VAT rarely stops a Shopify launch. It shows up later — as a registration that came three months late, a zero-rated range charged at 20% or a return that does not reconcile with the store. This is the practical setup for a UK store selling to consumers. It is not tax advice; your accountant decides the treatment, and we make the store match it.
When you must register
- Your taxable turnover in the last twelve months passed £90,000 — the test is a rolling twelve months, not the tax year.
- You expect turnover in the next 30 days alone to pass £90,000.
- Below the threshold you can register voluntarily, which lets you reclaim VAT on costs but adds 20% to consumer prices or comes out of your margin.
Setting it up in Shopify
- Under Settings → Taxes and duties → United Kingdom, enter your VAT registration number so Shopify collects VAT.
- Show prices including VAT. UK consumers must see the full price, and since 6 April 2025 drip pricing — adding unavoidable charges late in checkout — is banned.
- Assign product categories so Shopify can apply the right rate, and use tax overrides where a collection needs a different one.
- Check how delivery charges are taxed: they generally follow the goods, and mixed baskets of standard- and zero-rated items need a rule your accountant agrees with.
- Place test orders with a standard-rated item, a zero-rated item and a mixed basket, and compare the VAT line with what you expect.
Zero-rated and reduced-rate products
The standard rate is 20%, the reduced rate 5%, and some goods are zero-rated — children's clothing and books are the usual examples in ecommerce. Zero-rated is not the same as exempt: the sale is still taxable at 0% and still goes on your return. The common Shopify mistake is a single store-wide setting that charges 20% on everything because nobody configured the exceptions.
Making Tax Digital and records
VAT-registered businesses must keep digital records and file returns through software that works with Making Tax Digital. Shopify's tax reports are useful for checking, but they are not your VAT record. Connect the store to accounting software such as Xero or QuickBooks through an app, map payouts, fees and refunds properly, and reconcile monthly rather than at the end of the quarter.
VAT invoices
Business customers will ask for a VAT invoice with your VAT number, the rate and the VAT amount. Shopify does not produce one by default; an order-printer template or an invoicing app does, and it should use the same rates as checkout.
Selling abroad, and selling into the UK
- Selling into the EU from the UK: use IOSS for consignments up to €150 and DDP above it — covered in Shopify Markets for UK brands selling into the EU.
- Selling to the US: there is no de minimis exemption any more — see selling to the US from the UK.
- Selling into the UK from abroad: for consignments up to £135, the overseas seller charges UK VAT at checkout and needs a UK VAT registration.
The wider rule set — cancellation rights, pricing, reviews and cookies — is in selling online in the UK. We configure tax settings and the accounting connection as part of Shopify store setup.