The short version: In his first Budget on 28 October, Chancellor John Healey said online marketplaces including Amazon, eBay, Shein and Temu must collect VAT for UK business sellers above £90,000 from October 2027, and raised small-shop rates relief to £18,000. It targets traders who skip VAT, not people clearing out their wardrobes.
The UK government will make online marketplaces responsible for collecting the VAT owed by businesses that sell through them, Chancellor of the Exchequer John Healey told Parliament in his Budget speech on Wednesday 28 October 2026. According to Reuters, the rule takes effect in October 2027 and applies to UK businesses that are VAT-registered or that sell more than £90,000 a year on a single marketplace. Reuters named Amazon, eBay, Temu, Shein and Alibaba among the platforms affected.
Healey said he would strengthen the rules so that “sellers cannot avoid paying VAT when they sell online,” and that the money raised would help pay for business rates cuts for physical shops. In the same speech he raised the threshold for full small business rates relief from £12,000 to £18,000 of rateable value, and the tapered relief threshold from £15,000 to £21,000, according to the Morning Advertiser. Healey told MPs that about 70,000 more businesses would pay no rates, and that half of the country’s shops, restaurants and gyms would now pay none at all, ITV reported.
What changes in October 2027
The change closes a gap the 2021 reforms left open. Since 2021, marketplaces have been liable for VAT on certain sales by overseas sellers to UK consumers, which HM Revenue & Customs says improved compliance. Those rules did not cover UK-based businesses, and HMRC estimated in a June factsheet that tens of thousands of them trading through marketplaces were not meeting their VAT obligations, with the shortfall running into hundreds of millions of pounds.
HMRC consulted on two designs over the summer: a minimum threshold per platform, or a VAT rate relief for small businesses below the registration threshold. The rule Healey announced uses a per-platform line of £90,000, according to Reuters. In practice the marketplace — not the seller — becomes responsible for collecting the VAT on qualifying sales, which makes it much harder for a business to trade at volume while quietly leaving the tax off its prices.
Why now: the high street’s long complaint
Physical retailers have argued for years that they compete on an uneven floor. Before the Budget, the British Retail Consortium found that retail carried the highest effective tax rate of 11 sectors it studied, at 71.5% in 2025/26, and the Retail Jobs Alliance pressed for shops to be spared the top business rates multiplier of 50.8p, TheIndustry.fashion reported on 14 October. Healey’s package answers both complaints at once: tax the online sellers who were not paying, and use the proceeds to lighten the rates bill for small shops.
It also fits a wider pattern of platforms being made to carry responsibilities they once pushed onto sellers or shoppers. In October Shein agreed to pay $100 million to settle a US Federal Trade Commission investigation over delivery complaints, and in France Vinted and rival marketplaces agreed four steps to stop looted goods being resold. Governments have stopped treating marketplaces as neutral noticeboards.
The Faz read
The interesting effect is on price, not tax. A business that leaves VAT off its prices can undercut a compliant competitor by the whole value of the tax, and on a marketplace that gap looks like a bargain. When the platform collects the tax itself, that particular bargain disappears. Some marketplace prices are likely to rise once the rule starts for exactly that reason, and the fair reading is that they were never the real price.
The rates change matters more to the kind of business Faz writes about. An independent boutique, a repair workshop or a small vintage shop with a rateable value under £18,000 will pay no business rates, and those just above the line get tapered relief. That is a meaningful cost cut for shops that stock independent designers and that most chains would never open. The weakness is timing: the marketplace money arrives from October 2027, so for at least a year the relief is funded by promise.
The measure is also narrower than the headline suggests. It deals with UK businesses on marketplaces. Reuters’ report of the speech did not mention any new action on low-value parcels shipped directly from overseas, which is where much of the ultra-cheap fashion trade sits.
What it means if you buy, sell or run a shop
If you sell your own clothes, nothing changes. The rule is aimed at businesses, and HMRC’s June consultation said people who are not in business, including individuals selling second-hand goods, were out of scope. HMRC has said since December 2024 that occasional sales of unwanted personal items carry no tax.
If you buy on marketplaces, expect fewer prices that look too good to be true from UK-based sellers, and treat the ones that remain with suspicion. If you buy secondhand designer pieces, the usual checks still matter more than the tax position — Faz’s step-by-step guide to checking a designer bag before you buy covers them.
If you run a small shop, check your rateable value now. Budget documents cited by the Morning Advertiser give April 2027 as the date from which thousands of hospitality businesses pay no rates; confirm the start date for retail before you budget on it.
What happens next
The detail now moves into legislation and HMRC guidance, which will settle the points the speech left open: how marketplaces must treat sellers near the £90,000 line, how second-hand goods sold by businesses are handled, and whether platforms pass compliance costs back to sellers through fees. Rates relief for hospitality is due from April 2027, according to Budget documents cited by the Morning Advertiser, and the marketplace VAT rule from October 2027. Independent retailers will want to see both dates hold.
Where this leaves you
This is a small Budget measure with a clear principle behind it: a price that depends on someone not paying their tax is not a price worth chasing. Buy from shops and makers whose prices you can explain — independent designers and craft workshops, vintage and estate pieces, accessible luxury, and selective mainstream luxury — and skip the mid-tier mass market, where the cheapest listing is usually cheap for a reason.
The next move is yours.
Sources: HMRC, Extending online marketplace liability factsheet · Reuters via Yahoo Finance · Morning Advertiser · ITV News · TheIndustry.fashion
