HMRC's published guidance on the UK's 2% Digital Services Tax — scope, thresholds, the £25 million exemption, safe harbour, group reporting obligations, and the 2025 review position, from introduction in April 2020 through to 2026/27.
All figures sourced from HMRC's published DST guidance and Digital Services Tax Act 2020. DST applies to qualifying groups, not individual companies or consumers.
Per HMRC's published Digital Services Tax guidance on GOV.UK, DST is a 2% tax on the UK revenues of large digital businesses. It targets revenues generated from UK users of qualifying digital services — not profits — and applies at the corporate group level rather than to individual companies within the group.
HMRC's full technical guidance is in its Digital Services Tax Manual (DST) on GOV.UK. The primary legislation is the Digital Services Tax Act 2020. DST is administered by HMRC's Large Business directorate, and returns are filed by a nominated entity on behalf of the group.
Per HMRC's published guidance, a group only comes within scope of DST if it meets both of the following thresholds in the relevant accounting period:
| Threshold | Amount | Notes |
|---|---|---|
| Global digital services revenues | £500m | Group's total worldwide revenues from in-scope digital activities |
| UK digital services revenues | £25m | Revenues attributable to UK users from in-scope activities |
| Annual UK revenues exemption | First £25m exempt | Only UK revenues above £25m are charged at 2% |
Source: GOV.UK — Digital Services Tax guidance
Per HMRC's published guidance, a group with no physical UK establishment may still be within the scope of DST if it meets both thresholds through revenues from UK users. DST is a user-location based tax — it is the activity of UK users that creates the liability, not the location of the company's servers, headquarters or bank accounts.
Per HMRC's published guidance, DST applies to three categories of digital services activity:
| Activity | HMRC's description |
|---|---|
| Social media platforms | Services designed to facilitate online interaction between users, allow users to share content, or allow users to view content generated by others. Examples include social networks and messaging platforms. |
| Internet search engines | Services that allow users to search the internet and return results, including shopping and price comparison search engines that search across multiple third-party websites. |
| Online marketplaces | Platforms that facilitate transactions between users (buyers and sellers) in relation to goods, services, or digital content. Includes both product and service marketplaces. |
| Associated online advertising | Online advertising services associated with any of the three activities above are also in scope — for example, advertising placed on a social media platform or search engine. |
Source: GOV.UK — DST guidance & HMRC DST Manual
Per HMRC's DST manual, services provided exclusively to members of the same corporate group do not fall within the scope of DST. For example, an internal social network used only by employees of the group and not accessible by third parties is not in scope. This exclusion is confirmed in HMRC's DST Manual on GOV.UK.
Per HMRC's published guidance, DST is calculated as 2% of the group's UK digital services revenues above the £25 million annual exemption. The tax is assessed at group level across all in-scope activities in the accounting period. Revenue attribution to UK users follows HMRC's published rules on user location.
Illustrative only. Actual DST liability depends on group structure, revenue attribution methodology, and whether a safe harbour election applies. This is not tax guidance — consult a qualified adviser for your group's specific position.
| Period | DST rate | Global threshold | UK threshold & exemption |
|---|---|---|---|
| 1 Apr 2020 – 5 Apr 2021 (2020/21) | 2% | £500m | £25m / £25m |
| 2021/22 | 2% | £500m | £25m / £25m |
| 2022/23 | 2% | £500m | £25m / £25m |
| 2023/24 | 2% | £500m | £25m / £25m |
| 2024/25 | 2% | £500m | £25m / £25m |
| 2025/26 | 2% | £500m | £25m / £25m |
| 2026/27 | 2% | £500m | £25m / £25m |
Source: GOV.UK — Digital Services Tax guidance. Rate, thresholds and exemption have been unchanged since introduction. The 2025 Treasury review may affect future years — see the Review section below.
Per HMRC's published DST Manual, a company's DST expense is deductible in computing its profits for corporation tax purposes on normal principles. HMRC has confirmed that DST is directly related to the earning of revenues and is a legal obligation arising from trade. In most cases it is therefore deductible in the accounting period in which the expense arises.
Per HMRC's published guidance, a safe harbour election is available for groups where the standard 2% revenue charge would be disproportionate relative to the operating profits generated from the in-scope activities. The safe harbour allows DST liability to be calculated on an alternative, profit-margin basis.
Per HMRC's published guidance: where a group elects the safe harbour, its DST liability for the period is determined by reference to its operating margin on the relevant in-scope activities. A group with a negative operating margin (i.e. an operating loss) on those activities will have no DST liability. Groups with a very low positive margin pay a reduced DST liability. The safe harbour election is made in the group's DST return and cannot be changed after filing. See HMRC's DST Manual for the precise margin thresholds and calculation methodology.
Per HMRC's published guidance, DST is administered at group level through a nominated entity — a single member of the group that files returns and makes payments on behalf of the entire group. The nominated entity must be registered with HMRC if the group meets or expects to meet the basic threshold for DST.
Per HMRC's guidance, a group that is within the basic threshold must provide HMRC with certain information through its nominated entity, and has an ongoing obligation to notify HMRC if that information changes within 90 days of the end of the relevant accounting period or from the date of the change. Groups must also register with HMRC if they expect to cross the thresholds in the current period.
Per HMRC's published guidance, groups that meet the basic revenue threshold are required to file a DST return in respect of each accounting period — even if the amount due is low or zero because of the £25m UK revenues exemption. The notification and filing obligations apply separately from the payment obligation. Penalties apply for missed notification deadlines under HMRC's published DST penalty framework.
Per HMRC's published guidance, the UK's DST was introduced as a temporary measure pending agreement on international tax reform (the OECD's Pillar One framework, which would reallocate taxing rights to market jurisdictions). The UK government's stated policy is to disapply DST when an agreed multilateral solution is implemented. As of the date of this guide, no such implementation has occurred and DST remains in force.
The UK government committed to a review of the Digital Services Tax during 2025, five years after the tax's introduction. Per publicly available information, the review was intended to assess whether the scope, thresholds and design of DST remain appropriate, particularly in light of US-UK trade negotiations in which the DST has featured prominently.
As of May 2026, DST remains in force at 2% with thresholds and rates unchanged from introduction. The UK government confirmed in May 2025 that DST was unchanged as part of a sectoral trade agreement with the USA. However, the broader policy position — including possible rate changes, scope modifications, or connection to OECD Pillar One implementation — remains subject to ongoing HM Treasury review and future Budget announcements. Readers with DST obligations should monitor HMRC's DST guidance page on GOV.UK for updates.
This page is an informational summary of HMRC's published guidance — it is not personalised tax guidance or legal guidance. DST involves complex group attribution and reporting rules. Our free matching service connects you with verified UK tax professionals experienced in digital economy taxation.
Answers based on HMRC's published guidance with direct GOV.UK links. This is an informational guide only — not personalised tax or legal guidance.
This page is an informational summary of HMRC's published rules — not personalised tax guidance. Our free matching service connects you with verified UK tax professionals.
Important — informational guide only, not tax or legal guidance. UK Tax Hero summarises HMRC's published guidance as a free information and expert-matching service. Nothing on this page constitutes personalised tax guidance, legal guidance, financial guidance, or a recommendation to take any action. Every group's circumstances are different. Figures, rates and rules shown are based on HMRC's published guidance and may be subject to change. Always verify on GOV.UK and consult a qualified tax professional before acting. UK Tax Hero is not regulated by HMRC, the FCA or any professional body.
