Shopify UK VAT Now Follows the Fulfilment Location

Shopify UK VAT Now Follows the Fulfilment Location

Released on 23 October 2026, a Shopify update changes how VAT is worked out on orders to Great Britain: it now depends on which fulfilment location order routing picks for each order, so an order over £135 that ships from outside the UK carries no VAT at checkout, even when the store also has a UK location. Read the Shopify Changelog release note here.

Shopify files this under Admin as an improvement, which undersells it. The change decides what a buyer in England, Scotland or Wales pays at checkout, and whether they get a bill from the carrier before the parcel is handed over. Any store that ships to Great Britain from more than one place is affected: a UK brand with a warehouse or 3PL in the EU, an overseas brand with some stock in the UK, or a store whose UK location sometimes runs short.

The logic mirrors the HMRC rule for direct sales that has applied since the start of 2021. When goods are outside the UK at the point of sale, a consignment to a GB customer worth £135 or less carries UK VAT charged by the seller at checkout. Above £135, normal import VAT and customs rules apply. Shopify now runs that test on each order, using the location it actually ships from. The changelog does not say how these orders were taxed before, so check your own orders rather than assume nothing has moved.

How it works

Every Shopify order is assigned to a fulfilment location by the store's order routing rules. For orders shipping to Great Britain, that assignment now feeds the VAT calculation, which is how Shopify already handles tax on orders shipping to the United States. If an order totals more than £135 before tax and shipping and is assigned to one location outside the UK, Shopify treats it as an import and charges no VAT at checkout. Shopify's Help Center guide to charging VAT on orders over £135 is explicit that this applies even if the store has an active UK location. Having a UK location is not enough. The order has to be assigned to it.

Orders of £135 or less, orders to Northern Ireland and orders placed before the change are not affected. The store address in General settings does not count as a physical location for tax, so a UK location needs its own entry under Settings, then Locations, and it has to be active. If it is inactive, the £135 import test applies as though it did not exist.

Two details decide how individual orders come out. First, the location used for VAT is fixed at checkout, and changing an order's fulfilment location afterwards does not recalculate the tax. Second, the £135 test runs on the order total before tax and shipping, and if Include tax in prices is switched on, Shopify deducts the tax first. That moves the line on a VAT-inclusive store: at the standard 20% rate, a basket priced at £162 including VAT is worth exactly £135 before tax, so it has to go above £162, before shipping, for the import rule to apply. HMRC's guidance on VAT and overseas goods sold directly to customers in the UK applies the limit to the whole consignment, not to each item, and leaves transport and insurance out of the value unless they are built into the price.

Shopify gives two ways to charge VAT on these orders. One is to fulfil GB orders from a UK location: add it with a complete UK address, set it to active, stock the products you sell to Great Britain there, and check that routing assigns GB orders to it. The other is to collect duties and import taxes at checkout, so the order is still an import but the buyer pays the charges up front. A tax override cannot be used to charge UK VAT on orders over £135. Orders split across more than one location "can be handled differently", in Shopify's words, without saying how, so test split shipments rather than assume.

Examples / Use cases

Take a Leeds homeware brand that ships from its own warehouse and uses a Dutch 3PL, set up as a second Shopify location, for EU customers. A GB customer orders a £190 basket, priced including VAT, which is about £158 before tax. If everything is in stock in Leeds and routing prefers Leeds, VAT is charged at checkout as normal. If one item has sold out in Leeds and the Dutch location holds the whole basket, Shopify's own troubleshooting notes warn that routing might assign the order to the location outside the UK, making it an import. No UK VAT is charged at checkout and, unless the store collects duties and import taxes at checkout, the carrier asks the buyer for import VAT, and possibly Customs Duty, instead.

Now take a US skincare brand that keeps its bestsellers with a UK 3PL. A £150 order routed to the UK location is charged VAT at checkout, because Shopify applies VAT to any order assigned to an active UK location, whatever its value. A £150 order that includes a product stocked only in the US may be routed to the US warehouse, and if it is assigned there as one shipment, it becomes an import. A £120 order from the US stays under the threshold, so VAT is charged at checkout, and Shopify notes that a merchant outside the UK must be registered for UK VAT to make those sales. HMRC adds that an overseas seller whose goods are already in the UK at the point of sale must register and account for VAT at any value.

The third case is customer service. A buyer phones to add a £15 item to a £125 order that has already been charged VAT. In Shopify's own example, VAT stays on both, even though the order is now £140, because the Order Editor treats added items as separate transactions and does not rerun the £135 test. The workaround is to cancel the order and create a new one. The same rule catches warehouse teams: reassign an import order to the UK location after checkout and the VAT does not follow it.

What this means for UK merchants

The stores most exposed are UK brands with an EU stock point or 3PL set up as a Shopify location, stores whose fulfilment partners or apps ship from abroad (print-on-demand, dropshipping or a manufacturer shipping direct) and appear as locations in the admin, overseas brands with a UK stock point, and any store whose UK location can run short. A store that ships everything from one active UK location is not affected.

The buyer's side of an import is set out on gov.uk's page on tax and duty on goods sent from abroad. On goods worth more than £135 sent from outside the UK, the buyer pays VAT to the delivery company before delivery or on collection, charged on the total package value including postage, packaging, insurance and any duty. Customs Duty can also apply, at a rate that depends on the goods and where they came from. The carrier sends a bill, holds the parcel for about three weeks and returns it to the sender if the bill is not paid. For a customer who thought they were buying from a British shop, that is an unexpected bill at the door.

That leaves a choice for each store: route GB orders to a UK location and keep enough stock there for routing to use it, or collect duties and import taxes at checkout so the buyer sees the full cost before paying. It is the same pay-now or pay-on-delivery choice we covered when Shopify Managed Markets ended DDU support. If some GB orders stay imports without charges collected at checkout, tell buyers before they pay. Schedule 2 of the Consumer Contracts Regulations 2013 lists, among the information given before a distance contract, additional delivery charges and other costs or, where they cannot reasonably be calculated in advance, the fact that they may be payable. Whether carrier-collected import VAT falls under that is a question for your adviser, but the cautious reading is to say so at checkout and in the shipping policy.

Timing matters too. Black Friday falls on 27 November 2026, and peak trading is when bestsellers sell out at the UK location and routing reaches for stock elsewhere, so check routing rules and UK stock levels before the sale. UK VAT and shipping set-up sit inside the build scope of our Shopify web design work, and a store whose locations and routing grew piecemeal is worth tidying before peak.

Practical considerations

Test with a real checkout, not a draft order. Shopify warns that draft orders might not have a fulfilment location assigned when tax is calculated, so a draft can show a different VAT result from a real one. Place a test order over £135 to a GB address through the checkout, then confirm which location it was assigned to and what tax it carried. Check that the UK location is active and stocked for every product you sell to Great Britain, and give split shipments their own test.

Keep the scope in mind. Northern Ireland orders follow separate rules, digital goods are taxed by destination whatever the order value, and HMRC has different rules for goods sold through online marketplaces, so this covers sales through your own store. When you compare orders from before and after the change, use order-level tax data: the Shopify Payments activity report we covered in August reconciles your balance against the bank, but it is a summary, not a transaction-level VAT record. Finally, take tax advice. Shopify Support can help with settings but not with tax or compliance questions, so speak to your accountant or HMRC if you sell from outside the UK, hold stock in more than one country, or are near the £90,000 VAT registration threshold.

Shipping in the other direction has its own deadline. From 1 November 2026, parcels sent from Great Britain to EU consumers need product identifiers for every item, which we cover in Shopify's EU product identifiers update for shipping labels.

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