Chancellor John Healey reportedly plans to include a tax reform in the upcoming Budget that would shift the responsibility for collecting Value Added Tax (VAT) to digital platforms. Under the anticipated proposal, online marketplaces would be required to collect VAT for all merchants trading on their sites, including those based in the United Kingdom.
Current regulations require platforms to collect VAT on sales made by overseas sellers to UK consumers. However, reports indicate that some foreign companies have bypassed these rules by using shell companies. The proposed changes would extend this requirement to any retailer on a platform with an annual turnover exceeding £90,000, regardless of the business’s location.
Eve Williams, vice president and general manager at eBay UK, stated that the company supports efforts to ensure overseas sellers meet tax obligations but emphasized that domestic small businesses must be protected. Williams told the Press Association that she has held discussions with the Treasury regarding how to ensure new rules do not hinder growth or discourage entrepreneurship.
The scale of the impact involves thousands of small enterprises across the UK. According to an eBay report, 31 of the 40 areas with the highest concentrations of small business activity on its platform have a gross domestic product (GDP) per head below the national average. Williams suggested that "tight thresholds" for VAT and national insurance—a tax paid by employees and employers to fund state benefits—can inhibit the ability of these businesses to expand.
The government is scheduled to present the Budget on October 28, 2026, where the specific details and effective dates of the tax changes are expected to be confirmed. In addition to the VAT collection changes, eBay has called for the government to increase the trading allowance—a tax exemption for casual earnings—from its current level of £1,000 to £3,000 per tax year to support new business ventures.