"We Are Seven" takes place in the British countryside, somewhere where there are rolling hills and forests. Though the poem doesn't explicitly say so, we're picturing it taking place in the Lake District, where Wordsworth made his home.
More specifically, the poem takes place close to the child's home, which is a cottage only "twelve steps" from the church-yard where her dead brother and sister are buried. Their graves are so close to home that the girl can spend part of every day chilling with her dead sibs. Depending on your point of view, this may be incredibly sweet—or incredibly creepy. Would you want to live right twelve steps away from your dead siblings? That's a setting that will tell you pretty quickly just what kind of person you are (a loving optimist like the little girl, or a doubting grouch like our speaker).