Tax registration for UK merchants
If you're already using Shopify to sell in the United Kingdom (UK), then you can update your tax settings to reflect your tax registrations. This change doesn't affect how tax is charged on your products.
When you update your tax settings, you're asked to provide a VAT number. After it's been added, tax rates are automatically set that apply in the areas you've registered for.
On this page
VAT registration requirements
A VAT number, also referred to as a value-added tax identification number (VATIN), is an identifier used in the United Kingdom and the European Union (EU). It's provided to you by a country's tax authority after you register with them. This number is issued by countries to allow your business to charge value-added tax.
UK VAT registration threshold
Typically, you need to register for VAT if your sales in the United Kingdom are equal to or greater than £90,000 GBP within a 12-month period. This threshold applies to merchants located in the United Kingdom only.
If you're located outside of the United Kingdom, then the following rules apply:
- For orders equal to or less than £135 GBP: You must register for UK VAT and charge VAT at the point of sale.
- For orders over £135 GBP: You might not be required to collect VAT at checkout. VAT and duties are remitted by the importer.
The £135 GBP threshold is calculated on the order total before tax and shipping. If you have Include tax in prices activated, then the system deducts the tax amount to determine if the order meets the threshold.
Learn more about UK taxes.
VAT number format
UK VAT registration numbers follow a specific format. They start with "GB" followed by 9 digits. For example, GB123456789. Shopify doesn't verify that VAT numbers are valid, so ensure that you enter your number correctly.
Set up UK VAT collection
After you've registered with HM Revenue and Customs (HMRC) and have your UK VAT number, you can set up your UK taxes.
Steps:
From your Shopify admin, go to Settings > Taxes and duties.
In the Tax regions section, click United Kingdom.
In the VAT collection section, click Collect VAT.
In the VAT number field, enter your VAT number. If you've applied for a VAT number but don't have one yet, then leave this field blank and update it when you receive your number.
Click Collect VAT.
Charge VAT on orders over £135 GBP
If you're located outside of the United Kingdom and need to charge VAT on all UK orders, including those over £135 GBP, then you need to add an active physical location within the United Kingdom.
Steps:
From your Shopify admin, go to Settings > Locations.
Click Add location.
Enter a complete UK address.
Ensure the location is set to Active.
Click Save.
You can't use a tax override to charge UK VAT on orders over £135 GBP.
Selling to EU customers
If you're based in the United Kingdom and also sell to customers in the European Union, then you might need to register for EU VAT. The registration type depends on what you're selling:
- Physical goods: Register for Import One-Stop Shop (IOSS) to collect VAT at checkout on orders up to €150 EUR.
- Digital goods or services: Register for Non-Union OSS.
Learn more about EU VAT registration types and how to set them up.
Test your tax settings
Before processing live orders, use draft orders to verify that your tax settings are working correctly.
Steps:
From your Shopify admin, go to Orders > Drafts.
Click Create order.
Add a product to the order.
In the Customer section, add a customer or enter a UK shipping address.
Add a shipping method to the order. Tax won't calculate without a shipping method.
Review the Tax line to verify the correct VAT rate displays.
Optional: Delete the draft order after testing, or click Mark as paid to convert it to a test order.
Tax overrides
You can create tax overrides for products where the default VAT rates don't apply. For example, certain children's clothing or food items might be exempt from VAT or have a reduced rate.
Learn more about creating tax overrides.
Tax rounding
Tax amounts are rounded at the line-item level. The total tax value is calculated by applying the tax rate to each line in the order, rounding the result, and then adding these subtotals together. This might cause small variances in your total tax amounts compared to calculating tax on the order's subtotal.
Learn more about tax rounding calculations.
Troubleshooting UK VAT issues
Troubleshoot VAT not being charged on UK orders
If VAT isn't displaying on orders shipped to the United Kingdom, then check the following:
- Verify your VAT registration: Go to Settings > Taxes and duties > United Kingdom and confirm your VAT registration is set up.
- Check shipping zones: Tax regions are created based on shipping zones. Ensure you have a shipping zone that includes the United Kingdom under Settings > Shipping and delivery.
- Confirm the order threshold: If you don't have a UK location, then VAT only applies to orders of £135 GBP or less. Orders over £135 GBP won't have VAT charged.
- Review product settings: Go to the product page and confirm that Charge tax on this product is selected.
- Check customer exemptions: Go to the customer's profile and verify that they aren't set as tax exempt.
Troubleshoot VAT being charged when it shouldn't be
If VAT is unexpectedly applied to orders, then consider the following:
- Order threshold: If your order total is below £135 GBP (before tax and shipping), then VAT is applied. Check the pre-tax order value.
- UK location: If you have an active UK location, then VAT applies to all UK orders regardless of the order value. To use the £135 GBP threshold, deactivate your UK location or remove it.
- Tax overrides: Check if you have any tax overrides that might be affecting the rate. Go to Settings > Taxes and duties > United Kingdom > Tax overrides.
Troubleshoot incorrect VAT rate
If the VAT rate on orders doesn't match what you expect, then try the following:
- Check your tax service: Go to Settings > Taxes and duties > United Kingdom and verify which tax service you're using. Different services calculate rates differently.
- Review tax overrides: Product or shipping tax overrides might be changing the default rate.
- Product category: If you're using Shopify Tax, then the product's assigned category affects the tax rate. Verify the category is correct in the product settings.
- Proportional shipping tax: If your order contains items with different VAT rates, then the shipping tax rate is calculated proportionally, which might result in a tax line that's different than what you expect.
Troubleshoot VAT not updating after editing an order
When you use the Order Editor to add products to an existing order, the £135 GBP threshold rule doesn't recalculate. New items are treated as separate transactions for tax purposes.
Example: If an original order is £125 GBP with VAT applied, and you add a £15 GBP item, then the order total becomes £140 GBP. However, VAT remains on the original items and the new item, even though the combined total exceeds £135 GBP.
Workaround: If you need the correct VAT calculation based on the total order value, then cancel the original order and create a new order that includes all products.
Troubleshoot Northern Ireland tax issues
Northern Ireland has dual VAT status and is part of both the UK and EU tax regimes. The VAT applied depends on your location and registration:
- Shipping from the United Kingdom to Northern Ireland: UK VAT applies if you have a UK VAT registration.
- Shipping from the European Union to Northern Ireland: EU VAT applies if you have an EU registration (OSS or country-specific).
Ensure you're using the same tax service for both UK and EU regions to ensure proper cross-border VAT collection.
Learn more about VAT calculation in Northern Ireland.
Troubleshoot draft orders not calculating tax
If tax isn't calculating on draft orders, then check the following:
- Add a shipping method: Tax doesn't calculate on draft orders without a shipping or delivery method, even if it's a free rate.
- Enter a complete address: The system needs a full shipping address including postal code to calculate the correct tax rate.
- Verify tax region setup: Confirm that the United Kingdom is set up in your tax settings with an active VAT registration.
Frequently asked questions
Do I need a VAT number to sell in the United Kingdom?
If your UK sales are equal to or greater than £90,000 GBP within a 12-month period, then you typically need to register for VAT. If you're located outside of the United Kingdom, then you need to register for UK VAT if you sell goods valued at £135 GBP or less directly to UK consumers. Contact HMRC or a tax professional if you're unsure about your obligations.
Can I leave the VAT number field blank?
Yes. If you've applied for a VAT number but haven't received it yet, then you can set up your tax registration without entering the number. Update your settings when you receive your VAT number.
How do I know if the £135 GBP threshold applies to my order?
The threshold is calculated on the order total before tax and shipping charges. If you have Include tax in prices activated, then Shopify deducts the tax amount to determine the pre-tax value. Currency fluctuations might affect orders placed in currencies other than GBP.
What happens to digital goods?
Digital goods are taxed based on the customer's destination country, regardless of the £135 GBP threshold. The threshold for physical goods doesn't apply to digital products.
Can I use both UK and EU VAT registrations?
Yes. You can have VAT registrations for both the United Kingdom and EU countries. However, if you're located in the EU or collect VAT on sales within the EU, then you can't also use IOSS for shipping to the EU from outside the EU.
What's the difference between Shopify Tax and Basic Tax?
Shopify Tax provides automated VAT calculations, liability insights, and invoicing features. Basic Tax uses registration-based tax rates without the additional features. You can compare tax services to determine which is right for your business.
Prepare to contact Shopify Support about UK tax issues
Before reaching out to Shopify Support, gather the following information to help resolve your issue faster:
- The order number(s) where you're experiencing the tax issue
- Screenshots of the tax amounts displayed on the order
- The expected tax rate versus the actual tax rate charged
- Your VAT registration number and the country it's registered in
- Whether you have an active UK location in Settings > Locations
- The customer's shipping address (country, postal code)
- Whether the products have Charge tax on this product selected
- Steps you've already tried from the troubleshooting section
- Any error messages you've encountered
Having this information ready helps Shopify Support assist you more efficiently. Remember that Shopify Support can help with how to configure your settings, but can't advise on whether you should register for VAT or how to comply with tax regulations.
Brexit implications for your business
If you sell to customers in the United Kingdom, then the best way to get information about how Brexit affects your business is by contacting a local tax professional. The following key changes apply when selling to customers in the United Kingdom:
- The sale of goods from UK merchants to EU customers have become exports rather than dispatches.
- UK merchants might need to register for VAT and account for import VAT in the European Union.
- VAT registrations might be required across multiple EU member countries depending on your supply chain, customer locations, and delivery destinations.
- You might need an EU EORI number in addition to a UK EORI number.
Learn more about the implications of Brexit for your business.