Gift cards for a small UK shop: the law, expiry, the accounting and the Christmas rush
No UK law sets a minimum life for a gift card, but the fairness rules apply, VAT depends on what the card can buy, and the money is a debt until it is spent. The rules, the bookkeeping and a December plan for a small shop. Checked 9 November 2026.
This is for the owner of a small UK shop deciding whether to sell gift cards before Christmas. It answers four questions: can a card expire, do I charge VAT when I sell one, what if someone wants the money back, and how do I keep the books honest when the cash arrives in December and the goods leave in January. Every rule below is as it stood on 9 November 2026, linked to the page we read it on. Disclosure: we build Orbit Commerce, a hosted platform with gift cards built in, so weigh the Orbit parts accordingly. This is general information, not legal, tax or accounting advice.
In short
- No UK law sets a minimum life for a gift card; the Consumer Rights Act 2015 fairness rules decide whether an expiry term stands.
- VAT follows what the card can buy: a single purpose voucher is taxed when sold, a multi-purpose voucher when spent.
- A card sold is a liability until it is spent.
- The buyer can cancel a card bought online within 14 days. If the shop fails, holders are unsecured creditors.
- In Orbit, gift cards are on every plan, emailed on payment, with an optional expiry.
Can a UK gift card have an expiry date?
Yes. No UK law sets a minimum life for a gift card. A petition to legislate against expiry dates was rejected on Parliament’s petitions site on 4 January 2022: “This is a decision for individual retailers” (petition.parliament.uk, checked 9 November 2026). The consumer group Which? agrees, provided the buyer was told at the time of purchase (Which?, 13 October 2026).
The law controls whether the term is fair and visible. Under Part 2 of the Consumer Rights Act 2015 a term does not bind the consumer if, “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations” to their detriment (section 62, checked 9 November 2026). Written terms must be “expressed in plain and intelligible language” (section 68). The Act’s list of terms that may be unfair includes terms the consumer had no real chance to see before buying, and terms that let the trader keep money paid for nothing in return (Schedule 2). An expiry line buried in terms nobody sees before paying has the shape of both.
Since 6 April 2025 the Competition and Markets Authority has been able to rule on breaches itself and fine up to 10% of global turnover, and it named “unfair and unbalanced contract terms” among its first targets (gov.uk, 7 April 2025). Its revised guidance of 22 July 2026, CMA37, gives as an example of an unfair imbalance “a term allowing the trader to keep all prepayments where the consumer terminates the contract, regardless of the circumstances” (gov.uk, updated 22 July 2026, checked 9 November 2026). A card that lapses is the same concern: money kept for nothing supplied.
Can a customer get a refund on a gift card?
The buyer changes their mind. A card bought on a website is a distance sale, and the Consumer Contracts Regulations 2013 give the consumer 14 days to cancel (regulation 30). The exemptions in regulation 28 do not mention gift cards or vouchers (regulation 28, checked 9 November 2026), so treat an unspent card as cancellable for 14 days: refund the buyer and switch the card off. After that your terms decide, and Which? reads it the same way.
The goods bought with the card are faulty. The shopper’s rights are those in our guide to UK returns law, and a refund must use “the same means of payment as the consumer used” unless they expressly agree otherwise (Consumer Rights Act 2015, section 20(16)). So goods paid for with a gift card are refunded to a gift card, in practice a fresh one.
The shop fails. See below. For the buyer, Section 75 of the Consumer Credit Act 1974 makes a credit card issuer jointly liable where a single item costs over £100 and up to £30,000 (legislation.gov.uk). Below that, the route is a chargeback, and Which? says it “is not always successful”.
What happens to gift cards if the shop closes?
Card money belongs to the business the moment it is paid; the holder has a promise. On insolvency, the government’s 2018 response to the Law Commission says “Consumers are unsecured creditors”. Administrators or buyers of the business “are under no obligation to fulfil orders or honour gift vouchers”, though it is “reasonably common for them to do so” (gov.uk, 27 December 2018, checked 9 November 2026).
The Law Commission found vouchers were an issue in 15 of 20 large retail insolvencies: honoured in full in seven, taken as part payment in two, refused in six (Law Com No 368, July 2016, paragraphs 2.36 to 2.38). A holder claims with a proof of debt and, if there are no assets, “you will not get your money back” (gov.uk, updated 9 January 2025). So never sell gift cards as a way to save; the gift card industry’s own trade body told the Commission it does “not endorse gift cards and vouchers as a suitable product to be used for saving” (Law Com No 368, paragraph 5.25).
Do you charge VAT when you sell a gift card?
Only if you are VAT registered; our guide to UK VAT for online sellers covers the threshold. If you are, the rule is section 9 of VAT Notice 700/7, for vouchers issued from 1 January 2019; HMRC names gift cards as an example (gov.uk, updated 25 June 2026, checked 9 November 2026). Discount codes are not vouchers (9.2).
A single purpose voucher is one where the VAT rate of what it buys and the country of supply are known at issue (9.4.1): a card for a shop where everything is standard-rated and sold in the UK. VAT is accounted for when the card is sold, nothing more at redemption (9.4.3), and if the card is never used no VAT adjustment can be made unless you refund the buyer (9.12.1).
A multi-purpose voucher is any other voucher (9.5), including, on HMRC’s own example, one for a shop whose goods might be zero-rated exports (9.4.5). The money paid for the card “is disregarded at every stage”, VAT falls due when the goods are handed over (9.5.1), and a card never used carries none (9.12.2). Tell your accountant which kind you issue, and check how your platform records the sale.
| Question | Single purpose voucher | Multi-purpose voucher |
|---|---|---|
| What makes it this kind | VAT rate and place of supply known at issue (9.4.1) | Anything else, including goods sometimes zero-rated (9.5, 9.4.5) |
| When VAT is due | When the card is sold; none at redemption (9.4.3) | When the goods are handed over; the card sale is disregarded (9.5.1) |
| Card never spent | No adjustment unless you refund the buyer (9.12.1) | No VAT to bring to account (9.12.2) |
| Typical shop | Everything standard-rated, UK delivery only | Books, children’s clothes, food, or a shop that also ships abroad |
How do you account for gift cards?
Selling a card is not a sale of goods: the cash arrives and a liability is created in the same moment; the sale happens when the card is spent. Xero’s glossary lists “deferred revenue from customers who’ve paid for work you still owe them” among current liabilities (xero.com, 23 July 2026). QuickBooks’ UK help article says accepting payment for a gift certificate means “you accept the liability to redeem the gift certificate at some time in the future”, and records it with a liability account and a gift certificate item. That means a sales receipt on sale, then an invoice at redemption with the gift certificate item as a negative line (quickbooks.intuit.com, checked 9 November 2026).
Three habits: post card sales to the liability, never to sales; post redemptions as sales when the goods go out, with VAT as above; and at month end check that the unspent value on your cards equals the liability account. Expired or abandoned balances are breakage, and when they become income is your accountant’s call. Our post on shop bookkeeping in Xero or QuickBooks covers the clearing account, and the payouts, fees and tax guide follows the money to the bank.
The maths of unredeemed balances
Say you sell 100 cards at £40 in December. The only redemption figures on a public page are old. In December 2014 the Department for Business quoted the trade body, then the UK Gift Card and Voucher Association, as saying 6% of consumer vouchers went unused each year. Most were spent within three to six months, the association said, and users spend about 40% more than face value (gov.uk, 27 December 2014, checked 9 November 2026). The association, now the GCVA, keeps newer research for members.
| Line | Amount | What it is |
|---|---|---|
| Cards sold in December | £4,000 | Cash now, and a liability of the same size |
| Card fees, 100 payments at 2% + 25p (Orbit Solo, UK personal cards) | £105 | An expense; £3,895 reaches the bank |
| Spent if 94% is redeemed | £3,760 | Sales, as the goods go out |
| Orders those cards sit in, at 40% overspend | £5,264 | About £1,504 paid by other means |
| Never spent, at 6% | £240 | A liability until the cards expire or are released |
The 6% is small, and not yours until an accountant says so. The 40% only happens if the stock is on the shelf in January.
When do people buy gift cards, and when do they spend them?
People buy them before Christmas and spend them after it. The Law Commission wrote of a known surge in “purchases of gift vouchers just before Christmas” and said the issue of unspent vouchers “arises each year immediately after Christmas” (Law Com No 368, paragraphs B.9 and 4.66). The 2014 figure has most cards spent within three to six months. So be ready to sell from mid-November and ready to supply from Boxing Day to Easter.
| When | What to do | Why |
|---|---|---|
| Early November | Create the card product, set the expiry, write the email, buy one as a test | The card has to arrive with the right words |
| Mid-November | Gift cards in the main menu, a line in the announcement bar, a banner tile on busy category pages with live-from and live-until dates | A card nobody can find sells nothing |
| After the last posting date | Keep the card at the top of the shop | It is emailed the moment payment succeeds, so Christmas Eve orders arrive in time |
| Boxing Day to Easter | Stock in, January offers on, read Total redeemed weekly | Most cards are spent within three to six months, often with money on top |
| Every month end | Check the unspent balance against the liability account; email anyone whose card is about to expire | A lapsing card is a customer about to be let down |
Choosing amounts, expiry and wording
Amounts. Offer three: one a little above your typical order, so a card covers a whole purchase, then one lower and one higher. Odd amounts can be issued by hand.
Expiry. Leave it blank or make it long, and say so in the same words in three places: the product page, the email and your terms. “This gift card does not expire” passes section 68; “subject to our standard terms” tells nobody anything.
Wording. Say how the card arrives, what it can buy, whether it expires, that an unspent balance stays on the card, and that it is a gift, not a way to save.
Discounts. A gift card is stored value, not a promotion: in Orbit the gift card product always sells at its face value, and a card and a discount code can share an order at the recipient’s checkout, discount first.
Where Orbit fits
Gift cards are on every Orbit plan, from Solo at £25 a month, or £19 a month billed yearly, excluding VAT (pricing). Create a product with the Gift Card type, add the amounts as variants and publish. The buyer picks an amount, adds the recipient’s email, an optional name and a message of up to 1,000 characters, and pays. One card per unit is created and emailed the moment payment succeeds, with a sixteen-character code that uses no I, O, 0 or 1.
The Gift Card Received email carries the code and the message in your branding, is a template you can edit, and goes out from your own domain once three DNS records are added (customer emails). Cards never ship and are never stock-tracked. The only cost of selling one is the card fee on the buyer’s payment at your plan’s rate, 2% + 25p for UK personal cards on Solo, with nothing added on top; issuing one by hand is free.
Expiry is a date you set or leave blank; Orbit checks every five minutes and marks cards past their date Expired, a card spent to nothing becomes Depleted, and you can deactivate a card and reactivate it later. The list shows balance, status and expiry with codes masked, and four tiles: Total issued (a count), Outstanding balance (the unspent value, your month-end figure), Total redeemed and Expiring soon (active cards due within 30 days). At checkout the shopper types the code and sees the balance. A discount code applies first, the gift card pays what is left, and any unspent balance stays on the card.
If the gift card covers only part of the order, the rest is charged to the shopper’s payment card on the hosted payment page. The gift cards page has the detail and the guide has the set-up steps. The payouts and VAT page covers the exports and the Xero and QuickBooks plugins; ask your accountant how to map the gift card product. See also digital products, subscriptions, services and gift cards and, for a service business selling them, your own holiday cottage website.
Read next: whether a small shop needs a loyalty scheme, selling flowers online with next-day delivery and product reviews after the UK fake reviews ban.
Questions people ask about gift cards
Can a UK gift card have an expiry date?
Yes. No UK law sets a minimum life for a gift card; a petition to Parliament was rejected in January 2022 as “a decision for individual retailers”. The term must be fair and shown clearly before purchase under the Consumer Rights Act 2015, which the CMA has enforced directly since 6 April 2025.
Do I charge VAT when I sell a gift card?
Only if you are VAT registered. If the VAT rate and place of supply of what the card buys are known at issue, it is a single purpose voucher, taxed when sold. Otherwise it is multi-purpose: VAT falls due when the goods are handed over, and none on cards never used (VAT Notice 700/7, section 9).
Can a customer get a refund on a gift card?
The buyer can cancel a card bought online within 14 days under the Consumer Contracts Regulations 2013, whose exemptions do not mention gift cards, so refund an unspent card in that time. After that your terms decide. Faulty goods paid for with a card are refunded by the same means, in practice a replacement card.
What happens to gift cards if a shop goes bust?
Holders are unsecured creditors. Administrators or a buyer of the business need not honour gift vouchers, though the government notes it is reasonably common for them to do so (gov.uk, 27 December 2018). A buyer who paid by credit card for a single item over £100 may claim under Section 75.
How do I account for gift cards in Xero or QuickBooks?
As a liability, not a sale. Set up a current liability account and a gift card item coded to it, post each card sold there, and on redemption raise the sale for the goods with the gift card item as a negative line. At month end the unspent value on your cards should match the account.
To see the whole loop before Christmas, build the card product on a 14-day free trial, no card required, buy a card from yourself, spend it at your own checkout and watch the Outstanding balance tile move.