One number decides how every parcel you sell into the UK gets taxed: £135. At or under it, VAT is your job at checkout. Over it, tax moves to the border — and someone has to pay it before your customer gets their parcel. Dropshippers who mix up the two sides of that line either undercharge and eat the difference, or their customers meet a courier asking for money at the door.
This guide covers how the rule actually works in 2026, the mistakes we see on declarations every week, and the change the UK government confirmed in July 2026: the £135 duty relief is being scrapped by October 2028. If you sell into the EU as well, read this together with our IOSS and EU VAT guide — the UK and EU systems look similar but are run separately.
The rule in one table
| Consignment value | VAT | Customs duty | Who handles it |
|---|---|---|---|
| £135 or less (B2C) | 20% charged at your checkout, paid via your UK VAT return | None under current relief | You (or the marketplace, if you sell through one) |
| £135 or less (B2B, buyer has UK VAT number) | Reverse charge — buyer accounts for it | None | Your buyer, if your invoice notes the reverse charge |
| Over £135 | Import VAT at the border | UK Trade Tariff rate applies | Importer of record — your customer, unless you ship DDP |
The threshold is measured on the intrinsic value of the whole consignment — the price the goods were sold for, excluding shipping and insurance when they are shown separately. One order, three items of £50 each, shipped together: that is a £150 consignment and it clears under the over-£135 rules, even though every individual item is cheap.
At or under £135: the tax point is your checkout
Since January 2021 there is no import VAT on B2C consignments at or under £135 sent to Great Britain. Instead, the sale itself is UK VAT-able: you charge 20% at checkout and pay it to HMRC through a UK VAT return. Three things about this catch dropshippers out:
- There is no registration threshold for overseas sellers. The £90,000 threshold UK businesses enjoy does not apply to you. Your first £135-or-under sale to a GB consumer already requires a UK VAT registration.
- Marketplaces take over the obligation. If the sale happens through an online marketplace (Amazon, eBay, Etsy), the marketplace is the deemed supplier and collects the VAT. Your own Shopify store is not a marketplace — there, the obligation is yours.
- The parcel still needs correct customs data. No import VAT does not mean no declaration. The consignment needs an accurate value and description; your VAT number belongs on the paperwork so the border can see tax was handled at sale.
Over £135: tax moves to the border
Cross the line and the normal import regime applies: import VAT on top of the goods value, customs duty at whatever the UK Trade Tariff says for your product code, and usually a brokerage or handling fee from the carrier. By default all of that lands on the importer — your customer — as a payment demand before delivery. That is the doorstep surprise that turns into refund requests and chargebacks.
The alternative is shipping DDP (Delivered Duty Paid), where duties and taxes are calculated and prepaid before dispatch, and your customer pays nothing at the door. We wrote up the mechanics in our complete DDP guide and the honest trade-offs in DDP vs DDU. For UK orders over £135, DDP is less a preference and more the difference between a repeat customer and a dispute.
What not to do: value games
Two shortcuts show up constantly and both are declaration fraud, not planning. Under-declaring the value to duck under £135 — HMRC compares declared values against payment data, and the penalty exposure sits with the importer and seller, not the factory that printed the label. And splitting one order into several parcels to keep each under £135 — the rules treat goods ordered together and shipped for delivery together as one consignment. A paused parcel at customs costs you more in refunds and reviews than the duty ever would.
Confirmed July 2026: the £135 duty relief is going away
On 13 July 2026, HM Treasury and HMRC confirmed the outcome of their low-value imports review: the customs duty relief on consignments of £135 or less will be removed, with the new regime in place by October 2028 at the latest — six months earlier than first planned. Once it lands, low-value goods will pay duty at the applicable UK Trade Tariff rate like any other import. How checkout VAT collection interacts with the new customs model is still being designed (sources: GOV.UK, KPMG).
The direction of travel is the same everywhere: the US ended its $800 de minimis in 2025, the EU abolished its €150 duty exemption on 1 July 2026, and the UK has now set a date. The low-value loophole era is closing in every major market. Sellers who build duty into their landed cost now will not need to re-price in a panic later — our landed cost formula walks through the math.
A worked example
Say you sell a £49 home-gym accessory to a customer in Manchester, sourced for £11 from a factory in Ningbo. The consignment is under £135: you charge £49 + 20% VAT = £58.80 at checkout, file it on your UK VAT return, and the parcel crosses the border with no demand on your customer. Now a customer orders three units in one go: £147 consignment, over the line. Import VAT and the tariff-rate duty now apply at the border — shipped DDP, those costs fold into one per-unit landed price you knew before dispatch; shipped DDU, your customer gets a payment link from the courier plus a handling fee, for a surprise bill that can run £40 or more. Same product, same customer, completely different experience — decided entirely by consignment value and shipping terms.
Where an agent fits — and where it does not
Honest boundary first: a sourcing and fulfillment agent cannot register you for UK VAT or file your returns — that is between you, HMRC, and your accountant. What we do handle at EboxMan: accurate declarations on every parcel (real values, correct descriptions, your VAT number on the paperwork for under-£135 orders), and DDP shipping for over-£135 orders with all applicable duties prepaid in one per-unit price. Every order also gets photo QC before it ships, so what clears customs is what your customer ordered.
If you want the tariff-inclusive landed cost for your exact product on UK routes, send it through our quote form — a named agent replies within 24 hours with one number, not a price that stops at the warehouse door.
Frequently asked questions
Do I need a UK VAT number if I only sell a few orders a month?
Yes, for direct B2C sales of consignments at or under £135 — there is no minimum threshold for overseas sellers. If all your UK sales run through a marketplace, the marketplace handles the VAT and you may not need your own registration for those sales.
Is the £135 threshold per item or per order?
Per consignment — the goods value of everything travelling together under one transport contract, excluding separately-shown shipping and insurance. Three £50 items in one box make a £150 consignment.
Does the 2028 change mean I should stop selling to the UK?
No. Duty on typical e-commerce categories is often modest, and every competitor faces the same change at the same time. The sellers who suffer in these transitions are the ones whose pricing assumed tax-free forever. Build the landed cost now and the 2028 switch becomes a non-event.
Who pays if my customer refuses the duty bill on a DDU parcel?
Usually you, twice: the refund to the customer and often a return or disposal fee from the carrier. This is the core argument for DDP on anything over £135 — the cost exists either way; DDP just moves it to where it cannot ambush anyone.
Private Agent for Dropshipping Success