Shopify VAT UK Guide 2025: How to Set Up, Charge & File VAT the Right Way

Managing VAT (Value Added Tax) in Shopify can feel like walking through a maze, especially if you’re selling in multiple regions like the UK, Northern Ireland, or the European Union. Whether you’re a startup founder, a side hustler in digital products, or an established UK merchant hitting the £90,000 threshold, understanding how Shopify VAT works is essential to staying compliant and maximizing profitability.

In this guide, we break down every layer of Shopify VAT handling, including how to register, charge, configure tax settings, and file returns, so your store runs smoothly and legally.

What Is Shopify VAT and Why Does It Matter?

Shopify VAT is the mechanism by which Shopify merchants collect, record, and report Value Added Tax on goods and services sold, depending on the customer’s location and the seller’s VAT registration status.

Shopify enables sellers to:

• Collect VAT automatically at checkout
• Customize VAT rules for specific products or countries
• Issue tax-compliant invoices through apps like Sufio
• Use global checkout tools like Shop Pay to streamline compliance

Tip: Shopify does not remit VAT for you. As a seller, you’re responsible for filing returns with HMRC in the UK or through the OSS/IOSS system in the EU.

VAT Rules for UK Shopify Sellers

VAT Registration Threshold in 2025

If your Shopify store earns more than £90,000 in taxable sales over 12 months, you must register for VAT with HMRC under UK law.

Once you’re VAT-registered:

• You must charge VAT on your sales:
  • 20% standard rate for most goods and services
  • 5% reduced rate for items like children’s car seats or energy-saving products
  • 0% (zero-rated) for goods like baby clothes, books, and food items
• You must file VAT returns every quarter through the HMRC online portal

Your Shopify invoices must show:

• Your VAT registration number
• The VAT rate applied to each item
• The total VAT amount charged on the order

Shopify lets you add your VAT number and automatically applies the correct tax rates based on where your customers are located.

How to Set Up VAT for UK Sales in Shopify (2025)

If you’re selling to customers in the United Kingdom, you must ensure your VAT settings are correctly configured in your Shopify admin. This ensures you apply the correct VAT rates, generate compliant invoices, and avoid issues with HMRC.

Set Up UK VAT in Shopify: Step-by-Step Guide

1. Go to your Shopify admin panel.
2. Navigate to Settings → Taxes and Duties.
3. Under Countries/Regions, click on “United Kingdom.”
4. Click the “Collect VAT” button.
5. Enter your VAT number if you’re already registered. (If you haven’t registered yet, you can leave this blank for now and update it once HMRC assigns your VAT number.)
6. Shopify will automatically apply the standard 20% VAT rate to your UK sales.

Adjusting for Reduced or Zero-Rated Goods

Some items in the UK qualify for reduced or zero VAT rates. If you sell any of these:

• Create manual collections in Shopify (e.g., “Children’s Clothing” or “Books”).
• Go back to Settings > Taxes and Duties.
• Scroll to Tax Overrides, then click “Add Product Override.”
• Select your collection, choose the United Kingdom, and enter the correct rate

For example:

• 5%: Children’s car seats, energy bills
• 0%: Baby clothes, food, books

Not sure which rate applies? See the full UK VAT rate guide

Advanced Setup (Optional)

If your store requires more customized tax handling, you can:

• Use Shopify’s Tax API for programmatic control
• Integrate with apps like A2X or Avalara for advanced VAT workflows

Once this is configured, Shopify will calculate VAT automatically at checkout and display VAT-inclusive prices if needed.

UK Shopify VAT Rules: What Sellers Need to Know

VAT Registration Threshold

• Mandatory if turnover > £90,000 in a rolling 12-month period
• Voluntary registration is allowed if you wish to reclaim input VAT
• Once registered, you must:
  • Charge VAT to UK customers
  • File quarterly VAT returns via Making Tax Digital (MTD)
  • Display VAT registration number on invoices

Different VAT Rates in the UK

Type	Rate	Example Products
Standard Rate	20%	Most goods and services
Reduced Rate	5%	Children’s car seats, energy bills
Zero Rate	0%	Food, books, newspapers, baby clothes

Not sure which VAT rate applies to your products?
Check out our full list of current UK VAT rates—with simple examples and categories—to make the setup easier.
👉 See the full VAT rate guide

Shopify Sellers in Northern Ireland: Unique VAT Conditions

Thanks to the Windsor Framework, Shopify sellers in Northern Ireland remain part of the UK VAT system but must also follow EU VAT rules for goods.

Selling From NI	Selling To	Consumer (B2C) VAT	Business (B2B) VAT
NI	UK	20% (standard)	20% (standard)
NI	EU	Charge VAT	0% (reverse charge)

This information solves the query “Shopify VAT Northern Ireland” through regional compliance data.

Shopify EU VAT Compliance After Brexit

OSS & IOSS: Simplified VAT Filing for EU Sales

If you sell to customers in the EU, you can:

• Use OSS (One-Stop Shop) to report all EU VAT in one country
• Use IOSS for imported goods < €150 to collect VAT at checkout
• Avoid customer complaints over surprise customs fees

Important: Shopify helps you collect EU VAT but doesn’t remit it. You must file OSS returns yourself.

Product-Level VAT in Shopify: Managing Mixed Rates

Selling digital goods, zero-rated essentials, and standard-rated items? Configure Shopify to apply tax correctly.

Example: Assigning Tax Overrides

• Create manual collections (e.g., “Zero-Rated Products”)
• Apply region-based overrides
• Review invoices via Sufio or A2X

Example: Selling baby clothes (0% VAT) and adult apparel (20% VAT) requires two VAT rates. Shopify lets you automate this per SKU.

Shopify VAT Reverse Charge

When using Shopify’s paid services:

• Shopify won’t charge VAT if you supply your UK/EU VAT number
• You self-account using the reverse charge mechanism
• Report both input and output VAT in your return (net VAT = £0)

For “Shopify reverse charge VAT UK”, this clarifies seller-side treatment.

Shopify Bookkeeping and VAT Reconciliation

Tools like Link My Books and A2X integrate Shopify with accounting platforms like Xero and QuickBooks. They:

• Automate VAT categorization
• Reconcile Shopify payouts
• Track product-wise VAT rates

Example: A2X breaks down a £1,000 payout into:

• £833.33 sales revenue
• £166.67 VAT liability
• All auto-matched with your bank deposits

Compliance Checklist for UK Shopify Sellers

To stay fully compliant with UK VAT laws while using Shopify, you need to complete a few essential tasks. This checklist helps you track what needs to be done and where to focus your efforts as a VAT-registered business.

• Register for VAT if turnover exceeds £90,000
• Set up VAT collection in the Shopify admin
• Apply correct VAT rates using overrides
• Issue VAT-compliant invoices
• Submit quarterly VAT returns to HMRC
• Automate reporting with apps like Link My Books

Need a Printable Version?
Click here to download the Full VAT Checklist for UK Shopify Sellers (PDF)

Frequently Asked Questions

Final Thoughts

Shopify gives you the tools to handle VAT, but compliance is on you. With this guide, automation tools like Link My Books, and accurate VAT settings, you can focus more on growth and less on tax headaches.

Start smart. Set up VAT in Shopify today and stay ahead of UK and EU tax rules for 2025.