E-Books and New VAT Rules

Last week I (like all Amazon authors) received an email from Amazon about changes in the VAT rules for e-books. This change comes into effect on January 1st 2015.

Previously (i.e. pre-Jan 2015) VAT on e-books was calculated according to the seller’s country but under the new rules, VAT rates will depend on the buyer’s country. Previously, VAT on Kindle e-books was 3% because Amazon’s headquarters (Amazon are the sellers) are in Luxembourg. Now, for UK e-book buyers it will rise to 20%.

Amazon will automatically change all list prices of existing e-books to reflect this change. This means that Kindle e-book prices are on the rise. The British government will benefit but readers of e-books will lose out.

Previously the lowest price possible on Amazon UK for an Indie e-book, with the author choosing 35% royalties, was 77p. From the 1st Jan 2015 this will rise to 99p. The lowest possible price with the author choosing 70% royalties was £1.53, this will rise to £1.99. The Amazon information page on this is here.

The moral of the story for readers? Stock up on e-books before the end of the year, or face a steep price hike! If you were planning on shopping for a Kindle or tablet in the January sales, download the free Kindle app to your PC and buy your books now to read on your new Kindle later.

The moral of the story for Indie writers? I’m not sure. We’ll have to wait and see if the new, higher prices send the customers running back to print books. Let’s hope not!

Another word of warning – if you sell e-books directly from your own website, it is your responsibility (whether you are currently VAT registered in the UK or not) to implement the new rules i.e. you must charge VAT according to the buyer’s country and then pay the VAT to the relevant government. I’ve found two interesting links on this topic Rachel Andrew has written a blog post  and Juliet E. McKenna has put together another useful post.

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  1. #1 by David Massie on December 10, 2014 - 11:00 pm

    hello sally yes like all of us that e mail came sneakily from the tax people. by the way thank you for the information in your book and i have now become an author and as i’m happily retired i feel very good will close now. dave

    • #2 by Sally Jenkins on December 11, 2014 - 9:23 am

      Thanks for dropping by, Dave. Best wishes with that book – and let’s hope the new tax rules don’t affect writers too badly.

  2. #3 by Nick Daws (@nickdaws) on December 11, 2014 - 9:44 am

    Thanks, Sally. The last paragraph of your post is particularly worrying, in my view. I would urge all writers to sign the petition from Change.org to get the new regulations reviewed and ensure that the UK VAT exemption threshold is upheld for micro-businesses. Here’s a link: https://www.change.org/p/vince-cable-mp-uphold-the-vat-exemption-threshold-for-businesses-supplying-digital-products

    If this does become law, I foresee many writers and other online businesses will refuse to do any business with Europe in order to avoid being drawn into compulsory VAT registration.

    • #4 by Sally Jenkins on December 11, 2014 - 4:16 pm

      Thanks very much for this, Nick. I didn’t know about the petition but will definitely be signing it – and I encourage everyone else to!

  3. #5 by Tracy Fells on December 11, 2014 - 12:52 pm

    Thanks for such a helpful post, Sally. This and other aspects completely puts me off self-publishing anything as an e-book!

    • #6 by Sally Jenkins on December 11, 2014 - 4:17 pm

      Don’t be put off, Tracy. It’s not scary! If you sell through Amazon then everything’s taken care of.

  4. #7 by hilarycustancegreen on December 11, 2014 - 10:41 pm

    Thanks so much for this clarification. I kept half reading the info they sent, then thinking, I can’t face this, I’ll just see what happens.

  5. #9 by Wendy Clarke on December 14, 2014 - 8:28 am

    Thanks for clarifying this, Sally.

    • #10 by Sally Jenkins on December 14, 2014 - 8:27 pm

      I just wish it wasn’t such bad news, Wendy.

  6. #11 by Linda on December 14, 2014 - 4:57 pm

    I’ve just signed the petition. Hope it helps.
    I haven’t self published anything yet, but as a reader I’ve always thought it unfair that VAT is charged on ebooks while print books and magazines are zero rated.

    • #12 by Sally Jenkins on December 14, 2014 - 8:28 pm

      Thanks for signing, Linda. And does it seem very unfair that VAT is charged on e-books at all – maybe it needs another petition!

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