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.
As of January 31, 2019, the United Kingdom is no longer part of the European Union. However, the UK will remain inside the EU VAT regime until the end of the December 2020 transition period.
To charge VAT to some customers and not to others, all product prices in your store should be set without VAT.
Visit the Settings → Taxes page in the administration of your Shopify store and make sure that the “Show all prices with tax included” checkbox is unchecked.
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:
- Go to the page Settings → Taxes in your Shopify admin. You should set tax rates for all EU countries you are shipping to.
- If you do not see all EU countries in the Tax rates list, go to the page Settings → Shipping, 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.
- Set the tax rate for each EU country on the Settings → Taxes page. In most cases, you should use the VAT rate of your store's country for all EU countries.
As of January 31, 2019, the United Kingdom is no longer part of the European Union. However, the UK will remain inside the EU VAT regime until the end of theDecember 2020 transition period.
VAT threshold in other EU countries
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.
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.
Get your free Shopify Tax Guide
Charging your customers the correct tax rates is essential for your business.
Get a free copy of our easy-to-read guide and kick off your sales!
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.