Dropshipping to the UK 2026 – Who Pays Customs Duty and VAT?

Definition of dropshipping and the question of customs liability

Dropshipping is a sales model in which you do not hold goods in stock — you order from a supplier (in Poland, China, Turkey) only after receiving an order from an end customer, and the supplier ships directly to the buyer. The customs problem arises when your customer is in the UK and the goods come from outside the UK.

The question "who pays customs duty" in dropshipping has no single answer — it depends on three factors: shipment value, Incoterms (DDP vs DAP) and sales channel (marketplace or own shop). Below we explain each scenario.

The £135 threshold — goods below this value

Since 1 January 2021 HMRC abolished Low Value Consignment Relief (LVCR), which previously exempted small parcels from VAT. Now every parcel entering the UK, regardless of value, is subject to VAT.

For shipments with a value up to £135 (goods value excluding delivery costs and insurance):

• Import customs duty is not charged (Relief from customs duty)
• VAT (20%) is collected at the point of sale — by the marketplace (Amazon, eBay, Etsy) or by you as the online seller
• If you sell via Amazon.co.uk or eBay.co.uk — the marketplace collects VAT from the buyer and pays it to HMRC. You do not need to register for UK VAT solely on this basis.
• If you sell via your own shop (Shopify, WooCommerce) — you must register for UK VAT and charge 20% VAT on the invoice

In practice most dropshippers selling low-cost goods (electronics, gadgets, clothing) via Amazon or eBay may not need to register for UK VAT on orders below £135 — as long as total marketplace sales do not exceed the £85,000 annual threshold.

Goods above £135 — importer of record: buyer or seller?

When the goods value exceeds £135, standard UK customs rules apply. The goods must be cleared through customs, import duty and import VAT must be paid. Who does this depends on the Incoterms:

DAP — Delivered At Place (buyer is the importer)

Under DAP terms (formerly DDU) the buyer is responsible for customs clearance and payment of duty and VAT on delivery. In practice couriers (DHL, FedEx, UPS) invoice the buyer for duty + handling fee (£15–25). Many UK buyers refuse to accept a parcel with an unexpected customs surcharge → high return rate, negative reviews, losses.

DDP — Delivered Duty Paid (seller is the importer)

Under DDP terms you as the seller pay customs duty and VAT, and the buyer receives the parcel "duty-free". This is better for the customer experience but requires you to hold a GB EORI number, a UK VAT number and knowledge of HS codes for your products.

At Easy Clearance we help dropshippers set up the DDP model — UK VAT registration, GB EORI and clearance handling for regular dropshipping deliveries.

Dropshipping from China: HS code, double clearance, rules of origin

Dropshipping from China to the UK is particularly complex. Goods shipped directly from China to the UK require:

1. Correct HS code in 10-digit UK Trade Tariff format — must match the goods, otherwise HMRC penalties and investigations follow
2. Import clearance in the UK — C88/E2 form in the CDS system, customs value, country of origin (China), tariff rate
3. Import VAT or marketplace settlement for parcels up to £135

A key issue is rules of origin. Goods manufactured in China have Chinese origin — they do not become "Polish" or "European" simply by being repacked. The UK tariff treats them as goods from China, with the corresponding tariff rate (often higher than for EU goods).

For goods shipped from Poland but manufactured in China (dropshipping via a European warehouse), the UK tariff rate depends on the actual country of manufacture, not the country of dispatch.

What "UK importer of record" means for non-UK businesses

A Polish company that imports goods into the UK as part of dropshipping can act as the UK importer of record — but must meet several conditions:

• Hold a GB EORI number (registration with HMRC, free of charge, takes 2–3 working days)
• Be registered as a UK VAT payer (if parcel values exceed £135 or annual sales > £85,000)
• Have a UK fiscal representative or UK establishment — depending on the tax structure

Many dropshippers use the services of a UK freight forwarder or customs broker as an import intermediary (customs agent acting as indirect representative) — this is simpler than self-registration when sales are irregular.

GB EORI — when required for a dropshipper

A GB EORI number is required when your imports to the UK exceed £135 per shipment or when you carry out your own customs clearances. If you sell exclusively via Amazon or eBay and all parcels are below £135 — you may manage without an EORI for now, as the marketplace handles VAT and clearance.

However, as your revenue grows or you move into premium segments (higher-value products), a GB EORI becomes essential. Registration is free and available on GOV.UK within a few days.

The trap: parcels sent as "gifts" — HMRC does not accept this

One of the most common abuses in dropshipping from China is marking parcels as "gift" with a fictitious value below £39 (the old LVCR limit). This was illegal before Brexit and is entirely illegal now — after Brexit LVCR no longer exists and every parcel is subject to VAT.

HMRC regularly inspects courier and postal shipments from China. Consequences for a dropshipper:

• Seizure of goods by HMRC
• Financial penalty of up to 20% of goods value per declaration
• Entry on the customs violations register, which hinders future import activity in the UK
• Possible criminal proceedings for systematic falsification of values

The only legal option is to declare the correct goods value and pay the appropriate VAT via the marketplace or your own UK VAT registration. Read more about errors on customs invoices.

FAQ — frequently asked questions about dropshipping to the UK

As a dropshipper from Poland, do I need to register for UK VAT?

It depends on your model. If you sell via a marketplace (Amazon, eBay) and all orders are below £135 — the marketplace collects VAT on your behalf and you do not need to register. If you sell via your own shop, order values exceed £135, or your annual marketplace sales have exceeded £85,000 — UK VAT registration is mandatory.

Who pays customs duty in DDP dropshipping from China?

Under DDP (Delivered Duty Paid) terms you as the seller pay import duty, VAT and all customs charges. The buyer receives the parcel with no surcharges — which is the standard for a good shopping experience in the UK market. This requires holding a GB EORI number and UK VAT, or working with a customs broker acting as your representative.

What should I do if a UK customer received a customs bill from the courier?

This means the shipment was on DAP terms and the buyer is the importer of record. You can cover that cost as compensation (bank transfer), offer a refund, or switch to a DDP model in future. Many complaints and negative reviews on Amazon / eBay result from unexpected customs charges on delivery.

Current rules — as of 2026

The rules on dropshipping and VAT for UK shipments have been in force since 1 January 2021. HMRC is tightening controls on small parcels from China, implementing risk-based targeting at the border. The information in this article reflects the legal position as of April 2026.

Official sources

• GOV.UK: VAT and overseas goods sold to customers in the UK — HMRC, 2026
• GOV.UK: Customs duty on goods brought into the UK — HMRC, 2026