Online tax ‘will hit small retailers’

By the Editorial Team · Monday, October 19, 2026

The UK government plans to require digital platforms to collect VAT on all sales above £90,000 turnover, a move expected to raise up to £1 billion but raising concerns about potential negative effects on small domestic businesses. eBay UK’s vice-president urged the government to protect small businesses and recommended raising the trading allowance and integrating online sellers into local economic strategies to support growth outside major economic centers.

The UK government is facing calls to ensure that reforms to the collection of online sales tax do not disproportionately impact small businesses, according to Eve Williams, vice-president and general manager of eBay UK. The proposed changes, expected to be announced in the upcoming budget, would require digital platforms to collect value-added tax (VAT) on all sales made through their sites by retailers with an annual turnover exceeding £90,000, regardless of whether the sellers are based in the UK or overseas.

Currently, digital platforms must collect VAT on sales from overseas businesses to UK consumers, but some foreign companies have reportedly evaded this requirement by using shell companies. The new measure is anticipated to generate up to £1 billion in revenues for the Treasury, with a portion expected to alleviate business rates for physical retail stores.

Williams emphasized the need for the government to protect small UK businesses amid these reforms. She highlighted concerns that tax thresholds, such as those for VAT and national insurance contributions, could stifle the growth of emerging enterprises. “We strongly support that overseas sellers meet their legal and tax obligations,” Williams said, “but it is equally important to ensure that domestic sellers get the fairest chance to succeed, and that any changes do not inadvertently hinder small business growth.”

Accompanying her remarks was a report by eBay that assessed the distribution and potential of small businesses operating on its platform across the UK. The findings revealed that 31 out of 40 areas with the highest concentrations of eBay small businesses had gross domestic product per capita figures below the national average. This suggests that online entrepreneurship is flourishing in regions outside traditional economic centers, often described as “hidden” high streets.

Williams argued that placing small business growth at the heart of the government's economic agenda could unlock further potential in these communities. She urged policymakers and regional authorities to incorporate small online businesses into local growth strategies to spur investment and development.

The report also recommended specific measures to support smaller enterprises, including increasing the UK trading allowance from £1,000 to £3,000. The trading allowance currently enables individuals to earn a limited amount tax-free from self-employment or casual services. Williams suggested that raising this threshold would encourage more people to experiment with business ideas and generate income without immediate tax burdens.

Additionally, she proposed facilitating low-value imports into the European Union as part of efforts to reduce barriers faced by small businesses engaged in cross-border trade. The broader aim, according to Williams, is to build awareness of entrepreneurial opportunities and provide resources that enable small businesses to thrive in an evolving digital economy.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.