VAT for TikTok Shop Sellers: The Expert Guide (2026/27 Edition)

If you have been selling on TikTok Shop for more than five minutes, you already know the platform is an absolute beast for volume. One viral video, and you are shipping hundreds of units.

But you also know the backend reporting can feel like it was designed specifically to give accountants a migraine.

At Social Commerce Accountants, we see it every day. A brand hits six figures in revenue, they log into the Seller Center, and suddenly realise they have no idea if the money hitting their bank account includes VAT, excludes VAT, or if TikTok has already paid it for them.

With HMRC cracking down hard on digital platforms and data sharing rules getting tighter in 2026, you cannot afford to guess.

This guide isn’t just theory. This is exactly how we handle VAT for our D2C clients, from registration to that final Xero reconciliation.

Do I Need to Register for VAT? (The Threshold)

Let’s start with the basics, because getting this wrong is expensive.

In the UK, you must register for VAT if your taxable turnover exceeds the current VAT registration threshold (currently £90,000) in a rolling 12-month period.

Note: This is not a calendar year. It is any rolling 12-month window. If you hit £90,001 on a Tuesday in November looking back over the last year, you must register.

What counts towards the threshold?

A common mistake TikTok sellers make is looking only at the "payout" amount that hits their bank. Do not do this.

You must calculate your turnover based on Gross Sales.

• Product sales (before TikTok takes their fees)
• Shipping income charged to customers
• Sales from all your channels (TikTok, Shopify, Amazon, eBay combined)

Pro Tip: If you are a UK business holding stock in the UK, you are responsible for your VAT. If you are an overseas seller holding stock in the UK, the rules change (marketplace facilitator rules), but for most domestic Ltd companies, the liability is on you.

TikTok Shop VAT Registration Threshold vs. Voluntary Registration

Many of our clients ask: "Should I register before I hit the £90k mark?"

If you are just starting, you might not be legally required to have a VAT registration number. However, voluntary registration can be a strategic move for ecommerce brands.

Why register early?

• Reclaiming Input VAT: You can claim back the VAT on your stock purchases, packaging, and ads. If you are selling zero-rated items (like children's clothes), you absolutely should register immediately.
• Perception: Being VAT registered makes you look like a larger, more established entity to suppliers.
• The "TikTok Freeze": We have seen TikTok Shop freeze payouts while they verify tax status. Having a valid VAT number upload often smoothes out the verification process in the TikTok Seller Center tax settings.

TikTok Shop VAT Rules: The Common Pitfalls

TikTok Shop does not work like Shopify. On Shopify, you set the tax rules. On TikTok, the platform controls the checkout flow, and if your settings are wrong, you are liable for the difference.

1. The Gross vs. Net Trap

When TikTok pays you, they deduct:

• Commission fees
• Transaction fees
• Shipping fee subsidies
• Affiliate commissions

If you sell a product for £20 (inc VAT), you owe HMRC £3.33 in VAT. TikTok might only pay you £14 after fees. Mistake: Paying VAT on the £14. Correct: Paying VAT on the £20.

You must account for the VAT on the full selling price, then claim back the VAT on the TikTok fees (provided you download the correct invoices).

2. VAT on Shipping Fees TikTok

This causes more confusion than anything else.

If you charge the customer £3.00 for shipping, that £3.00 is generally subject to VAT at the standard rate (20%), assuming your products are standard rated.

Even if TikTok "subsidises" the shipping (i.e., the customer pays free shipping, but TikTok pays you the shipping cost), that income is still taxable turnover. You need to watch your settlement reports like a hawk to see exactly who paid what.

How to Configure Your TikTok Seller Center Tax Settings

To ensure TikTok calculates tax correctly at checkout (so you aren't paying VAT out of your own pocket), you must configure the backend correctly.

1. Log in to TikTok Seller Center.
2. Navigate to Account Settings > Taxes.
3. Add your VAT Registration Number. Ensure the address matches your HMRC certificate exactly.
4. Set Product Tax Codes. Do not assume TikTok knows your product is a biscuit (standard rated) or a cake (zero rated). You must categorize your SKUs correctly.

If you skip this, TikTok may treat your sales as tax-inclusive by default, or worse, tax-exclusive without collecting it, leaving you to foot the bill.

How to Download VAT Invoice TikTok Seller

You cannot do VAT bookkeeping without the official tax documents. A screenshot of your dashboard is not enough for HMRC.

Here is the workflow we use for our clients:

1. Go to Finance > Settlements.
2. Do not just look at the list. Click on Reports.
3. You are looking for two specific documents:
   
   • The Settlement Report: This shows the cash flow (Excel/CSV).
   • The Fee Invoices: These are the legal PDF invoices from TikTok for their commissions.

Where do I find TikTok Fee Invoices? Look in the "Invoices" or "Tax Centre" tab within the Finance section. You need these PDFs to reclaim the VAT charged on TikTok’s commission fees. Without the PDF, you cannot legally reclaim that VAT.

Reconciling in Xero: A Guide for the "Best Accountant"

If you are doing this yourself, or if you have a generic high-street accountant, this is where things usually break.

You cannot simply connect the bank feed to Xero and click "Sales". That is incorrect because the bank deposit is a net figure.

The Specialist Method:

1. Create a Clearing Account: Set up a "TikTok Shop Clearing" bank account in Xero.
2. The Sales Invoice: Create a sales invoice for the Gross Sales (Total value of goods sold) + Shipping Income. Apply the 20% VAT rate here. Mark this as paid into the Clearing Account.
3. The Bills: Create bills for TikTok Commission, Transaction Fees, and Shipping charges. Apply the 20% VAT rate (reverse charge may apply depending on where TikTok bills you from—check the invoice address! If it is TikTok UK, it is standard VAT. If it is TikTok Singapore, it is different).
4. The Bank Feed: When the cash hits your real bank account, transfer it to the Clearing Account.

If you have done it right, the Clearing Account should balance back to zero (or close to it, pending timing differences).

Why You Need a Specialist TikTok Accountant

Can a general accountant do this? Maybe. Will they enjoy it? No. Will they miss the nuances of "Shop Shipping Fee Contribution" vs "Seller Shipping Fee"? Probably.

As a tax specialist UK focused on ecommerce, we see the patterns.

• We know when TikTok changes their invoice format (which they do).
• We know how to handle the "Affiliate Commission" deductions so you aren't taxed on money you gave to an influencer.
• We use A2X, Link My Books, or custom API setups to automate the data entry so we aren't manually typing numbers.

If you are serious about scaling on TikTok Shop, you need a partner who understands the platform, not just the tax return.

About the Author

Sam Hoye is the Founder and Director of Social Commerce Accountants. Specialising in high-growth ecommerce, Sam helps TikTok Shop sellers, Amazon FBA brands, and Shopify merchants navigate the complexities of UK tax and accounting.

Unlike traditional high-street firms, Sam understands the difference between an ASIN and an SKU, and knows exactly how to handle platform payouts, settlement reports, and cross-border VAT. He works with 7-figure sellers daily to turn chaotic data into compliant, investor-ready financials.

Is your TikTok Shop accounting keeping you awake at night? Contact us here.

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