Payments and accounting

Stripe vs Paddle vs Lemon Squeezy for a UK software business: fees and VAT compared

Stack Founder HQ · Updated 18 October 2026 · Payments and accounting · How we write

When you sell software or digital products online, the biggest decision isn't really about the fee percentage. It's about who is the seller. With a payment processor such as Stripe, your business is the seller, so you are responsible for charging, reporting and paying sales taxes like VAT in every country where you have an obligation. With a merchant of record (MoR) such as Paddle or Lemon Squeezy, the provider resells your product to the customer and takes on that tax responsibility, in exchange for a higher fee. Stripe now also offers its own merchant-of-record service, Stripe Managed Payments.

*Fees checked on 18 October 2026 on stripe.com/gb/pricing, paddle.com/pricing and lemonsqueezy.com/pricing. This is general information, not tax advice.*

The fees

Stripe (UK pricing, standard payments):

Item	Fee
Standard UK cards	1.5% + 20p
Premium UK cards	2.8% + 20p
EEA cards	2.5% + 20p
Currency conversion	Plus 2%
Stripe Billing (subscriptions), pay as you go	0.7% of billing volume
Stripe Tax (where you are registered)	0.5% per transaction (no-code), or 40p per API transaction
Stripe Managed Payments (merchant of record)	3.5% per successful transaction, in addition to the payments fees

Paddle: 5% + 50¢ per checkout transaction, as merchant of record, with no monthly fees. Paddle says the price covers payments, checkout, billing, global tax compliance, fraud protection, chargebacks and buyer support.

Lemon Squeezy: 5% + 50¢ per transaction, as merchant of record, with no monthly fees. Lemon Squeezy notes that some payments may be subject to additional fees. Its pricing page also links to a 2026 update about Lemon Squeezy and Stripe Managed Payments. Stripe acquired Lemon Squeezy in 2024. In a January 2026 update, Lemon Squeezy's CEO said the team has been focused on building Stripe Managed Payments, and acknowledged slower support and fewer product updates for Lemon Squeezy as a result. Read it before you choose Lemon Squeezy for a new product.

What "merchant of record" changes

With Stripe Payments, your business sells to the customer directly. In practice:

You need to know where your customers are and whether you have a tax obligation there. For example, the UK has its own VAT rules for digital services sold to consumers. The EU has a One Stop Shop scheme for non-EU sellers. US states have their own rules.
Stripe Tax can calculate and collect tax for jurisdictions where you have registered, but you still register and file the returns yourself, or pay an accountant to.
Chargebacks, refunds and customer billing queries are handled by you.

With a merchant of record (Paddle, Lemon Squeezy or Stripe Managed Payments):

The provider is the seller on the customer's receipt and handles indirect tax compliance and payment for the countries it covers. Stripe says Managed Payments covers more than 75 countries.
You receive payouts from the provider, rather than revenue from each customer.
Your customer's bank statement and receipt show the provider's name, and the checkout follows its flow.

For a small team selling worldwide, an MoR can remove a lot of tax admin. For a UK business selling mainly to other UK businesses, the benefit may be smaller, because domestic VAT is already part of normal UK bookkeeping.

Worked example: a £20 monthly subscription

Assume a UK customer paying with a standard UK card, with no currency conversion. These figures use only the published fees above. Paddle and Lemon Squeezy quote their fixed fee in US cents, so it is shown separately.

Option	Calculation	Fee per payment
Stripe Payments + Billing + Tax	1.5% + 20p = 50p; Billing 0.7% = 14p; Tax 0.5% = 10p	74p (3.7%), and you handle VAT registration and returns
Stripe Managed Payments	50p payments fee + 3.5% (70p), plus Billing if you use it	£1.20 plus any Billing fee
Paddle	5% = £1.00, plus 50¢	£1.00 + 50¢
Lemon Squeezy	5% = £1.00, plus 50¢	£1.00 + 50¢, and possibly additional fees

At small volumes, the difference between 74p and somewhere over £1 per payment is often less than the cost of an accountant handling international VAT registrations. At larger volumes, the percentage difference grows. That's why some businesses start with an MoR and move to Stripe later, once they have the revenue to handle tax compliance themselves.

The comparison changes for international cards. Stripe's EEA card fee is 2.5% + 20p, plus 2% if currency conversion is needed. Merchant-of-record fees are generally all-in, but check each provider's page for international and payment-method surcharges.

Developer experience and features

Stripe has the most flexible API, and the widest range of products: invoicing, Checkout, the customer portal, Radar fraud tools, Terminal for in-person payments and more. It's the usual choice if you need custom billing logic or plan to grow a large business.
Paddle is built for software companies. It includes subscription billing, checkout and tax handling in one product, with its own API and webhooks.
Lemon Squeezy is aimed at creators and small software businesses selling digital products, subscriptions and licence keys, with hosted checkouts and storefronts.

Switching later

Moving between providers is possible but awkward for subscriptions, because card details are held by the provider. Moving saved cards usually needs a data migration arranged between the two companies, and not every pair supports it. Ask about migration before you choose, and keep your own records of customers and plans.

Which to choose

Stripe Payments if you are comfortable handling VAT and other sales taxes (or have an accountant who is), want the lowest per-transaction fee, or need flexibility.
A merchant of record (Paddle, Lemon Squeezy or Stripe Managed Payments) if you sell to consumers in many countries and would rather pay a higher fee than manage tax registrations.

Speak to an accountant about your specific tax position before deciding.