What You Need to Know About Starting a Dropshipping Business in the UK
March 9th, 2025
In this day and age, and especially in this economy, the allure of starting an online business has never been more enticing. With the quick rise of e-commerce worldwide and the lifestyle flexibility it offers, entrepreneurs from all over the place are looking for ways to dive into the digital marketplace.
There are so many business ideas out there, but dropshipping is without a doubt one of the easiest and most profitable. Dropshipping is also a fun and exciting way to get started in the entrepreneurial world, without the responsibility of handling merchandise and shipping.
And the great thing about dropshipping is that anyone can do it!
So if you're looking to get into dropshipping, you don't need to look any further because we'll walk you through every step of starting a dropshipping business in the UK, from basic concepts to complex UK laws and regulations.
Dropshipping 101
Let's review the fundamentals before getting into the specifics of dropshipping:
What exactly is dropshipping?
To lay it out in simple terms, dropshipping is a retail fulfillment method in which a business sells products it doesn't actually keep in stock. This means that after you sell a product, your supplier will be in charge of fulfilling the order and sending it straight to your customer.
So essentially, by dropshipping you become a middleman between the customer and the supplier without actually having to handle the merchandise.
What are the steps to do dropshipping?
Although the dropshipping process is quite friendly compared to other business models, it does need certain steps to be followed to ensure the launch of a successful business. Let's get into it:
Getting started with an e-commerce store:
Creating an e-commerce website is the first stage in opening an e-commerce store. There are numerous platforms available for this purpose, some of which are Shopify, Woo-Commerce, and Wix.
Selecting your products:
After completing step one, it is time to finalize the decision on which products to sell. When you choose your products, it's also important to determine and understand your target audience and do some research on their consumer behavior and patterns.
Finding suppliers:
It's important to carefully select your suppliers, look into reliable dropshipping UK distributors, and make sure to check their history and past client reviews. The success of your business depends on finding suppliers with competitive prices and reliable shipping times. Try to build a strong relationship with them, this is crucial to ensuring customer satisfaction.
Creating product listings:
Once you've sourced your products, list them on your website. To make it easier for customers, provide very clear product descriptions and details on your products.
Offering customer support:
Attend customers' questions and concerns as soon as possible to ensure the best service.
Paying your taxes:
Just like any other business owner, you'll need to understand and fulfill your tax obligations in the UK, we´ll discuss it more in-depth later.
FAQ
Is dropshipping legal?
Yes, dropshipping is completely legal in the UK. But like any business, there are legal considerations to keep in mind. Ensuring that you follow the rules is essential for long-term success.
Is dropshipping worth it?
Dropshipping can be very profitable when done properly, but let's not confuse things, it isn't a "get rich quick" scheme. Dropshipping success depends on so many factors like product selection, supplier reliability, effective marketing, and customer service. You need to put in a lot of work to get benefits.
Starting a dropshipping business step-by-step
Now let's get into the steps to take and what to do in order to start a successful dropshipping business in the UK.
Here are six steps to get you going:
1. Research Your Target Market
You have to understand your audience: who they are and what they like. There are many free available tools online like Google Trends to identify market gaps and areas of interest in your niche.
2. Register Your Business
In the UK, you'll need to register your business, whether as a sole trader, partnership, or limited company. Each option has its own legal and tax implications, so it's important to choose the right one for your goals.
3. Find Reliable Suppliers
Suppliers are a big part of your dropshipping success. Use platforms like Alibaba or Aliexpress to explore your options. Going to trade shows is also a great way to meet potential suppliers in person to gauge your compatibility.
4. Choose an E-Commerce Platform
Select a platform like Shopify, WooCommerce, or BigCommerce based on your business needs. Look for features that cater to dropshipping, such as integration with suppliers and payment gateways.
5. Set Up Your Store
Make sure your storefront is visually appealing and user-friendly. Your product listings should be informative to encourage sales.
6. Launch and Market Your Store
Once your store is ready, launch it and start promoting it through digital marketing channels. Use social media, search engine optimization (SEO), and paid ads to attract traffic and generate sales.
How to find reliable dropshipping suppliers in the UK?
Finding high-quality products and reliable suppliers is probably the most important thing you can do to ensure your business's success.
Here are some tips on how to find the best suppliers:
Attending trade shows:
Trade shows are an excellent way to meet potential suppliers in person, this can help you gauge if they are a right fit for you and if they align with your business goals and objectives.
Checking Online Marketplaces:
Platforms like Alibaba, AliExpress, and SaleHoo are excellent resources for finding suppliers with strong reputations.
Contacting Manufacturers Directly:
Reach out to manufacturers outside of popular marketplaces and inquire about dropshipping arrangements.
Networking:
Join industry forums and networking groups to discover hidden opportunities and suppliers in the dropshipping space.
Evaluating Supplier Services:
Assess factors like product quality, shipping times, and customer service to ensure they meet your standards.
How to Register Your Dropshipping Business in The UK
Registering your business is a tedious but necessary task, but it's very important to understand the legal requirements to avoid confusion or any misunderstandings in the future.
Choosing your business model:
Decide whether to operate as a sole trader, partnership, or limited company. Each option has different tax and legal implications.
Picking a business name:
A unique name is what gives your business personality and sets you apart from others, so make sure to really focus on this step. You can check name availability using the HMRC tool. Also, consider trademarking your name and logo for extra protection.
Registering with HMRC:
You must inform HMRC about your business for tax purposes. You can register online through the HMRC website.
Registering with VAT:
If your taxable turnover exceeds the VAT threshold (£85,000 as of 2023), you'll need to register for VAT.
Getting a good business insurance:
You can never be too protected, consider getting good business insurance to protect your company from liability. The following is a compilation of some of the most common types of business insurance so you can choose the one that best fits your needs.
Dropshipping and Taxes
Not handling products doesn't absolve you from paying taxes, in fact, just like with any other business, you must comply with your tax obligations regularly to keep a healthy business. Here's what you need to know:
Income Tax
As a sole trader or partner, you'll pay Income Tax on your profits. Be sure to report your earnings annually to HMRC.
VAT
If your taxable turnover exceeds the VAT threshold, you'll need to register for VAT and obtain a VAT number if your business's taxable turnover exceeds the threshold, this will allow you to charge and collect VAT from customers.
Corporation Tax
If you run your dropshipping business as a limited company, you'll pay corporation tax on your profits.
National Insurance
If you employ staff, you'll also need to pay National Insurance contributions.
Do I Need a VAT Number For Dropshipping?
This depends on your business´s annual taxable turnover. You'll need to register for VAT and obtain a VAT number if your business's taxable turnover exceeds the threshold, this will allow you to charge and collect VAT from customers.
You might need to register for VAT depending on your earnings, and keep a close eye on them to avoid potential penalties and for a seamless business operation.
Let us Help You at LawBite
Are you ready to start dropshipping?
Getting into dropshipping in the UK is a fun and exciting adventure, but the legal area can be challenging to navigate at times.
Let us help you. At LawBite we offer expert legal support tailored to your business needs, from setting up your business structure to ensuring compliance with UK laws.
How We Can Help:
- Setting Up Your Business: We´ll go through everything you need to set up your business
- Supplier Contract Reviews: We offer legal support when it comes to hiring staff and preparing contracts and other legal documents.
- Compliance with UK Laws: We can guide you on issues such as consumer protection, data privacy, and other legal obligations.
- Business Scaling: We will be with you as you grow and scale your business.
Starting a dropshipping business is an exciting opportunity, and at LawBite we´re here to ensure your success. Book a free 15-minute consultation today to get started!
