Selling to the EU From the UK: VAT, IOSS and Customs in 2026

Every parcel falls into one of three regimes

Since the EU's 2021 ecommerce VAT reforms there is no VAT-free threshold for goods entering the EU: VAT is due from the first cent. How it is collected depends on the consignment's intrinsic value, meaning the goods price excluding shipping and insurance, and on whether you use IOSS.

• Up to €150 with IOSS: you charge the destination country's VAT rate at checkout, declare it through one monthly IOSS return, and the parcel clears customs with no further charges to the customer
• Up to €150 without IOSS: the carrier or postal operator collects VAT from your customer on arrival, usually adds a handling fee, and holds delivery until they pay
• Over €150: IOSS cannot be used; import VAT and, depending on the goods and their origin, customs duty are due at the border, paid either by the customer (DDU) or by you through the carrier (DDP)

The UK side is simpler: exports to the EU are zero-rated for UK VAT, provided you keep evidence of export such as carrier confirmation of despatch abroad.

IOSS: what registration involves for a UK business

The Import One-Stop Shop lets you register once and account for VAT on all eligible EU consumer sales through a single monthly return. For customers the difference is dramatic: the checkout price is final, there is no customs email or doorstep charge, and parcels typically clear faster.

• As a non-EU business, a UK store in practice registers through an EU-established IOSS intermediary who files on your behalf; expect a setup fee plus ongoing monthly or annual charges
• You must charge the correct VAT rate per destination country at checkout; Shopify's tax settings, WooCommerce tax plugins and services such as Avalara or Taxually maintain the rate tables
• Your IOSS number travels in the electronic customs data for each consignment and should never be printed on the parcel, to stop fraudsters reusing it
• Returns are filed and paid monthly through the intermediary, and IOSS records must be kept for ten years

Whether IOSS pays for itself is straightforward arithmetic: intermediary fees divided by EU order volume. At a handful of EU orders a month, DDP without IOSS may be cheaper; beyond that, IOSS usually wins on both cost and customer experience.

Selling through marketplaces: the platform carries the VAT

If your EU orders arrive through Amazon, eBay, Etsy or another marketplace, the platform is the deemed supplier for consignments up to €150. It charges the buyer VAT at the point of sale and remits it under its own IOSS number.

• Use the marketplace's IOSS number in the customs data for those parcels, exactly as the platform's shipping instructions specify
• Never reuse a marketplace IOSS number on orders from your own website; that is misdeclaration
• Mixed sellers therefore run both routes: platform IOSS data for marketplace orders, and your own IOSS or DDP arrangements for direct orders

Customs data: what keeps parcels moving

Most EU border delays for small UK shippers are data problems, not tax problems. Every parcel needs complete, accurate, electronically transmitted customs information.

• A GB EORI number for your business, free from HMRC and usually issued within days
• A commodity code (HS code) for every product line; classify honestly using the UK trade tariff tool, because vague descriptions like "gift" or "accessories" cause holds
• Accurate values and plain-language descriptions on the CN22 (lower-value postal items) or CN23 and commercial invoice; undervaluing goods to dodge charges is customs fraud
• Electronic pre-advice: your shipping platform, whether Royal Mail Click & Drop, a multi-carrier tool or carrier APIs, must send the data ahead of the parcel
• For many consumer product categories, the EU's General Product Safety Regulation requires an EU-established responsible person whose details accompany the product, so check whether your lines are in scope

Set product-level customs data correctly once in your shipping software and every subsequent label inherits it.

DDP or DDU: decide who pays at the border

For consignments over €150, or any parcel where you skip IOSS, someone has to pay the import charges, and you choose who.

• DDU, also labelled DAP: the customer pays import VAT, any duty and a carrier handling fee before delivery. Cheapest for you, worst for them; refused parcels and angry emails follow
• DDP: you pay the charges through the carrier and build them into your pricing. It costs more per shipment, but conversion, reviews and repeat purchase rates benefit
• If you must use DDU, disclose it unmissably at checkout, for example "Import charges will be collected by the carrier before delivery"; surprise fees are a leading cause of EU chargebacks against UK stores

A common 2026 setup for small stores: IOSS for sub-€150 orders, DDP for higher-value orders to your main EU markets, and DDU nowhere a customer could be caught off guard.

The per-parcel cost worksheet

Before setting EU delivery prices, run one real product through this list and see what actually remains of the margin.

• Product cost and UK-side margin, remembering the sale itself is zero-rated for UK VAT
• Destination VAT: the customer country's rate applied to the sale price where you collect it via IOSS or absorb it via DDP
• Customs duty: usually nil under €150; above that, the tariff rate for your commodity code, noting that UK-origin goods may qualify for zero duty under the Trade and Cooperation Agreement if you can declare preferential origin
• Carrier charges: base international shipping plus any DDP or duty-handling fee
• IOSS intermediary fees divided by your expected monthly EU orders
• A returns allowance, since cross-border returns cost a multiple of domestic ones

If the total kills margin on low-value items, the realistic options are an EU free-shipping threshold that pushes baskets above break-even, restricting your EU range to higher-margin lines, or an EU fulfilment partner once volume justifies holding stock there.

What is changing next

These rules will not stand still. The EU has been advancing a major customs reform that is expected, in time, to remove the €150 customs duty exemption for low-value imports and shift more liability onto sellers and platforms, and there have been proposals for additional handling fees on small parcels entering the bloc. Timelines have moved repeatedly, so build a habit rather than a prediction: review your EU setup against carrier notices and HMRC and EU guidance once or twice a year, and re-run the worksheet above whenever fees change.

None of this is a reason to give up on EU customers; it is a process to set up once and maintain lightly. If you want IOSS rates, customs data and duties logic wired properly into your checkout and shipping stack, our team at Thind Global Services can help.