VAT guide for Shopify stores in the UK

The UK has one VAT system, but it doesn't treat every sale the same way. After Brexit, Northern Ireland still follows EU VAT rules for goods, while England, Scotland, and Wales don't. Where your store is based and where your customers are both change how much VAT you charge.

This guide explains when you need to register for VAT, how to charge it on different types of sales, and which upcoming VAT changes you should prepare for.

Last updated on November 5, 2026

In this article, we'll discuss

• The difference between the UK and Great Britain
  • Northern Ireland and the Windsor Framework
• When to register for VAT
• My business is not VAT registered
• My business is VAT registered
  • Selling to customers in the UK
  • Selling to customers outside the UK and the EU
  • Selling from Great Britain to customers in the EU
  • New EU customs duty on low-value parcels
  • Selling from Northern Ireland to customers in the EU
    • Selling to consumers (B2C) and non-VAT-registered businesses
    • Selling to VAT-registered businesses (B2B)
• Selling digital services
  • VAT rules for digital services
• Invoices
• Upcoming VAT and e-invoicing changes for online stores

Before looking at the VAT rules, it's important to understand the difference between the UK and Great Britain:

• The United Kingdom (UK) is made up of four countries: England, Scotland, Wales, and Northern Ireland.
• Great Britain (GB) refers only to England, Scotland, and Wales.

The Northern Ireland Protocol, introduced in January 2021, was designed to prevent a hard border between Northern Ireland and the Republic of Ireland. As a result, Northern Ireland stayed in the UK VAT system but continued to follow EU VAT rules for goods.

The Windsor Framework, agreed in February 2023, updated these arrangements:

• Northern Ireland is still part of the UK VAT system, and HMRC collects VAT there. All UK sales are reported on the same UK VAT return.
• The UK government can apply UK VAT changes to certain goods sold only within Northern Ireland.
• Goods moved from Great Britain to Northern Ireland can use the green lane (simplified customs checks) if they stay in Northern Ireland, or the red lane (full customs checks) if they might move on to the EU. These lanes are customs rules, not VAT rules.

UK VAT changes don't always apply in Northern Ireland at the same time. For example, the temporary 0% VAT rate on household electricity applies only in Great Britain, while Northern Ireland keeps the 5% rate.

If your business is based in the UK, you have to register for VAT when either of these applies:

• Your VAT taxable turnover in the past twelve months (a rolling period, not the tax year) was more than £90,000.
• You expect your VAT taxable turnover to go over £90,000 in the next 30 days alone.

Zero-rated sales, including exports, count toward this threshold. Exempt sales don't. You can deregister if your taxable turnover falls below £88,000, and you can register voluntarily at any time.

The £90,000 threshold has applied since April 1, 2024. The November 2025 Budget kept it at £90,000 from April 1, 2026, so it applies for the 2026/27 tax year.

If your business is based outside the UK, there's no threshold: you have to register as soon as you make taxable sales in the UK or hold stock there for sale.

If your business isn't registered for VAT, you don't charge VAT on any of your sales, no matter where your customers are located. This applies everywhere in the UK, including Northern Ireland.

If your business is based in the UK and is VAT registered, whether you charge VAT depends on where your store is based and where your customers are.

When you're VAT registered, your invoices also need to include your VAT registration number to be valid VAT invoices.

When you sell to consumers or businesses anywhere in the UK, you charge UK VAT. This also applies to sales from Great Britain to customers in Northern Ireland, which are taxed just like sales within Great Britain.

The UK has three VAT rates: standard (20%), reduced (5%), and zero (0%).

• Standard rate (20%): applies to most goods and services.
• Reduced rate (5%): applies to some goods, such as children's car seats and mobility aids for older people.
• Zero rate (0%): applies to goods such as books, newspapers, and children's clothes and shoes.

Even though zero-rated goods are taxed at 0%, you still have to include them in your VAT records and report them on your VAT return.

Whatever rate you charge, your invoices must show the VAT information.

Sufio automatically creates valid invoices with a detailed breakdown of the VAT charged.

Goods you ship from anywhere in the UK to customers outside the UK and the EU are zero-rated.

Even though the VAT rate is 0%, you still have to record these sales in your VAT accounts, report them on your VAT return, and keep evidence of removal. This includes shipping and customs documents that show the goods left the UK.

Goods you ship from Great Britain to customers in the EU are exports, so they're also zero-rated for UK VAT. You report them the same way as sales outside the UK and the EU, and you have to keep evidence of removal.

However, your EU customers still have to pay import VAT in their own country:

• For orders of €150 or less, you can collect the EU VAT at checkout and report it through the Import One-Stop Shop (IOSS). UK businesses usually need an EU intermediary to register for IOSS.
• If you don't use IOSS, or the order is worth more than €150, import VAT is charged when the goods enter the EU, usually to your customer.

Since July 1, 2026, the EU no longer exempts goods worth €150 or less from customs duty. Because Great Britain is outside the EU, this affects orders you ship from Great Britain to consumers in the EU.

Instead, a temporary flat customs duty of €3 per item applies. An item here means each product type, by customs classification. A single parcel with several products can therefore attract more than one €3 charge.

Because Northern Ireland follows EU VAT rules for goods, sales of goods from Northern Ireland to the EU work like sales between two EU countries.

Sales of goods to consumers and businesses that aren't VAT registered in the EU are called distance sales:

• If your total distance sales to all EU countries stay at or below €10,000 (£8,818) in a calendar year, you charge UK VAT.
• Once your total distance sales go over €10,000, you charge the VAT rate of your customer's EU country.

To report the EU VAT, you can register for VAT in each EU country you sell to or use the One-Stop Shop (OSS) Union scheme. This lets you report and pay the VAT for all these sales on a single return through HMRC.

Shopify lets you set up tax settings for individual VAT registrations and automatically charge the correct VAT to your EU customers.

Most goods sold from Northern Ireland to VAT-registered businesses in the EU are zero-rated. Make sure you have your customer's valid EU VAT number before you zero-rate the sale.

You still have to report these sales on your VAT return and keep evidence that the goods left Northern Ireland. VAT-compliant invoices, such as those created by Sufio, help you document these sales.

Digital services follow their own VAT rules, depending on where your customers are. First, check whether what you sell is actually a digital service.

Digital services include radio and television broadcasting, telecommunication services, and electronically supplied services, such as online magazines, music, films, and games.

Selling online doesn't automatically make a product a digital service. If customers order physical goods through your Shopify store, it's still a sale of goods and follows the rules above.

When you sell digital services to consumers in the UK, you charge UK VAT as usual.

When you sell digital services to consumers in the EU, you charge the VAT rate of your customer's EU country. There's no €10,000 threshold for UK businesses, so this applies from your first sale. This is true for businesses in both Great Britain and Northern Ireland, because Northern Ireland follows EU VAT rules only for goods.

To pay this VAT, you can either:

• Register for the OSS non-Union scheme in one EU country of your choice and report all your EU digital sales on a single return, or
• Register for VAT in each EU country where you have customers.

If you sell digital services through an online marketplace, the marketplace usually handles the VAT in your customer's country instead.

Once your tax rates are set up correctly in your store, Sufio creates valid invoices with a breakdown of the VAT charged. Invoices can be created in multiple languages and include all the details that UK invoicing rules require.

If you sell to businesses (B2B), Sufio invoices include all the required information, such as your VAT registration number and your business customer's VAT number.

Having the correct tax breakdown on your invoices is essential for your bookkeeping and your VAT returns.

The UK government has confirmed several VAT changes that will affect how online stores sell, invoice, and pay VAT:

• Online marketplaces (from October 1, 2027): If you also sell through marketplaces such as Amazon or eBay, the marketplace will account for the VAT on your sales of goods located in the UK. This applies if you're VAT registered or if your sales on that marketplace are over £90,000 a year. It doesn't affect sales through your own Shopify store.
• Mandatory e-invoicing (from April 1, 2029): VAT-registered businesses will have to issue and receive VAT invoices in a structured electronic format, exchanged through the Peppol network. A PDF sent by email won't count as an e-invoice. The detailed requirements are due between October 2027 and April 2028.
• VAT by direct debit (from April 2029): VAT-registered businesses will have to pay their VAT by direct debit.

To be ready for 2029, make sure your invoicing app can create and receive e-invoices in the required format.