Regional Support: Taxes (UK)

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Shopify Staff
Shopify Staff
365 36 101

Learn more about collecting and managing taxes while running your Shopify store in the UK.

This thread is part of the Regional Support threads offered for merchants in the United Kingdom. To see which other topics are available, you can visit the UK hub here.


The prices of most products sold in the United Kingdom are tax-inclusive, meaning the sales tax (VAT) is included in the price. The standard VAT rate in the UK is currently 20%. To display tax-inclusive pricing, you can adjust your settings to show prices with tax included:

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Customers who are required to pay VAT will see the amount of tax that they have paid at checkout and in their order confirmation. Customers who are not required to pay VAT will still pay the full price at checkout, but will see a VAT/ sales tax rate of 0% when making their purchase.

In an example taken from my test store, this first screenshot was taken at checkout when I proceeded with a UK address, making me eligible for taxation:

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However, when I change my address to one from the United States, a location where I do not collect taxes, the price remains the same but no VAT is charged:

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If you want to be able to charge a lower price for customers who are not required to pay VAT, you can opt to disable the “Show all prices with tax included” option in your tax settings and set all prices for your products to be the pre-VAT rate. This means that customers who are required to pay sales tax will see the appropriate VAT added to their order at checkout, whilst customers who are not required to pay VAT will see no sales tax added. To do this, you will want to ensure that the option shown in step 2 here is disabled:

 

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If this is what you decide to do, then you may also want to list the VAT-inclusive price on your product pages alongside the VAT-exclusive price. We offer a guide on how to do this over at our Help Center.

Shopify is unable to offer direct tax advice to merchants. If you’re unsure of your tax obligations as a business operating in the UK, then we recommend consulting a tax expert for professional advice. We offer our own documentation on setting taxes for merchants outside of the United States and Canada, and you may also find some of these third-party resources helpful: 

If you have a question or comment to make about managing your taxes with Shopify in the United Kingdom, please post it below.

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What settings should I apply, If I'm earning less than £85,000 in taxable turnover? 

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Shopify Staff
Shopify Staff
365 36 101

Hi @tyrra000,

 

Thank you for reaching out with your question. As you're probably aware, the £85,000 figure you referenced is the taxable turnover threshold for which you must register your business for VAT with HM Revenue and Customs. You can read more about this on the UK government's website.

 

If your business' VAT taxable turnover -  the total value of everything you sell that is not exempt from VAT - is under this £85,000 threshold, and will not hit this threshold in the next thirty days, you do not need to register for VAT with HMRC. If your business is not registered to pay VAT in the United Kingdom, you should not need to charge UK-based customers VAT when they place orders on your Shopify store. This can be configured in the Shopify admin.

 

If you head to Settings > Taxes, you should see the United Kingdom as a region listed here. If you are marked as "collecting" for taxes in the UK, you can press "Edit" - this will then give you the option to change the rate of tax charged:

 

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Changing this figure from 20% to 0% and then saving will ensure no taxes are charged to customers in the United Kingdom when they checkout.

 

As with all tax-related enquiries, I'd recommend doing your own research into you and your business' tax obligations, and to consult with a tax professional if you are unsure on what you need to do. I'd also recommend checking out some of these third-party resources on this topic for additional advice:

 

I hope this has helped clarify things but please let me know if you have more questions.

 

Kind regards,

 

Victor | Shopify Social Care

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Thank you so much! I understand it much better now.
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Tourist
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Hi - are any other UK stores frustrated by this?

My overseas customers are constantly pinging me asking why they are being overcharged (since their price doesn't drop when the tax is removed)

 

It would be an even bigger problem in the UK to show prices ex-VAT to consumers, so please don't offer that as a feasible solution.

 

It is a severe restriction on our overseas growth at the moment - as it's impossible for me to show competitive prices

 

Does anyone have a meangingful work-around?

 

Thanks

Paul

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Shopify Staff
Shopify Staff
365 36 101

Hi @PMckay777,

 

This is something we've heard from merchants in tax-inclusive countries before, including the UK. It's not an ideal situation but this is something our development team is aware of and considering. I have submitted your feedback to them and if any changes to this system are made I will be sure to update this thread.

 

I understand that it would be problematic to show pre-VAT prices on your store when selling to UK customers without also showing the VAT-inclusive price; one option you have would be to perform a theme customization, shown here, which would display both the tax-exclusive and tax-inclusive prices on the product page. Another option would be to use an app such as Multi Country Pricing to reduce the prices of your products for customers in countries and regions where you do not need to charge VAT, whilst keeping your prices as VAT-inclusive for your customers in the UK.

 

Kind regards,

 

Victor | Shopify Social Care

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Hi I am just starting a new store ,I really do not know what will be my sales but I want to start as sole trader now to save accountant bills but as and when sales revenue hit more than 30K in a year I plan to open Ltd company. In order to change from sole trader limited company in future, should I just change the payout account details on shopify addmin and change privacy policy etc on website. Is there anything else I need to consider during that time as I want to plan in advance. Also at what revenue does Shopify notify the HMRC about revenue I assume its $20K for USA. 

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Shopify Staff
Shopify Staff
365 36 101

Hi @tarung17,

 

Thank you for reaching out with your questions. In terms of switching from a sole trader to a limited company, I'd recommend updating any documentation on your site that says otherwise with the updated information. I'd also suggest checking out the steps to creating a limited company on the government's official website.

 

For merchants with a US Shopify Payments account, Shopify will file a 1099-K form to the IRS when the merchant has made a minimum number of transactions and amount of revenue in a year. I do not believe the same situation applies for merchants with a UK Shopify Payments account in terms of HMRC, and it is down to the merchant to file and submit all relevant tax documentation to them directly.

 

Further advice I can offer on setting up a limited company is limited, so I would suggest reading through these third-party resources for more information on the process and what you should consider:

 

Please let me know if you have further questions.

 

Kind regards,

 

Victor | Shopify Social Care

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Hi @tarung We help making the decision of setting up a limited company and to have a plan to submit the tax returns.

Please get in touch with us
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Shopify Staff
Shopify Staff
365 36 101

The UK government has set up a hotline for businesses concerned about paying their taxes due to the coronavirus pandemic. The number in question is 0800 0159 559 and more information can be found here.

 

In summary:

 

HMRC has a set up a phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (COVID-19).

 

The helpline allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. Up to 2,000 experienced call handlers are available to support businesses and individuals when needed.

I will attempt to update this thread with any tax-related information as the situation progresses.

 

Victor | Shopify Social Care

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