VAT when selling apps and digital products in the UK

I am a developer, not a tax adviser. Nothing here is a recommendation for your registration, your invoices, or a particular year. It is the picture I wish I had had in one place when I first sold software as a small UK business, so you know which questions to take to someone who can sign them off.

This is a map, not advice for your return

VAT is a tax on some supplies of goods and services. Digital products — mobile apps, in-app purchases, downloadable tools, some online services — are usually treated as digital or electronically supplied services, not as physical goods. That matters, because the place-of-supply rules, and the way platforms are treated, are not always the same as they are for a box you post.

Two questions are worth keeping apart from the start:

• Do you have to register for VAT, and file returns? That depends on your circumstances and on the current registration rules, including the threshold and any rules for businesses outside the UK. HMRC publishes the current test; I will not quote a threshold here as if it were fixed.
• Who accounts for the VAT on a particular sale? Sometimes you do. Sometimes a platform does, under rules for marketplaces and digital platforms. Those are different jobs, and you can be affected by the second even when the first has not come up yet, or the other way around.

If you already have an accountant for the rest of your work, take this map to them rather than opening a second, informal advice channel from a blog post — including this one. The brief-building habit is useful: write down what you sell, through which platforms, to whom, and in which countries, before the meeting, so you are not reconstructing it from memory.

Selling through the App Store, and who collects VAT

If you sell an iOS app, a subscription or an in-app purchase through Apple’s App Store, you are usually selling through a digital platform. HMRC’s guidance on VAT when you supply digital services to consumers describes when a platform, rather than the underlying seller, is responsible for accounting for VAT on that consumer sale.

In outline, and this is the official idea rather than a private interpretation of your contract: if the platform identifies you as the seller but sets the general terms, authorises payment, or handles delivery or download of the digital service, the platform may be the one that accounts for the VAT charged to the consumer. You then need to understand, from Apple’s current documentation and from your own advice, how that shows up in your reports and whether you are treated as making a supply to the platform instead.

What you should actually do, in practice:

• Read the current tax and banking sections in App Store Connect, complete the forms accurately, and keep copies. They ask about your location and tax status for a reason.
• Read HMRC’s current digital-services and platform guidance, not a Twitter thread about “Apple handles VAT so I can ignore it.”
• Look at a real payout and a real transaction report. See how tax is labelled for a UK customer, and for a customer in another country, rather than assuming a single story.
• Don’t guess a price “plus VAT” or “including VAT” until you know, for that storefront, what the customer will be shown. There is more on the number people see in How to price a small app or digital tool.

Apple’s own role, the countries it collects in, and the way it reports tax to you can change. This is why I will not say “Apple always collects UK VAT for UK developers” as a timeless fact. The question to take to an accountant is: “For sales through this store, in these countries, who is the person who accounts for VAT to the tax authority, and what do I still need to record?”

Other stores (Play, a games store, a marketplace for desktop software) have their own contracts. Don’t copy an App Store conclusion onto a different platform.

Selling from your own site

If you sell a digital download, a licence or a subscription from your own website, there is often no platform sitting in the middle to account for VAT on your behalf. Payment providers (card networks, “Stripe-style” processors, PayPal and so on) usually process the payment; they are not, just by taking the card, the same thing as an App Store-style marketplace. Some of them offer tools that help you collect tax; those tools are not a substitute for knowing whether you should be registered, or at what rate a given customer should be charged.

On a direct sale, the questions tend to be:

• Is this a taxable digital service for VAT purposes? Many downloads and paid web tools are. Some supplies are not. The classification is a job for guidance and advice, not for a guess based on the file extension.
• Where is the customer, and are they a consumer or a business? Place-of-supply rules differ, and the evidence you need to keep (country, VAT number, and so on) differs. HMRC describes this in the digital-services guidance and in the wider VAT guide.
• What do you show on the invoice or receipt? If you are VAT registered and you are charging VAT, the invoice has to meet the current content rules. If you are not charging VAT, don’t invent a “VAT number” or a rate to look official.
• What do you do for a customer outside the UK? A UK consumer sale and a sale to a consumer abroad are not always treated the same, and a foreign tax may be due even when UK VAT is not. That is the next section, not a footnote.

Direct sales also make the price-on-the-page problem your problem. If you are registered and the price is VAT-inclusive, say so. If it is exclusive, say so before the payment is taken, not only on a PDF that arrives afterwards.

VAT registration, thresholds and what they are for

VAT registration in the UK is a legal status with consequences: you may have to charge VAT, you may be able to reclaim some input VAT, you have to file returns, and you have to keep records for the period HMRC currently requires. There is a threshold at which registration can become compulsory, and there is usually a path to register voluntarily below it. The figures and the tests are published by HMRC and they have changed before. Look them up on GOV.UK when you need them, and don’t plan a year of sales around a number you memorised in a previous tax year.

Registration is not the same question as “does Apple collect VAT on my App Store sales?” You might be unregistered and still see tax deducted or collected in a store report. You might be registered and still have some supplies treated in a special way. Mixing the two up is how people either ignore a registration duty, or add VAT to a price twice.

A few cautions:

• Don’t wait for a round-number scare. If your turnover is approaching the current threshold, take advice in time to register on the timetable HMRC sets, not after you have already passed it.
• Turnover for the test is defined by HMRC, not by “what landed in my current account after Apple’s commission.” The base you use matters.
• Voluntary registration can be rational if you have recoverable input VAT, and a poor fit if it would make your prices harder to explain and you have little to reclaim. That is a sums-and-advice question.
• Other taxes exist. Corporation tax, income tax, and digital services taxes aimed at large platforms are not this article. Don’t treat a clean VAT map as a complete tax map. What an iOS app really costs is about project cost, not about your return, and it stays out of price lists for the same reason I stay out of them here.

Digital services to customers outside the UK

If you sell a digital service to a consumer who is not in the UK, UK VAT may not apply to that sale, and tax in the customer’s country might. The EU, in particular, has for years had special rules for electronically supplied services to consumers, and those rules have been revised more than once. Other countries have their own registration thresholds and platform regimes.

For App Store sales, the platform may collect and remit in some storefronts and not in others. For direct sales, you may need to register in a foreign system, use a special scheme, or change how you sell. I will not name a scheme, a rate or a threshold here as if it were current. The right next step is: list the countries your customers actually come from, read the current HMRC page on digital services to consumers, and ask an accountant whether a foreign registration or a platform’s collection covers you.

Two practical habits help regardless of the current schemes:

• Keep evidence of customer location for digital sales, in the form the current rules ask for, if you are the person who has to apply a rate.
• Don’t assume a US or EU customer is “the same as” a UK one. The Time Zone & DST Explorer is a small reminder that “international” is a set of local rules, not a single other country.

Business customers (VAT-registered organisations) can be a different treatment again, sometimes involving a reverse charge or a similar mechanism. That is advice territory. Don’t copy a consumer invoice onto a business invoice without checking.

Prices, ‘VAT included’ and what people see

People judge a product by the number on the button. Whether that number includes VAT depends on the storefront, your registration status, and how you configured the price.

On the App Store, you pick a price or a price tier, and the store displays a price to the customer in that storefront. Tax can affect what is displayed or what is remitted. Look at the store with a UK account and, if you sell elsewhere, with a second storefront, rather than multiplying in a spreadsheet and assuming the result is what a person in Berlin or New York will see.

On your own site:

• Be consistent. “£12 including VAT” and “£12 + VAT” are different offers.
• Don’t change the tax treatment at the payment step.
• If you are not VAT registered, don’t add a VAT line to look bigger.

This also feeds the paid-versus-subscription decision in Paid, freemium or subscription: a monthly price that looks cheap can look less cheap once you understand what is included, and a “simple” upgrade price can surprise you when a storefront applies tax differently. Use the Word Counter if you want, not for VAT maths, but to keep the sentence on the product page short enough that the tax wording still fits: “Includes VAT where applicable” is not poetry, but it is clearer than silence.

Records worth keeping

Whatever your eventual position, you will be glad you kept:

• The contracts and tax forms you accepted with Apple, Google, or your payment provider, with dates
• Transaction reports that show country, tax collected, and the amount you received
• Copies of invoices you issued, and of invoices you relied on if you reclaim input VAT
• A short note of what you sell, and through which channel, updated when you add a product
• The advice you took, if you took some, so you are not reconstructing it at year end

HMRC sets the periods for which records must be kept. Check the current period rather than throwing files away after a year because that felt long enough. This is dull, and it is cheaper than reconstructing a year of App Store reports from memory during an enquiry.

When to speak to an accountant

Speak to someone who can give tax advice, in particular, if:

• you are approaching the current registration threshold, or you have already passed it
• you sell from your own site to consumers in other countries
• you have, or are thinking about, a company as well as a sole trade
• a platform’s report shows tax treatments you cannot explain
• you want to register voluntarily, or to deregister
• you have started charging VAT, or stopped, and you are not sure what the invoices should say

Bring them the map of channels and countries, not a shoebox of screenshots. A specialist who already works with small software and creative businesses will spend less of your money finding out what the App Store is.

Then follow their advice, and HMRC’s current publications, even if they differ from a paragraph in this article. They will, eventually, because the rules will move and this page will have a date on it. If you are choosing an iOS developer, tax treatment is not their job, but a clear map of what you sell and through which store, before a launch, will save everyone a messy conversation afterwards.

Key takeaways

• This is a map, not tax advice. Confirm rates, thresholds and who collects VAT with HMRC and with an accountant.
• A sale through the App Store and a sale from your own site are different: a platform may account for VAT on a consumer digital sale, and you still need to understand the reports and your own registration.
• Registration is a separate question from “who collects tax on this transaction,” and the current threshold lives on GOV.UK, not in a remembered number.
• Customers outside the UK can bring foreign rules into play; don’t assume one treatment covers every storefront.
• Keep contracts, transaction reports and invoices, and get advice before you guess at a registration or a price-plus-VAT wording.

If you want a second pair of eyes on how you have described a product’s price, tell me about it — and still take tax questions to an accountant.

Frequently asked questions

Written by Lee Johnson. Published 10 November 2026.