TikTok Shop VAT compliance guide for UK sellers in 2025: Navigate new tax obligations and avoid costly penalties

TikTok Shop is slowly gaining traction as one of the powerful e-commerce spaces in the UK. This development is pushing e-commerce sellers to update their understanding to traverse through the intricate web of VAT (Value Added Tax) compliance.

As of 2025, the extension has led to the mandate of more stringent protocols and advanced tax automation systems implying that non-adherence to these new regulations will lead to platform restrictions, audits, and even penalties. So, whether you are a new e-commerce seller or are already running an established TikTok Shop, knowing and complying to new VAT obligations is a must.

VAT registration threshold: The £90,000 benchmark

Starting April 1, 2024, the UK’s HM Revenue and Customs (HMRC) increased the VAT registration limit to £90,000 from the former threshold of £85,000 in taxable turnover over a one-year rolling period. This indicates:

• You are to voluntarily and legally register for VAT if your gross annual revenue from taxable supplies, including TikTok Shop sales exceeds £90,000.
• Once successfully registered, you are to charge VAT on applicable goods and services and file VAT returns on a quarterly basis while keeping detailed digital records of the same.

However, if your gross revenue does not cross the threshold yet is close enough, it is recommended to still go for voluntary VAT registration.

Charging and calculating 20% VAT on TikTok Shop sales

Once you go through with VAT registration, most of your sales on TikTok Shop are up for standard-rated 20% VAT. This covers goods like accessories, electronics, and clothing. For instance:

• If you make a sale of £100 on an item, £20 VAT must be accounted for (£100 ÷ 1.2 = £83.33 net + £16.67 VAT).
• The resulting gross price must precisely indicate if VAT is charged.

Unless the Seller Center is configured, your TikTok Shop cannot add VAT automatically to prices. So, make sure that all listings are done correctly to highlight your VAT obligations. Failing to do so will end up with underpaid VAT, particularly if HMRC analyzes your income assuming as VAT-inclusive by default.

Cross-border EU sales and IOSS compliance

In 2025, any fulfilling orders from the UK to EU customers will fall under the Import One-Stop-Shop (IOSS) scheme. Under this scheme:

• UK e-commerce sellers can leverage IOSS to simplify VAT collection for orders below €150, presuming that it is shipped directly to EU customers.
• You can also collect VAT directly at the point of sale and remit it through a single EU tax return rather than waiting for the buyer to pay VAT upon delivery. This could cause unwanted VAT claim refusals or delays.

Depending on the structure of the transaction, the TikTok Shop is liable to act on your behalf as a deemed supplier and handle IOSS filings. This is why e-commerce sellers must confirm if TikTok is acting as an intermediary for cross-border shipments or whether they should independently register for IOSS.

VAT invoicing through TikTok Seller Center

As of 2025, the TikTok Seller Center provides automated VAT invoicing features to simplify compliance. These features cover:

• Downloadable invoice summaries for bulk bookkeeping in a monthly format.
• Auto-generation of VAT invoices for each fulfilled order.
• Customizable invoice templates revealing itemized prices, seller VAT number, and VAT breakdown.

To enable the automation feature, ensure that your VAT registration number is correctly verified in your Seller Center account. If not, the invoices will lack some essential information, risking your filings.

Integration with QuickBooks, Xero, and other accounting software

Keeping up with the digitalization, TikTok Shop now provides integration with reliable accounting platforms like Xero, QuickBooks, and Sage Business Cloud for streamlined bookkeeping and VAT reporting.

These integrations accurately and automatically sync order data, VAT amounts, and fee deductions. This enables real-time monitoring and advanced preparedness for quarterly VAT returns. So, ensure to map your sales channels orderly because if you mislabel them, it could skew your VAT obligations.

Quarterly VAT filing requirements

As a requirement of MTD (Making Tax Digital) for VAT, every VAT-registered TikTok seller must:

• Submit digital VAT returns every quarter via the MTD-compatible software.
• Keep detailed digital records of every sale, fees, and VAT charged.
• File VAT returns and pay liabilities by the 7th day of the second month after each quarter-end.

If you miss any deadline, it can incur automatic interest or penalties, especially under the HMRC’s newly mandated points-based regime, which has been in effect since 2023. You may leverage automated software reminders and calendar alerts, or even commission quarterly filings to an expert TikTok UK accountant for accuracy and timely submissions.

Reclaiming VAT on TikTok advertising and platform fees

Platform transaction fees, shipping services, and TikTok Ads are many such costs that TikTok Shop sellers should account for. VAT charged on these various expenses can be reclaimed in your VAT returns when presented with valid invoices and ensuring that these services are used only for business purposes.

Steps to reclaim input VAT:

• Keep all your VAT invoices and receipts showing your name and VAT number.
• Input all expenses into your accounting system correctly.
• Add the reclaim amount in Box 4 of your VAT returns.

Note: If you mistakenly reclaim VAT on any non-business expenditure, it can result in HMRC audits.

Now, while being compliant is non-negotiable, most TikTok sellers use VAT planning as a strategic lever. Here’s how you can do it too:

• Price smartly by integrating VAT into items’ pricing to protect profit margins.
• Optimize input VAT to determine all reclaimable costs, such as logistics, packaging, ads, etc.
• Apply the Flat Rate Scheme to simplify the accounting process for smaller sellers with minimal expenses.
• When planning for international growth, consider IOSS and non-EU VAT regulations.

Efficient VAT planning can produce considerable savings with smoother cash flow.

Common VAT errors TIkTok sellers make

To maintain compliance, stay away from these pitfalls:

• Not registering for VAT as and when crossing the £90,000 threshold.
• VAT charge without registration is illegal and confuse buyers.
• Using gross amounts in returns without excluding the VAT margin.
• Misclassification of exempt or zero-rated items, like children’s clothing.
• Failure to keep digital records as per the MTD protocols.

It is wise to conduct a VAT health check every half-yearly and hire a TikTok UK accountant for consistent compliance.

Last thoughts

Today, running a TikTok Shop in the UK is not only competitive, but also complex. While you dedicate your time in launching new products, creating content, and building your brand, a trusted TikTok UK accountant can take of the essential legalities and compliance, reducing risks and boosting efficiency.