VAT on a Shopify shop: a UK guide

The short answer: HM Revenue & Customs (HMRC) states you must register for VAT when your total taxable turnover for the last 12 months goes over £90,000. A second test applies if you realise it will go over £90,000 in the next 30 days. The rolling test gives you 30 days from the end of the month you crossed in; the forward-look test gives you until the end of that 30-day period. Registration changes your pricing rather than your platform, because a British shopper expects the price on the page to include VAT. Shopify's documentation notes that with a UK VAT registration, orders of £135 or less have UK VAT charged. It also notes that UK-to-EU sales can require registrations in other countries. What Shopify will not do is decide any of this for you.

This guide is general orientation, not tax advice. HMRC and your accountant decide what applies to your business, and this article's job is to tell you which questions to take to them.

Shopify plans, pricing and features change; always verify the current details on shopify.com before deciding.

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Every figure below is attributed, with the date it was read.

The two registration tests

HMRC's guidance sets out two separate tests, and most sellers only know the first.

The backward-looking test. You must register if "your total taxable turnover for the last 12 months goes over £90,000". This is a rolling 12 months, not your accounting year — the check happens at the end of every month, looking back.

The forward-looking test. You must also register "if you realise that your total taxable turnover is going to go over the £90,000 threshold in the next 30 days".

The deadlines differ, which catches people out.

On the rolling test, HMRC states: "You have to register within 30 days of the end of the month when you went over the threshold. Your effective date of registration is the first day of the second month after you go over the threshold."

On the forward-look, you "have to register by the end of that 30-day period". Both figures and both deadlines were read on gov.uk on 31 August 2026.

A single strong month can trigger the second test on its own. If you take a large wholesale order that will push you past the line within 30 days, the clock starts when you realise it, not when the money lands.

What "taxable turnover" actually counts

This is where a shop's own numbers and HMRC's definition drift apart, and it is worth a conversation with your accountant rather than a paragraph from us.

The threshold is measured on taxable turnover, which is not the same as the revenue figure in your Shopify dashboard. Your dashboard total may include things that are treated differently for VAT, and it may exclude things HMRC counts.

Two practical consequences follow.

Don't monitor the threshold from your dashboard alone. Use the figure your bookkeeping produces, on the same definition every month.

Check the rolling window monthly. The test looks back 12 months from the end of each month, so a quiet autumn does not undo a busy Christmas.

If you are anywhere near the line, that monthly check is the single most useful admin habit in this article.

What changes the day you register

Registration changes your prices, your invoices and your filing, and only the first of those is visible to customers.

Your displayed prices. A British consumer expects the price on the product page to be the price they pay, VAT included. That is a pricing decision, not a Shopify setting.

Your invoices. VAT-registered business customers expect a VAT invoice, with your VAT number on it. That matters most if you sell to trade.

Your filing. Returns become a recurring obligation, and the mechanics are HMRC's to state and your accountant's to run.

Your input VAT. Registration also lets you reclaim VAT on eligible business purchases, which is the part that occasionally makes voluntary registration attractive.

Notice what does not change: the platform. None of the above is a Shopify feature you switch on and forget.

The margin trap nobody warns you about

Here is the arithmetic that catches unregistered shops crossing the line.

Suppose you sell a product at £60 and keep £60. After registration, if you keep the shelf price at £60, that price now includes VAT — so part of every sale is no longer yours.

At the standard rate, a VAT-inclusive £60 leaves you materially less than £60. The exact split is arithmetic your accountant will confirm, but the direction is not in doubt: same price, smaller margin.

That leaves three choices, and all three are business decisions rather than tax ones.

Raise prices and pass the difference to customers, which is simplest and most visible.

Absorb it and accept a thinner margin, which can be right if you sell into a price-sensitive market.

Split the difference, which is what most shops end up doing.

The mistake is doing nothing. A shop that registers and leaves its prices untouched has quietly cut its own margin without deciding to.

Voluntary registration: when it makes sense

You can register before you hit the threshold, and for some shops it is the better call.

You sell mainly to VAT-registered businesses. They reclaim the VAT you charge, so your prices are effectively unchanged for them while you reclaim on your own purchases.

You have heavy input VAT. Stock, equipment and services bought with VAT on top can make registration worth it.

You are close to the line anyway. Registering on your own timetable beats registering in a rush after a strong month.

Against that, if you sell mainly to consumers, voluntary registration means either raising prices or cutting margin ahead of when you had to. That trade-off is exactly the kind of thing to put in front of an accountant with your actual numbers.

What Shopify handles, and what it doesn't

The platform provides settings; it does not provide answers.

The UK tax documentation states this plainly: "It's your responsibility to consult with local tax authorities or a tax professional to verify that you charge your customers the correct tax rates," read on 31 August 2026.

It also documents a one-way door worth knowing about before you touch it. On duties for UK orders, the same page states: "After you activate duties for UK orders, deactivating duties doesn't restore native tax collection for the UK. If you need to change how tax is collected on UK orders, then consult a tax professional or contact Shopify Support."

Read that twice before experimenting in a live shop. A setting you can turn on but not cleanly turn off deserves a test order and a conversation, not a curious click on a Friday afternoon.

The £135 rule for imported goods

If you import stock or sell into the UK from abroad, one threshold shows up repeatedly.

The UK tax documentation states that where you have a UK VAT registration and "the order is equal to or less than £135 GBP, then UK VAT is charged". Different handling applies above that value, read on 31 August 2026.

That £135 line is a consignment-value rule rather than a per-item one. How it applies to your particular goods and shipping arrangements is a question for HMRC's guidance and your accountant.

What matters practically is that it exists, and that it changes who accounts for the VAT on a cross-border consignment. If your supply chain crosses the border, this is the paragraph to take to a professional.

Selling to EU customers after Brexit

The post-Brexit position is the part most imported advice gets wrong, and Shopify's documentation is direct about it.

Its UK tax page states: "After the transition period, UK merchants who sell to EU customers and EU merchants who sell to UK customers can't use these simplified procedures. Merchants who sell between the UK and EU countries might require VAT registrations in additional countries," read on 31 August 2026.

Three practical implications follow for a British shop with EU customers.

An EU sale is an export. It is not a domestic sale with a longer delivery time.

Registrations elsewhere may be required. Whether they are, and where, depends on what you sell and how much of it goes where.

Your customer may face charges on delivery. A customer who pays unexpected import charges at the door frequently becomes a return, which costs you the parcel twice.

None of that argues against selling into the EU. It argues for pricing and describing it accurately, and for asking your accountant before you scale it.

Digital products are a different problem

If you sell downloads, courses or software rather than parcels, the VAT rules that apply are not the ones above.

Digital services have their own place-of-supply treatment, and the country your customer is in can determine where VAT is due regardless of your own turnover.

We are not going to summarise those rules here, because getting them slightly wrong in a guide is worse than not covering them. What we will say is this: if your shop sells digital products to customers outside the UK, that is a specific question for HMRC's guidance and a professional. Ask it before launch rather than after the first quarter.

A monthly VAT routine that takes ten minutes

Most VAT trouble in small shops comes from not looking, not from looking and getting it wrong. A short monthly habit fixes that.

Pull your rolling 12-month taxable turnover from your bookkeeping at the end of every month, on the same definition each time.

Compare it with the threshold and note the gap. A figure written down beats a feeling about how the year is going.

Flag any single order that could trigger the forward-look test. A large wholesale enquiry is the classic case, and the clock starts when you realise.

Check whether your customer mix has shifted. More EU orders, more trade buyers or a new digital product all change the questions you need to ask.

Keep the note somewhere your accountant can see it. Two lines a month makes the annual conversation short.

Ten minutes, twelve times a year, and the threshold never arrives as a surprise.

Getting your prices ready before you register

If you can see the threshold coming, you can plan the price change rather than react to it.

Model both scenarios. Run your top twenty products at current prices with VAT absorbed, and again with VAT added on top. The gap in monthly margin is the real decision.

Look at your competitors' shelf prices. If they are VAT-registered, their displayed prices already include it, and you may have less headroom than you think.

Decide product by product where you can. Absorbing on a high-margin line and passing it through on a thin one is often better than a blanket rule.

Time it deliberately. Changing prices in your quietest week is easier on customer support than doing it mid-campaign.

Tell trade customers in advance. Business buyers reclaim the VAT, so the change costs them nothing, but an unannounced invoice change still costs goodwill.

Doing this before registration turns a compliance event into an ordinary pricing exercise.

What to take to your accountant

Turn up with these six things and one meeting will usually settle the lot.

• Your rolling 12-month turnover, on your bookkeeping's definition rather than the dashboard's.
• A split of sales between consumers and VAT-registered businesses.
• Your split between UK, EU and rest-of-world customers.
• Whether you import stock, and the typical consignment values.
• Whether you sell any digital products, and to where.
• Your current pricing, so the margin conversation is about real numbers.

That list is the whole point of this article. The platform settings are the easy part; these six answers are what decide them.

This is an independent educational site. It is not operated by, affiliated with, or endorsed by Shopify Inc.

Five VAT mistakes on British shops

Each of these is common, and each is avoidable.

Watching the calendar year instead of the rolling 12 months. The test looks back from the end of every month, not from April.

Forgetting the forward-look test. A single large order that will push you over within 30 days starts its own clock.

Registering and leaving prices unchanged. That is the margin trap above, applied by accident.

Treating EU sales as domestic. They are exports, and they may bring obligations in other countries.

Experimenting with tax and duty settings on a live shop. The documentation says activating duties for UK orders cannot be cleanly reversed by deactivating them.

None of the five is exotic. They are all the result of treating VAT as a platform setting rather than as a business decision with a platform setting attached.

Frequently asked questions

When do I have to register for VAT in the UK?

HMRC states you must register when your total taxable turnover for the last 12 months goes over £90,000. A second test applies if you realise your turnover will go over £90,000 in the next 30 days, read on gov.uk on 31 August 2026. The rolling test gives you 30 days from the end of the month you crossed in, while the forward-look test requires registration by the end of that 30-day period.

Does Shopify handle VAT for me?

No. It gives you tax settings and collects according to how they are configured. Its own documentation states that verifying you charge the correct rates is your responsibility, and points you to local tax authorities or a tax professional. The decisions — whether to register, what to charge, where you owe — sit outside the platform.

Do I have to include VAT in my displayed prices?

British consumers expect the price on the page to be the price they pay, which in practice means VAT-inclusive display for consumer sales. How you configure that, and what applies to business customers, is a question for HMRC's guidance and your accountant rather than a universal rule from an article.

What is the £135 rule?

The UK tax documentation states that with a UK VAT registration, an order equal to or less than £135 is charged UK VAT. Different treatment applies above that value, read on 31 August 2026. It relates to imported consignments, and how it applies to your goods and shipping arrangements is worth confirming with a professional.

Can I sell to EU customers from a UK Shopify shop?

Yes, but the simplified pre-Brexit procedures no longer apply. Shopify's documentation states that UK merchants selling to EU customers cannot use them, and that selling between the UK and EU "might require VAT registrations in additional countries". Treat EU orders as exports, and get advice before you make them a large share of your sales.

Should I register for VAT voluntarily?

It depends on who you sell to. If most of your customers are VAT-registered businesses, or you carry heavy input VAT on stock and equipment, voluntary registration can work in your favour. If you sell mainly to consumers, it means raising prices or accepting a thinner margin earlier than necessary — a decision to make with an accountant and your real numbers.

Sources

1. GOV.UK, "Register for VAT: When to register". https://www.gov.uk/vat-registration/when-to-register — retrieved 31 August 2026.
2. GOV.UK, VAT guidance for businesses. https://www.gov.uk/topic/business-tax/vat — retrieved 31 August 2026.
3. Shopify Help Center, "United Kingdom tax reference". https://help.shopify.com/en/manual/taxes/uk/uk-tax-reference — retrieved 31 August 2026.
4. Shopify Help Center, "Pricing plans and billing overview". https://help.shopify.com/en/manual/intro-to-shopify/pricing-plans/pricing-overview — retrieved 31 August 2026.
5. Shopify, "Pricing" (United Kingdom). https://www.shopify.com/uk/pricing — retrieved 31 August 2026.