Set up UK taxes in your Shopify store

Shopify Taxes UK Flag.png

This document will help you configure taxes if your Shopify store is based in the United Kingdom.

The most important difference when it comes to charging VAT in your store is whether your business is VAT registered or not. This topic is covered in more detail in our Shopify VAT guide for selling to EU customers.

If your business is VAT registered and you want to sell to both consumers and business customers in different countries of the European Union, you will need to correctly set up your tax settings and tax rates.

Tax settings

To charge VAT to some customers and not to others, all product prices in your store should be set without VAT.

Visit the SettingsTaxes page in the administration of your Shopify store and make sure that the All taxes are included in my prices checkbox is unchecked.

Taxes Excluded Checkbox Shopify

If you still want to show prices with taxes included to customers shopping in your store, please have a look at Shopify’s Show VAT prices on your product pages article.

Tax rates in the United Kingdom and the EU

In the EU, you need to charge different tax rates when selling physical and digital goods.

Selling physical goods

When selling physical goods to customers in the European Union, you should charge the VAT rate of your home country.

As of 4th January 2011, the current rate of VAT in the UK is 20%.

To set tax rates for selling physical goods:

  1. Go to the page SettingsTaxes in your Shopify admin. You should set tax rates for all EU countries you are shipping to.
  2. If you do not see all EU countries in the Tax rates list, go to the page SettingsShipping, click the Add shipping zone link and type Europe in the search field. This will add all European countries to the list, but you might want to remove those who are not members of the EU.
  3. Set the tax rate for each EU country on the SettingsTaxes page. In most cases, you should use the VAT rate of your store's country for all EU countries.

Note

If your annual turnover in a certain EU country surpasses its VAT threshold, you have to register for a local VAT registration number. In that case, you have to charge the VAT rate of that country instead. You can read more about VAT thresholds in our EU VAT guide for Shopify stores.

For example, if your business is based in the United Kingdom, but you have had to register for a local VAT registration number in Germany, your tax rates in Shopify might look as follows.

Shopify Tax Settings UK VAT

The tax rates of a Shopify store based in United Kingdom that also has a local VAT number in Germany. The UK VAT rate of 20% is set for all countries of the European Union besides Germany, which is set to the German VAT rate of 19%.

Selling digital goods

When selling digital goods (such as e-books, downloadable music, stock photographs or online courses) to customers in the European Union, you should charge VAT at the rate applicable in the customer’s country.

See this article to find out how to set up EU taxes for selling digital goods.

Invoices

Once you set your tax rates correctly in your store, Sufio will automatically create valid invoices with the breakdown of different VAT taxes charged. Invoices are fully compliant with accounting legislation in the UK.

Issuing invoices with a correct tax breakdown is vitally important for your bookkeeping and tax purposes.

If you are selling to businesses (B2B), Sufio invoices display all the required information including VAT identification numbers of your store and your business customers.