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VAT on discounts and vouchers comes down to one rule for most sellers: you pay VAT on what you actually receive for the sale, not on the full ticket price. Gift cards are the exception, because their VAT depends on whether they count as single-purpose or multi-purpose vouchers, and that decides when the VAT falls due.
Black Friday lands on 27 November 2026 and Cyber Monday on 30 November, and the promotions you set up in October decide what goes on your VAT return in the new year. This guide covers discount codes, gift cards, multi-buys and bundles, platform-funded offers and free giveaways, with worked figures. If you would rather we checked your promotions before they go live, our team does this every autumn.
- Discounts and discount codes
- Gift cards: single-purpose or multi-purpose
- Multi-buys, bundles and free gifts with purchase
- When a marketplace or brand pays towards the discount
- Giveaways, samples and influencer freebies
- A Black Friday VAT checklist
- Frequently asked questions
Discounts and discount codes: VAT on what the customer pays
A price reduction reduces the VAT. HMRC’s business promotions guidance (VAT Notice 700/7) says VAT is due only on the discounted amount you actually charge. That applies to a sitewide 25% off, a strike-through sale price and a discount code typed in at checkout.
A worked example. You sell a hoodie at £60 including VAT, so the VAT in it is £10. On Black Friday you take 25% off and it sells for £45. The VAT is now £7.50, one sixth of £45 at the 20% standard rate. Sell 400 of them and the difference is £1,000. If your records post the full price and then a separate “discount” line with no VAT on it, you pay VAT on money you never received.
Free money-off codes carry no VAT when you hand them out, provided any goods they come with are sold at their normal price. Notice 700/7 says money-off coupons are normally issued for no payment, so there is nothing to tax until the code is used, and then it simply lowers the price. One point of vocabulary saves a lot of confusion: under HMRC’s rules a discount code is not a “voucher”. That word is reserved for things like gift cards, which work very differently.
Gift cards: VAT on vouchers depends on the type
Gift cards and e-gift vouchers peak in December, and since 1 January 2019 they fall into two groups under Schedule 10B of the VAT Act 1994. The test is simple: do you know the VAT position at the moment you sell the card?
A single-purpose voucher is one where, when it is issued, you already know both the VAT rate of everything it can buy and where the supply will happen. A £50 gift card for a UK store that only sells standard-rated goods, such as phone accessories, is single-purpose. You account for the VAT (£8.33) in the period you sell the card, not when it is spent.
A multi-purpose voucher is any voucher that is not single-purpose. If your store sells zero-rated children’s clothing alongside standard-rated adult clothing, you cannot know at the sale which rate will apply, so the card is multi-purpose. Selling it is not a taxable supply. You account for VAT when it is redeemed, on whatever the customer actually buys. Cards that cannot be passed on to someone else fall outside both groups.
| Single-purpose voucher | Multi-purpose voucher | |
|---|---|---|
| Example | Gift card for a UK store selling only standard-rated goods | Gift card for a store selling zero-rated and standard-rated goods |
| When VAT is due | When you sell the card | When the card is spent |
| VAT on what | What the customer paid for the card | The goods actually bought with it |
| If it is never used | No adjustment, the VAT stays paid | No VAT at all |
That last row matters every January. An unspent single-purpose card has already had its VAT paid and you cannot claw it back. An unspent multi-purpose card never generates VAT at all. Tag gift card sales separately in your ecommerce platform so the two types do not get mixed into ordinary sales.
Need this done for you? Our FCCA-chartered team sets up VAT for promotions, gift cards and marketplace payouts for UK ecommerce sellers every day. Book a free 30-minute call and we’ll show you what we’d do in the first 30 days.
Multi-buys, bundles and free gifts with purchase
“Buy one get one free”, “3 for 2” and “free tote bag with every order” do not create a free supply for VAT. HMRC treats them as a sale of all the items for the price the customer pays. The free item carries no separate VAT, as long as it genuinely comes as part of the paid order.
The catch is mixed rates. If the items in the deal carry different VAT rates, Notice 700/7 says you will usually have to apportion the price between them. Say you sell a children’s winter coat (zero-rated) with a free adult hat (standard-rated) for £40. The £40 has to be split fairly between the two, for example in proportion to their normal selling prices, and VAT charged on the hat’s share.
If you have relied on the old “linked supplies” rule of thumb, check it again. HMRC withdrew that concession from Notice 700/7 on 13 February 2026. It used to let a cheap extra follow the VAT rate of the main item, and plenty of online guidance still quotes it. Any bundle that mixes VAT rates should now be checked against the current notice, not an old blog post.
When a marketplace or brand pays towards the discount
Some Black Friday discounts are not paid for by you. Marketplaces, TikTok Shop among them, run co-funded vouchers where the platform covers part of the reduction, and brands sometimes pay resellers towards a multi-buy. The customer pays less, but you may not receive less.
HMRC’s position is plain: payment from anyone other than your customer is still part of the price of the sale to that customer. If the customer pays £30 and the platform tops you up by £10, your VAT is on £40, not £30. The same applies to a manufacturer’s contribution towards a “3 for 2” offer, which Notice 700/7 treats as further payment for the sale.
The practical problem is spotting the top-up. It usually shows up as its own line in the settlement report, separate from the order value. Our guide to marketplace VAT for UK sellers covers how platform payouts are built. Before 27 November, open last year’s Q4 settlement reports and find where platform-funded amounts appeared, so they are coded to sales rather than lost in “other income”.
Giveaways, samples and influencer freebies
Free products given away with no purchase follow the business gifts rules. You do not account for VAT on gifts to the same person as long as their total cost stays at £50 or less, excluding VAT, in any 12-month period. Go over that and output VAT is due on the cost of all of them, not just the excess, provided you were entitled to reclaim the VAT when you bought them.
Influencer seeding is where Q4 campaigns go wrong. If a creator is expected to post in return, the product is not a gift. It is payment for their promotion, and VAT is due on its value whatever the amount (Notice 700/7, section 5). The £50 limit only covers genuine no-strings giveaways, and it is per person across 12 months.
Samples are separate. A sample is a specimen that promotes the product and lets its qualities be assessed without final consumption, and a qualifying sample carries no VAT. A full-size product, or more than is needed to judge it, does not qualify. Keep a simple log of who received what, at cost, and why, so each item can be checked rather than guessed.
VAT on discounts and vouchers: a Black Friday checklist
- Test one discounted order end to end. Place a test order with your Black Friday code and check that your accounting software shows VAT on the discounted price, not the full price.
- Decide what type each gift card is. If everything you sell is standard-rated and delivered in the UK, it is probably single-purpose. Mixed rates or overseas delivery point to multi-purpose.
- List any bundle that mixes VAT rates and agree how you will apportion the price, before the listing goes live.
- Find platform-funded amounts in your settlement reports and code them to sales.
- Start a gifts log for giveaways and creator seeding, with cost per person and whether a post was expected in return.
Getting VAT on discounts and vouchers right is only part of peak season, so two related checks are worth doing in the same sitting. A strong November can push your rolling turnover over the £90,000 VAT registration threshold, and discounted Q4 trading needs a cash plan, which our Black Friday cash flow guide walks through. January returns then reverse some of this, and how refunds affect your tax covers that side.
Frequently asked questions
Do I charge VAT on the full price or the discounted price?
The discounted price. HMRC says VAT is due only on the reduced amount you actually charge. A £60 item sold for £45 on Black Friday carries £7.50 of VAT at 20%, not £10. Make sure your accounting software records the sale at the discounted price, rather than posting the full price and a separate discount with no VAT adjustment.
Is there VAT on gift cards?
Yes, but the timing depends on the type. A single-purpose voucher, where the VAT rate and place of supply are known when it is sold, is taxed at the point of sale. A multi-purpose voucher is taxed only when it is spent, on the goods actually bought. A store selling only standard-rated goods in the UK usually issues single-purpose gift cards.
What happens to VAT on an expired gift card?
It depends on the type. For a single-purpose voucher the VAT was paid when the card was sold and no adjustment can be made if it is never used, unless you give a refund. For a multi-purpose voucher no VAT is due at all, because the sale of the card was disregarded and nothing was ever supplied.
Do I pay VAT on free gifts I give to customers?
Not if the gift comes with a purchase, because it is treated as part of that sale. For no-strings gifts with no purchase, such as giveaways, no VAT is due as long as the total cost of gifts to the same person is £50 or less, excluding VAT, in any 12 months. Above that, VAT is due on the cost of all of them. Products sent to creators in return for a post are not gifts, and VAT is due on their value.
How does VAT work when a marketplace funds part of my discount?
Money you receive from anyone other than the customer is still part of the price of the sale. If the customer pays £30 and the platform tops you up by £10, VAT is due on £40. Check your settlement reports for platform-funded amounts and code them to sales, not to other income.
Talk to a UK ecommerce accountant
If you’d like a hand applying any of this to your business, our FCCA-chartered team works with over 700 UK ecommerce sellers across Amazon, Shopify, eBay and TikTok Shop. We check promotions, gift cards and platform payouts before peak season so your VAT return reflects what you actually took. Read more about our accountancy service for ecommerce sellers. Book a free consultation or request a tailored quote.
