Shrub expansion at high latitudes has been implicated in driving vegetation 'greening' trends and may partially offset CO2 emissions from warming soils. However, we do not yet know how Arctic shrub expansion will impact ecosystem carbon (C) cycling and this limits our ability to forecast changes in net C storage and resulting climate feedbacks. Here we quantify the allocation of photosynthate between different ecosystem components for two common deciduous Arctic shrubs, both of which are increasing in abundance in the study region; green alder (Alnus viridis (Chaix) DC.) and dwarf birch (Betula glandulosa Michx., B.). Using 13C isotopic labelling, we show that carbon use efficiency (i.e. the fraction of gross photosynthesis remaining after subtracting respiration) in peak growing season is similar between the two shrubs (56 ± 12% for A. viridis, 59 ± 6% for B. glandulosa), but that biomass production efficiency (plant C uptake allocated to biomass production, per unit gross photosynthesis) is 56 ± 14% for A. viridis, versus 31 ± 2% for B. glandulosa. A significantly greater proportion of recent photosynthate is allocated to woody biomass in A. viridis dominated plots (27 ± 5%), compared to plots dominated by B. glandulosa (4 ± 1%). Allocation of C to belowground pools also differs significantly; after 2.5 weeks we recovered 28 ± 6% of recent photosynthate in root-free soil under B. glandulosa, but under A. viridis we were unable to detect recent photosynthate in the soil. We provide the first evidence that the impact of shrub expansion on Arctic C cycling will be species dependant. Where Betula dominates, ~1/3 of recently photosynthesised C will be rapidly allocated belowground to soil and microbial pools. Where Alnus dominates, more recently fixed C will be allocated to woody biomass. We conclude that models driven by remotely-sensed aboveground canopy characteristics alone (i.e. greenness) will be unable to accurately represent the impact of vegetation change on Arctic C storage.