Your bank says £70k. HMRC might say £95k. Shopify pays you net of its fees, so the money landing in your account is always less than you sold — but VAT registration is measured on what you sell. Those two numbers drift apart quietly, month after month, until one day you're registered and didn't know it.
Sell £1,000 on a good day and roughly £980 arrives on a UK Basic plan (Shopify Payments takes 2% + 25p per card sale). Its fees come off before the money reaches you, and refunds and chargebacks are netted inside the same payout — with international or Amex cards, and lower plan tiers, the deduction is bigger again. The payout also lands a couple of days late, covering orders from a period that doesn't line up with your month.
So there are two numbers running in parallel: what you sold, and what you banked. Most sellers only ever watch the second one, because it's the one they can see.
HMRC only cares about the first.
The threshold is £90,000 of taxable turnover. Taxable turnover is the value of the supplies you make — your sales, excluding VAT. It is not your profit, not your margin after the cost of goods, and not what Shopify pays into your bank.It does, though, catch one thing that isn't a sale at all: the overseas services you have to reverse-charge — your Shopify, Meta and Google fees billed from Ireland — count towards the £90,000 too. Around £86,000 of sales plus £6,000 of those fees already puts you over the line (more on this below).
There are two tests, and you must register if you fail either:
Your taxable turnover for the last 12 months goes over £90,000. This is a rolling 12 months — not your tax year, not your accounting year. It moves every single month.
You expect to go over £90,000 in the next 30 days alone. One huge month, one viral product, one Black Friday — this test can catch you on its own.
The rolling window is what makes this sneak up on people. You never sit down in April and check. It just quietly ticks over one Tuesday in November.
Here is the one that catches even careful sellers. When you buy the kind of business services that fall under the reverse charge — broadly, general-rule services whose place of supply is the UK, like software, advertising, SaaS and professional fees bought from a supplier outside the UK — HMRC requires you to include their value in your own taxable turnover when working out whether you have to register. Not every overseas purchase counts: an overseas hotel, land abroad or admission to an event abroad is supplied where it happens, not in the UK, so it stays out of the sum.
Read that again, because it sounds wrong: a purchase can push you over a threshold that is otherwise about sales. But it is the rule. HMRC's own guidance works it through with an example built on the old £85,000 threshold — a business at £80,000 that receives £10,000 of overseas services tips over and has to register. Run the same logic against today's £90,000 threshold and it still bites: £85,000 of sales plus £10,000 of overseas fees is £95,000, and you're registered.
Don't wait to spot the words 'reverse charge' on a Shopify invoice, either. Until you hand Shopify a UK VAT number it simply charges you 20% VAT and shows no reverse-charge wording at all — so its absence doesn't mean you're in the clear. Treat those overseas platform fees as counting towards the very threshold you think you're safely below; the reverse charge only appears on the invoice once you're registered.
If you register late, you owe the VAT from the date you should have registered— not from the date you noticed. You never charged that VAT to your customers, so it comes straight out of your own pocket, on sales whose money you have long since spent on stock and ads. There may be a failure-to-notify penalty on top, too — though it isn't automatic. For an honest mistake you disclose before HMRC asks, it can be reduced to nothing — but only if HMRC become aware within 12 months of the tax first becoming unpaid. Past that, the minimum for the same unprompted, non-deliberate disclosure is 10% of the VAT you should have paid. There's no penalty at all where you had a reasonable excuse.
That is why this one is worth ten minutes of your attention today rather than a very bad afternoon in eighteen months. It is not a fine. It is a tax bill on money you no longer have.
Stop measuring yourself by your payouts. Take your Shopify sales figure — gross, before fees, before refunds are netted off — for the last 12 months, add anything you sell elsewhere, and add the overseas platform fees you have to reverse-charge. That is the number HMRC is looking at. Then keep looking at it every month, because the window rolls.
If you're anywhere near £90,000, don't guess. Registering a month early costs you very little. Registering a year late can cost you tens of thousands.
Your sales. The VAT registration threshold is measured on taxable turnover — the value of the supplies you make — not on the cash that reaches your bank. Shopify pays you net of its fees, and refunds and chargebacks are netted inside the same payout, so your bank receipts are always lower than your sales. Using your payouts to judge where you stand will make you think you're further from the threshold than you are.
£90,000 of taxable turnover. There are two separate tests and you must register if you fail either one. The backward-look test: your total taxable turnover for the last 12 months goes over £90,000 — that's a rolling 12 months, not your tax year or your accounting year. The forward-look test: you expect to go over £90,000 in the next 30 days alone.
If you cross it on the backward-look test, you must register within 30 days of the end of the month in which you went over, and your registration takes effect from the first day of the second month after you exceeded it. On the forward-look test you must register by the end of that 30-day period, and registration takes effect from the date you realised you would exceed it.
They can — and this catches people out. Where you buy the kind of general-rule business services whose place of supply is the UK — software, advertising, SaaS and professional fees bought from a supplier outside the UK — HMRC requires you to include their value in your own taxable turnover when working out whether you must register. (Not every overseas purchase counts: an overseas hotel, land abroad or admission to an event abroad is supplied where it happens, so it stays out.) It sounds wrong — they're purchases, not sales — but it is the rule, and HMRC's own guidance works through an example of a business pushed over the threshold by exactly this. Don't rely on spotting the words 'reverse charge' on your invoice, though: until you give Shopify a UK VAT number it charges you 20% VAT and shows no reverse-charge wording at all, so its absence doesn't mean the rule won't apply. Treat the overseas fees as counting towards your £90,000; the reverse charge only shows on the invoice once you're registered.
You are liable for the VAT from the date you should have been registered — not from the date you noticed. That VAT comes out of your own pocket, because you never charged it to your customers. There may also be a failure-to-notify penalty — but it isn't automatic, and the timing matters more than most people realise. If the failure wasn't deliberate and you tell HMRC before they come asking, the penalty can be reduced to nothing — but only where HMRC become aware within 12 months of the tax first becoming unpaid. Once you are past that 12 months, the same unprompted, non-deliberate disclosure has a minimum penalty of 10% of the VAT you should have paid. There's no penalty at all where you had a reasonable excuse. That 12-month cliff is the real reason not to sit on it. Either way, what makes late registration expensive isn't the penalty — it's the tax bill on sales you've already spent the money from.
It depends on where the supply takes place, and it's the part of this that most needs a real answer rather than a rule of thumb. Exports of goods to customers outside the UK are generally zero-rated — and zero-rated sales still count towards your taxable turnover, which surprises people. Selling to EU consumers can create a VAT obligation in the EU itself; the optional One Stop Shop (OSS) and Import One Stop Shop (IOSS) schemes just let you settle it through a single return instead of registering in each member state, and IOSS only covers consignments of an intrinsic value not exceeding €150. Don't confuse that with the UK's own £135 rule — that is a separate regime, running the other way, for goods sold from overseas to customers here. Get this looked at properly rather than guessed.
Send us a year of Shopify sales and we'll tell you — properly, in plain English, with no obligation and no sales pitch.
Book a free call →General guidance, not advice for your specific situation — VAT turns on the detail. Last reviewed 13-07-2026.
We checked these rather than relying on memory. Every figure and deadline above comes from HMRC directly — go and read them yourself if you'd like to.
Last reviewed 13-07-2026. Tax rules change — if you're reading this long after that date, check the source.
