The UK’s Digital Services Tax (DST) began on 1 April 2020. This tax is designed to ensure that the major social media, search engines and online retailers are subject to a 2% tax on revenues generated from the participation of UK users of their services.

Businesses are liable to the DST when the group’s businesses worldwide revenues from the specified digital activities are more than £500 million, and more than £25 million of these revenues are derived from UK users. However, there is an allowance of £25 million, which means a group’s first £25 million of revenues derived from UK users will not be subject to Digital Services Tax.

The following three services are considered digital services activities for DST:

– a social media service,
– an internet search engine; or
– an online marketplace.


A group can make a voluntary election to calculate the liability to DST using an alternative basis of charge provision. The alternative basis of charge will benefit groups making a loss or operating at a low margin on their UK digital services activity.

There will be a review of DST by HM Treasury before the end of 2025, laid before Parliament.