Shopify's UK VAT now follows the warehouse. Four orders show what changed

What changed

On October 23, 2026, Shopify changed how it calculates VAT on orders shipping to Great Britain. VAT is now worked out from the fulfillment location your order routing settings choose for each order, the same way Shopify already handles tax on orders to the United States.

The part that bites is at the top end. If an order totals more than £135 before tax and shipping, and routing assigns it to a location outside the UK, Shopify now treats it as an import, and VAT isn't charged at checkout. That applies even if your store has a UK location. Orders of £135 or less, orders shipping to Northern Ireland and orders placed before the change aren't affected.

Your tax setting didn't change. Your routing rules just became part of your tax setup. The easiest way to see what that means is to follow a few orders through it.

The example store

Picture a brand based in the US, registered for UK VAT, with stock in two places: its own warehouse in the US and a small third-party warehouse in England. This is an illustration, not a real client, but it's a common setup. The UK warehouse holds the best sellers. Everything else ships from the US.

Its routing rules say: send orders to the closest location that has everything in stock, and fall back to the US warehouse otherwise. Those rules were written for shipping speed. Nobody was thinking about VAT when they set them up.

Four orders

Order one: £90 of best sellers to London. Under the threshold, so nothing changes. Shopify's changelog says orders of £135 or less aren't affected, wherever they ship from. Shopify's Help Center notes that sellers based outside the UK must register and charge VAT at the point of sale on these smaller orders, which this store already does.

Order two: £220 of best sellers to Manchester. Over the threshold, and everything is in stock in England. Routing picks the UK warehouse, so VAT is charged at checkout the way the store expects.

Order three: £220 to Leeds, with one item only stocked in the US. Here's the change. Routing sends the whole order to the US warehouse because that's the only place that has everything. The order is now over £135 and assigned to a location outside the UK, so Shopify treats it as an import and doesn't charge VAT at checkout. The UK warehouse doesn't help. The Help Center says that for sellers outside the UK, VAT and duties on these orders are remitted by the importer, which can come as a surprise to a customer who thought the checkout price was the whole price.

Notice what caused it. Nobody touched a tax setting. One item being out of stock in England moved the whole order to a different location, and that moved the order into a different tax treatment. On a busy weekend, with best sellers running low in the UK warehouse, this could happen to a good share of the larger orders without anyone noticing until somebody reads the tax report at the end of the month.

Order four: £220 to Belfast. Northern Ireland follows different rules, and Shopify says those orders aren't affected by this change. Nothing new to do here.

Two edge cases are worth knowing. Shopify says orders split across more than one fulfillment location can be handled differently, so if your routing splits orders, check how those come out. And the £135 is measured before tax and shipping. If your prices include tax, the Help Center says the tax is taken out first to decide whether an order is over the line. A basket that shows a little over £135 with VAT included may actually fall under it.

What to change

Shopify gives two ways to keep VAT on these orders at checkout.

Route them to a UK location. In the Shopify admin, go to Settings, then Locations, and add a location with a complete UK address, set to Active. Stock the products you sell to Great Britain there. Then review your order routing rules so orders to Great Britain are assigned to it. Shopify is explicit that the address in your store details doesn't count as a physical location for tax. It has to be a real fulfillment location.

For the example store, that means looking hard at the fallback rule. Should an order to Leeds wait for the UK warehouse to restock, ship split, or go from the US? Each answer has a different cost, speed and tax result now. We wrote about the routing side of this in deciding which orders a second warehouse gets, before it opens.

Collect duties and import taxes at checkout. If you'd rather keep shipping some orders from outside the UK, Shopify's alternative is to collect duties and import taxes at checkout, so the customer pays up front instead of being asked later.

Either way, look at your recent orders to Great Britain over £135 and see where they were routed. That tells you how many orders this actually touches.

Who should check this week

You should look at this soon if you sell into Great Britain from more than one location, if your UK stock is thinner than your total range, or if your routing rules have fallbacks you haven't reviewed in a while.

You can probably relax if every order to Great Britain already ships from a single UK location, or if almost all your UK orders are under £135.

Whatever you find, write down the rule you chose and why. The next person to edit routing for speed or cost should know they're also editing how VAT works. And talk to your accountant or tax adviser before you settle on an approach. This note covers how Shopify calculates the tax, not what you owe.

Our ecommerce team spends a lot of time on exactly this kind of quiet interaction between settings that look unrelated. If you want help reviewing your routing and tax setup together, talk to us.

Related work: Paddle8.