Healey plans marketplace VAT crackdown to fund high street business rate cuts

The marketplace plan

Chancellor John Healey is reportedly preparing to announce that online marketplaces will be made responsible for collecting the tax owed by retailers selling through their platforms, according to reports. The move would mainly hit overseas sellers that have used weak rules to avoid VAT, and it would cover platforms such as Amazon, eBay and Temu. Every seller with annual turnover above £90,000 would have VAT collected at source. The reports put the yield at up to £1bn, which Healey is expected to use to cut business rates for high street shops. Dan Neidle, founder of Tax Policy Associates, welcomed the tightening but warned about loopholes.

This is a step in the right direction but the Treasury needs to go further

He argued that marketplaces would need to collect every penny of VAT on sales made on their platforms, or Chinese sham companies would find another way around the rules. A Treasury spokesperson said decisions on tax are for the chancellor to set out at fiscal events rather than commenting on rumour or proposals.

Pressure over high street relief

Pressure on Healey to ease the burden on small retailers has grown ahead of the budget on 28 October. Andy Burnham has pledged to raise the business rates threshold so that 140,000 small high street retailers would not pay the tax, at a projected cost of £880 million. The Institute for Fiscal Studies warned that the budget risks being a 'work of fiction' unless Healey sets out how to cover £35bn in spending pressures. It said higher inflation means the chancellor would need either to top up his current spending plans or impose deep real-terms cuts by the end of the decade. Healey has framed the package as a budget for the 'white van man' and the 'high street beautician'.

Growth forecast and fiscal squeeze

The IMF raised its 2026 growth forecast for the UK to 1.3%, and one report says the upgrade reflects artificial intelligence driving economic growth. Sources give different sizes for the change, citing 0.3 points from July and 0.5 points from April. The IMF nonetheless urged Healey to 'stay the course' on repairing public finances. Silvana Tenreyro, the fund's economic counsellor, said the UK 'stands out' among G7 countries in having a plan to narrow its deficit. Another report says soaring borrowing costs linked to the Iran war and weaker growth have eaten into the government's fiscal headroom.

1. Oct 12, 2026IMF upgrades UK 2026 growth forecast to 1.3%
2. Oct 14, 2026Reports say the online marketplace VAT plan is being drawn up
3. Oct 28, 2026First budget, where the reported measure is expected to be announced

Capital gains tax and Scottish proposals

Healey may also raise capital gains tax, which is 24% for higher-rate taxpayers, although the Treasury is reported to have persuaded him to reject the most extreme option of matching the income tax rate of up to 45%. Rachel Reeves raised the rate from 18% to 24% for higher-rate taxpayers in her first budget, and receipts reached a record £24.2bn in the 2024-25 tax year. Much of that figure reflected a rush to sell assets before the rise, which makes the longer-term yield harder to predict. In Scotland, the Greens want a surcharge through Non-Domestic Rates on large online operations such as distribution centres, to offset falling footfall on high streets.

Huge global online retailers are making obscene profits while Scotland's small businesses are struggling and our high streets are being hollowed out.

Laura Moodie, the Green MSP for South Scotland, said an Amazon tax would let smaller firms compete on a level playing field, and reports say Amazon earned around £30bn in UK revenues in 2025 and paid more than £1.3bn in taxes. The Scottish Retail Consortium opposes the proposal. David Lonsdale, its director, argued that most retailers already sell online.

Most retailers of any scale sell online and most have warehouses.