Use case
VAT Calculator for UK Ecommerce
A worked Shopify / Etsy example: how to price products with VAT, what the customer sees, and what you actually keep.
The setup
You sell handmade candles via Shopify and Etsy in the UK. You're VAT registered, so 20% of every consumer price goes to HMRC. You need to price products so that:
- The sticker price looks right to shoppers
- Your net (ex-VAT) revenue covers cost + margin
Product pricing with VAT — worked example
Target: a £24 retail price that looks clean on the storefront.
Gross price: £24.00
Net (you keep, pre-cost): £24 ÷ 1.20 = £20.00
VAT to HMRC: £4.00
Build the rest of the maths on the £20 net:
Product cost: £6.00
Packaging: £1.50
Net profit per unit: £20 − £7.50 = £12.50
Working backwards from a margin target
If you want £15 net profit per candle and unit cost is £7.50:
Required net price: £7.50 + £15 = £22.50
Required gross price: £22.50 × 1.20 = £27.00
That's the sticker price you'd list on Shopify or Etsy. Run any variation in the VAT Calculator.
Net vs gross on different channels
- Shopify storefront: show gross (VAT inclusive). Customers expect a final price.
- Etsy: same — list the VAT-inclusive price.
- Wholesale / trade portal: quote net. Trade buyers reclaim the VAT.
- Invoices for B2B buyers: always show net, VAT and gross separately — use the Invoice Generator or the VAT Invoice Template.
Common ecommerce VAT mistakes
- Setting platform prices net by accident — losing 20% of every sale.
- Calculating margin on gross instead of net.
- Forgetting that shipping usually carries VAT too.
- Applying the UK rate to overseas orders without checking the rules.
Next step
Work out your numbers in the VAT Calculator, then check the volume you need to break even using the Break-even Calculator on your net price. For background reading, see VAT Inclusive vs Exclusive.
Frequently asked questions
Should Shopify or Etsy prices include VAT?
Yes. Consumer-facing storefronts in the UK should show prices including VAT. Most platforms can show the gross price to shoppers and break VAT out at checkout for B2B buyers.How do I work out the VAT inside a £24 product price?
Divide the gross by 1.20. £24 ÷ 1.20 = £20 net, so £4 of that price is VAT due to HMRC.Do I charge VAT on shipping?
Usually yes — shipping a UK order normally follows the VAT rate of the goods. Some items (e.g. zero-rated goods) don't attract VAT on the postage either.What about cross-border sales?
Selling overseas has its own rules (OSS / IOSS, reverse charge, etc.). Always check GOV.UK or speak to an accountant before assuming the UK rate applies.