketplace — Amazon, eBay, Etsy — the marketplace is treated as the "deemed supplier" for VAT purposes on consignments ≤ £135. The marketplace collects and remits the UK VAT; you don't.
So your VAT obligations split by channel:
- Your own Shopify store: you are responsible. You need a UK VAT registration and you charge and remit VAT yourself — or your corridor partner does, under their registration.
- Amazon / eBay / Etsy: the marketplace handles VAT on sub-£135 sales. You still register if you hold stock in the UK, but the point-of-sale VAT is theirs to collect.
Who charges VAT, when — at a glance
| Scenario | Who charges UK VAT | Where |
|---|---|---|
| Own store, consignment ≤ £135 | You (or your IOR partner) | At checkout |
| Own store, consignment > £135 | Import VAT at the border | On import |
| Marketplace sale ≤ £135 | The marketplace (deemed supplier) | At checkout |
| Stock held in a UK warehouse | You (UK VAT registration required) | At checkout |
Common mistakes
The four we see Indian D2C brands make most often:
- Assuming the £90,000 threshold protects you. It doesn't. Overseas sellers register from the first sale.
- Quoting prices VAT-exclusive. UK convention is VAT-inclusive display pricing. "£30 + VAT" reads as foreign and erodes trust.
- Mis-valuing the £135 consignment. Splitting or combining parcels changes the VAT mechanism — do it knowingly.
- Charging Indian GST on UK sales. Exports are zero-rated under GST. You do not add 18% Indian GST to a UK customer.
"Most Indian brands don't fail UK VAT because it's complex. They fail it because they assumed it worked like a UK business — and it doesn't."
Xeliport handles UK VAT registration, the £135 mechanics, and remittance to HMRC under our corridor service — so VAT is charged correctly at checkout from your first UK sale, and you stay an Indian company. When your volumes justify your own UK registration, we help you migrate. That's the playbook.