UK VAT Thresholds for SaaS & Digital Products Sold Abroad

You’re a UK business selling digital products (PDFs, ebooks, templates, courses) or SaaS subscriptions, at home and abroad. You know about the £90,000 UK VAT threshold. What nobody tells you is that it doesn’t protect you anywhere else.

Here’s where you owe tax, who tracks the thresholds, and when a Merchant of Record (MoR) is worth paying for. We’ll take a typical case: £2.99 resources and £13.99 bundles, or a £9/month SaaS tool, sold to consumers.

TL;DR

• UK customers: no VAT until your UK taxable turnover passes £90,000. E-books are zero-rated; SaaS, templates and worksheets are 20%.
• EU customers: no threshold for UK sellers. You owe EU VAT from the first sale, through one Non-Union OSS registration. This applies to downloads and SaaS alike.
• US, Canada, Australia: thresholds apply ($100,000 per US state, CAD 30,000, AUD 75,000).
• Two ways to handle it: a payment processor (Stripe) plus tax compliance software like GoodVat to track thresholds and file, or a Merchant of Record that does it all for a bigger cut of every sale.

Where your customers are	Threshold for a UK seller	What you do once you’re over it
United Kingdom	£90,000 UK taxable turnover	Register for UK VAT
European Union	None: from your first sale	One Non-Union OSS registration for all 27 countries
United States	$100,000 per state in most states; 200 transactions in some	Register in that state, if it taxes what you sell
Canada	CAD 30,000 in 12 months	Simplified GST/HST registration
Australia	AUD 75,000 a year	Simplified GST registration

Selling to UK customers: the £90,000 VAT threshold

You register for UK VAT once your UK taxable turnover passes £90,000 in any rolling 12 months. Digital products and SaaS sold to consumers outside the UK are outside the scope of UK VAT, so they don’t count towards it.

• Digital products: e-books and similar e-publications are zero-rated: 0% VAT even once you’re registered. Resources mostly meant to be filled in (worksheets, planners, templates) are usually 20%.
• SaaS: standard-rated at 20%.

Read next: UK VAT threshold 2026 · UK VAT guide

Selling to EU customers: VAT from your first sale

This is the one most UK sellers miss. Since Brexit, the UK is a non-EU country, so the EU’s €10,000 threshold doesn’t apply to you. Your first sale to an EU consumer creates an EU VAT obligation.

You don’t register in 27 countries. You register once for the Non-Union One Stop Shop (OSS) in a single EU country (Ireland is popular), charge each customer’s local rate, and file one return per quarter.

• Digital products: many EU countries tax e-books at a reduced rate. Other downloads usually pay the standard rate.
• SaaS: always the standard rate. Sales to EU businesses with a valid VAT number are reverse-charged, with no VAT on your invoice. Check numbers with the free EU VAT number checker.

Read next: Non-Union OSS for UK digital sellers · Late EU VAT registration, if you’ve already been selling

Selling to US customers: state economic nexus

The US has no national sales tax. Each state sets its own economic nexus threshold, usually $100,000 a year in sales into that state. 14 states, DC and Puerto Rico also count transactions: 200 sales there create nexus even below $100,000. California, Texas and New York are at $500,000.

• Digital products: about half the states tax digital downloads.
• SaaS: fewer states tax it, and some only partly (Texas taxes 80% of the price). In states with a transaction test, every monthly renewal counts as a transaction.

These thresholds apply to UK sellers too. Check your biggest states once a quarter.

Read next: US sales tax for foreign sellers · Economic nexus thresholds by state · Check yours with the free US nexus calculator

Selling to Canada and Australia: GST thresholds

• Canada: once your sales to Canadian consumers pass CAD 30,000 over any 12 months, you register under the simplified GST/HST system and charge 5% to 15% depending on the province.
• Australia: once your sales to Australian consumers reach AUD 75,000 a year, you register for simplified GST and charge 10%.

These rules cover both downloads and SaaS. Sales to businesses that give you a tax number don’t count in either country.

Two ways to handle it: a payment processor or a Merchant of Record

Option 1: payment processor + tax compliance software

Stripe, PayPal and other payment processors move the money; you are the seller. They don’t tell you when you cross a threshold. Stripe Tax monitors your Stripe sales only, and charges extra to register and file.

So you need tax compliance software such as GoodVat. It tracks the UK, US, Canadian and Australian thresholds across all your sales channels (Stripe, Shopify, Etsy, Gumroad) and warns you before you cross one. It also handles your EU OSS registration, calculates the right tax at checkout and files your returns.

Option 2: Merchant of Record

A Merchant of Record such as Paddle, Lemon Squeezy or Stripe Managed Payments becomes the legal seller. It charges your customers, handles the tax everywhere and pays you what’s left. You don’t need an OSS registration or any other.

You pay for that on every sale. Paddle lists 5% + 50¢ and quotes custom pricing for products under $10. Lemon Squeezy charges 5% + 50¢. Stripe Managed Payments adds 3.5% on top of normal Stripe fees.

	Payment processor + GoodVat	Merchant of Record
Who’s the seller	You	The MoR
Threshold tracking	GoodVat, across every sales channel	Not needed
Registrations and returns	GoodVat registers you and files	The MoR
Cost	Card processing + a flat monthly plan (from $0) + optional done-for-you filing (our filing prices)	6–8% of revenue, more on cheap products
Best for	Products under £5, or anyone past about $100,000 a year	Starting out, or never wanting an EU registration

Which one to pick

• Low-cost digital products: an MoR’s fixed fee can take 10% or more of a £2.99 sale. If you’re happy to hold one Non-Union OSS registration, Option 1 costs less from the start.
• SaaS: before about $100,000 a year, an MoR’s convenience is often worth it. After that, its percentage costs more each year. See the numbers in MoR vs Stripe + GoodVat and the SaaS payment setup guide.

FAQ

Does the £90,000 UK VAT threshold apply to sales abroad?

No. The £90,000 threshold only decides whether you register for UK VAT, and digital products or SaaS sold to consumers outside the UK don’t count towards it. Every other country applies its own rules, and the EU has no threshold for UK sellers at all.

Do UK sellers charge VAT on digital products and SaaS sold to EU customers?

Yes, from the first sale. Since Brexit the UK is outside the EU, so the €10,000 threshold doesn’t apply. You charge each EU consumer’s local VAT rate and report it through one Non-Union OSS registration in a single EU country. Sales to EU businesses with a valid VAT number are reverse-charged instead.

Do UK sellers have to collect US sales tax?

Only in states where you pass the economic nexus threshold, usually $100,000 a year in that state (14 states, DC and Puerto Rico also count 200 transactions), and only if that state taxes what you sell. A small UK seller is unlikely to reach one early on.

Should a UK seller use a Merchant of Record or Stripe?

There are two ways to handle it. Use a payment processor such as Stripe together with tax compliance software like GoodVat, which tracks your thresholds, handles your EU OSS registration and files your returns. Or use a Merchant of Record such as Paddle, Lemon Squeezy or Stripe Managed Payments, which handles the tax for a higher fee on every sale. The EU is the deciding factor, because you owe VAT there from the first sale.

Do I charge UK VAT to customers outside the UK?

Not for digital products or SaaS sold to consumers outside the UK: those sales are outside the scope of UK VAT. You may owe the customer’s local VAT or GST instead, depending on their country’s rules.