The UK £135 VAT rule for Shopify sellers

If you sell from outside the UK to consumers in Great Britain, parcels worth £135 or less are taxed at checkout, not at the border. You charge UK VAT, you pay it to HMRC, and you need a UK VAT number to do that. This article explains how the rule works, how to set it up in Shopify, and what changes above £135.

This article isn't legal or tax advice. Check with your accountant or HMRC.

How the rule works

Since 1 January 2021, for goods sold directly to consumers in Great Britain:

• £135 or less: the seller charges UK VAT at the point of sale and accounts for it to HMRC. No import VAT is charged at the border, and the customer pays nothing on delivery.
• Over £135: normal import rules. The customer pays import VAT, any duty and the carrier's handling fee on delivery, unless you ship DDP and pay them yourself.

The £135 counts the goods in one consignment, without shipping and insurance shown separately on the invoice, and without taxes. Two items sent in one parcel are added together.

Do I need to register for UK VAT?

If you sell parcels of £135 or less to UK consumers, yes. The £90,000 registration threshold is for businesses established in the UK; sellers established elsewhere register from their first sale. You don't need to register if you only sell to UK businesses that give you a valid VAT number.

Business buyers

When a business customer gives you a valid UK VAT number, you don't charge UK VAT on a parcel of £135 or less. The customer accounts for it under the reverse charge, and your invoice should say so, for example "Reverse charge: customer to account for VAT to HMRC".

What the rule doesn't cover

• Alcohol, tobacco and other excise goods. Normal import rules apply at any value.
• Gifts between private people.
• Sales through an online marketplace. The marketplace charges the VAT. Your own Shopify store isn't a marketplace, so the rule applies to you.
• Northern Ireland follows EU VAT rules for goods. An EU seller treats a customer there like a customer in another EU country.

Customs duty

Parcels of £135 or less pay no customs duty, except on excise goods. The UK plans to end that relief by March 2029 at the latest. Over £135, duty depends on the goods, and products made in the EU or the UK can enter with no duty when the invoice carries a statement on origin.

Setting it up in Shopify

1. Register for UK VAT with HMRC.
2. In Shopify, go to Settings > Taxes and duties > United Kingdom and add your UK VAT registration.

Shopify then charges UK VAT at checkout on orders of £135 or less, measured before tax and shipping, and not on larger orders shipped from outside the UK. Shopify's UK tax guide explains the settings.

3. Put your UK VAT number on your invoices, and give it to your carrier when you buy labels, so UK customs can see that the VAT was paid at checkout.

How Borderdesk helps

Borderdesk is a Shopify app for EU and UK shops that ship across the border.

• It prints commercial invoices with your UK VAT number, the tax charged at checkout, and the reverse charge note for business buyers.
• Before you print, it warns when a parcel of £135 or less to a UK consumer has no UK VAT number behind it, and when a buyer's VAT number isn't a UK one.
• It keeps the HS codes and countries of origin on your products complete, so parcels over £135 clear with the right duty.

Borderdesk on the Shopify App Store

Sources

• HMRC, VAT and overseas goods sold directly to customers in the UK
• HMRC, VAT Registration Manual, VATREG37210
• Shopify Help Center, UK taxes