The end of Merchant Discounts and the increase of PayPal fees in the UK

Say Goodbye to Merchant Discounts and say Hello to PayPal Tier Pricing


Last month, PayPal fees have changed in the UK.  Starting from the 19th of August, instead of paying 3.4% plus 20p per transaction with lower Merchant rates for sellers turning over more than £1.500 per month, PayPal introduced new flat rates with Tiered Rates available only for merchants with a greater turnover than £20.000 per month.




If you own a small business, you will now have to pay 2.9% plus 30p fixed fee per transaction. These new fees will negatively impact smaller merchants with very low average selling prices, as the increase from 20p to 30p would be greater proportion of the selling price than the 2.9% fee.

Also, bear in mind that if you refund a Commercial Transaction payment, PayPal will keep that 30p fixed fee portion. This means that you can come out with a loss of 30p per refund.

If your selling prices are very low, you should consider switching to the PayPal Micropayments plant, which has a 5% rate + 5p fixed fee per transaction.

PayPal has also made a general change to their currency conversion rates, meaning that starting from the 3rd of September, the currency conversion spread will rise to 3.75% for transactions that involve a PayPal currency conversion when paying for goods or services or sending money. The spread will be #% for all other transactions which involve PayPal currency conversion.

Merchants who use PayPal through Website Payments Pro and Virtual Terminal will pay a currency conversion spread of 3%.



What about this new Tier pricing system?


PayPal has emailed a couple of users informing them about the tiered rates, which look like the following:

Aggregate monetary amount of payments received in your PayPal Account in the previous calendar month


Fee per transaction


Tier 1: £0.00 – £20,000.00 2.9% + Fixed Fee (£0.30*)

Tier 2: £20,000.01 – £75,000.00 1.9% + Fixed Fee (£0.30*)

Tier 3: £75,000.01 – £200,000.00 1.4% + Fixed Fee (£0.30*)

Tier 4: £200,000.01 or more 1.3% + Fixed Fee (£0.25*)


Do these PayPal fees apply to all sales platforms?

With the new changes, 2.9% plus 30p is what you will be paying from now on if you sell on eBay, and it might or might not be what you will pay on your website – depending on which PayPal payment option you have implemented. Some users might still pay the old 3.4% website fees – which will be  a surprise, especially if you were on a Merchant rate with a significant discount:

  • PayPal Web Payments Standard and PayPal Checkout fees are 2.9% + 30p per transaction
  • PayPal Web Payments Pro fees are 3.4% + 20p per transaction plus a £20 monthly fee

It’s worth noting that PayPal has a lot of different fees, many of which users might not notice ( like currency conversion and currency spread) but can impact your business.

We would recommend reviewing your PayPal transactions for the past month, just to be sure that your costs are in line with your expectations.

If you wish to partially recover the money spent on fees, you should slightly increase the selling price of the items and delivery charge. This way these changes will have a lesser impact on your business.

Learn more:


Subscribe today for latest news