Amazon hosts more than 100,000 UK-based small businesses on its marketplace platform. What you need to know about selling on Amazon covers VAT registration, Corporation Tax, Income Tax, record-keeping obligations, and Making Tax Digital compliance. Every UK seller trading above £1,000 annual gross income faces HMRC reporting requirements regardless of sales volume or product category.
This guide covers the core tax and accounting rules for UK businesses selling on Amazon, with practical steps for sole traders and limited companies.
What Does Selling on Amazon Involve for UK Businesses?
Selling on Amazon involves registering on Seller Central, listing products, fulfilling orders through Fulfilment by Amazon (FBA) or merchant fulfilment, and meeting the tax obligations that HMRC imposes on all marketplace traders.
Amazon Marketplace connects sellers with buyers across the UK and international markets. The platform charges referral fees of 8% to 15% of the sale price depending on category, plus monthly subscription fees for Professional accounts. Sellers choose between two account types:
- Individual plan — £0.75 per item sold, no monthly subscription fee
- Professional plan — £25 plus VAT per month, no per-item fee, access to bulk listing tools and advertising features
Amazon’s VAT Calculation Service handles VAT collection on orders for sellers registered under the programme. The platform issues monthly settlement reports detailing sales, fees, refunds, and VAT amounts. HMRC cross-references these reports against seller tax returns under data-sharing agreements and the UK implementation of DAC7 reporting rules.
Why Does Selling on Amazon Matter for Your UK Business?
Selling on Amazon matters for UK businesses because it creates tax obligations distinct from traditional retail or direct-to-consumer sales. HMRC requires all marketplace sellers earning above £1,000 in annual gross trading income to declare that income through Self Assessment.
Three factors make compliance urgent:
- VAT thresholds — The UK VAT registration threshold is £90,000 for the 2024/25 tax year. Sellers exceeding this in rolling 12-month turnover must register within 30 days.
- Tax structure — Limited companies pay Corporation Tax at 19% on profits under £50,000 and 25% on profits above £250,000, with marginal relief between. Sole traders pay Income Tax at 20%, 40%, or 45% based on their tax band.
- Making Tax Digital — From April 2026, sole traders and landlords with income above £50,000 must submit quarterly updates via MTD-compatible software. The threshold drops to £30,000 from April 2027.
Ignoring these obligations produces penalties. HMRC issues late filing penalties starting at £100, with additional charges escalating to 100% of unpaid tax for deliberate concealment. Interest accrues on late payments at 7.75% as of the 2024/25 rate.
What Are the Key Tax Rules and Requirements?
The key tax rules for Amazon sellers involve VAT registration, Income Tax or Corporation Tax filing, record-keeping for at least 6 years, and Companies House reporting for limited companies.
The table below summarises the core obligations:
| Obligation | Threshold | Deadline |
|---|---|---|
| Trading income declaration | £1,000 annual gross income (trading allowance) | Self Assessment by 31 January following tax year end |
| VAT registration | £90,000 rolling 12-month turnover | Within 30 days of exceeding threshold |
| Corporation Tax (limited companies) | 19% under £50,000 profits, 25% above £250,000 | 9 months and 1 day after company accounting period end |
| Income Tax (sole traders) | £12,570 personal allowance at 0% | 31 January following tax year end |
| Companies House annual return | All registered limited companies | 9 months after accounting period end |
| Making Tax Digital for VAT | All VAT-registered businesses | Quarterly submissions via compatible software |
VAT Rules for Amazon Sellers
UK VAT rules require sellers to charge 20% standard rate VAT on most goods sold to UK customers. Amazon’s VAT Calculation Service collects and remits VAT on orders when the seller enrols in the programme, but the seller remains legally responsible for VAT accuracy.
Key VAT considerations:
- FBA storage — Storing goods in UK fulfilment centres creates a UK VAT obligation regardless of where the seller is based
- Distance selling to the EU — Sellers reaching EU customers must register for the OSS scheme or obtain individual country VAT registrations
- Input VAT recovery — Sellers reclaim VAT on stock purchases, Amazon subscription fees, FBA charges, and eligible business expenses
Professional VAT Services handle registration, quarterly returns, and reconciliation of Amazon settlement reports with HMRC records.
Corporation Tax and Income Tax for Amazon Sellers
Limited companies selling on Amazon pay Corporation Tax on trading profits after deducting allowable expenses. Allowable deductions include Amazon referral fees, Professional plan subscriptions, FBA fulfilment charges, advertising spend, stock costs, packaging, and business-use software.
Sole traders report Amazon profits on the SA103 Self Assessment form. The same expense categories apply. Profit is calculated as total Amazon settlement income minus all allowable business costs.
Corporation Tax planning and Company Accounts preparation ensure limited company sellers meet statutory filing deadlines without penalties.
Record-Keeping Requirements
HMRC requires Amazon sellers to retain business records for at least 6 years from the end of the relevant tax year. Required records include:
- Amazon settlement reports downloaded monthly from Seller Central
- VAT returns and VAT Calculation Service reports
- Purchase invoices for stock, packaging, and business expenses
- Bank statements for the dedicated business account
- Inventory records showing purchase cost and sale price per unit
Reliable Bookkeeping Services maintain compliant records year-round, reducing year-end pressure and producing MTD-ready data for quarterly submissions.
What Common Questions Do Amazon Sellers Ask?
Do I Need to Register for VAT If I Sell on Amazon?
Sellers must register for UK VAT when rolling 12-month turnover exceeds £90,000. Sellers below the threshold can register voluntarily to recover input VAT on stock purchases and Amazon fees. Voluntary registration benefits sellers with high upfront costs and relatively low output VAT on sales.
Do I Need a Limited Company to Sell on Amazon?
A limited company is not required to sell on Amazon. The platform accepts sole traders, partnerships, and limited companies. A limited company limits personal liability, allows tax-efficient profit extraction through dividends, and can improve the likelihood of Amazon Brand Registry approval. Limited Company Formations handle Companies House registration and initial statutory setup.
Does Amazon Report My Sales to HMRC?
Amazon reports seller data to HMRC under DAC7 rules. HMRC receives the seller’s registered name, bank details, registered address, and annual transaction volumes. This data enables HMRC to verify Self Assessment and Corporation Tax returns against actual marketplace activity.
What Accounting Software Works for Amazon Sellers?
Xero, QuickBooks, and Sage Business Cloud integrate with Amazon Seller Central through direct API connections or third-party tools such as A2X and LinkMyBooks. These platforms support MTD for VAT and produce categorised settlement summaries that separate fees, refunds, VAT, and net sales for accurate tax filing.
How Can an Accountant Help with Amazon Sales?
An accountant helps Amazon sellers by managing VAT registration and returns, preparing Self Assessment or Corporation Tax filings, maintaining MTD-compliant bookkeeping, and advising on business structure and tax efficiency.
Specific services include:
- VAT compliance — Registration, quarterly returns, OSS setup for EU sales, and reconciliation of Amazon VAT Calculation Service reports with HMRC submissions
- Tax filing — Tax Returns / Taxation preparation for sole traders and limited companies meeting all statutory deadlines
- Strategic guidance — Business Accounting Advisory covering pricing strategy, cash flow planning, and multi-marketplace expansion
- Software setup — Connecting Amazon Seller Central to MTD-compatible accounting software, configuring settlement categorisation rules, and training the seller on monthly reconciliation
Aqua Accounting operates as an ICAEW Registered Member Firm with ICAEW Chartered Accountants on staff. The team has 13+ years of experience serving North East businesses from Newcastle upon Tyne, with specific expertise in e-commerce and marketplace tax compliance.
Frequently Asked Questions
How Much Can I Earn on Amazon Before Paying Tax in the UK?
UK sellers can earn up to £1,000 per tax year under the trading allowance before registering for Self Assessment. Profits above £1,000 require declaration. The personal allowance of £12,570 for 2024/25 means sole traders pay no Income Tax on total income below this threshold. Read more about thresholds on our Tax Returns / Taxation page.
When Should I Register for VAT as an Amazon Seller?
Register for VAT when rolling 12-month turnover approaches £90,000. HMRC requires registration within 30 days of exceeding the threshold, with backdating to the date the threshold was crossed. Monitor turnover monthly using Amazon Seller Central dashboard reports. Our VAT Services team handles the full registration process.
Can I Claim Amazon Fees as Business Expenses?
Yes. Amazon referral fees, Professional plan subscriptions, FBA charges, advertising costs, and storage fees are fully deductible business expenses. Deduct these from gross sales to calculate taxable profit. Retain monthly settlement reports as evidence. Our Bookkeeping Services categorise these expenses correctly year-round.
What Penalties Apply for Not Declaring Amazon Income?
HMRC penalties range from 0% for innocent errors to 100% or more of unpaid tax for deliberate concealment. Late filing penalties start at £100. Interest accrues at 7.75% on all late payments. DAC7 data-sharing between Amazon and HMRC makes undeclared income increasingly difficult to conceal. Contact our Business Accounting Advisory team for disclosure support.
Disclaimer:
The information provided in this blog is for general informational purposes only and does not constitute professional advice. While every effort is made to ensure accuracy, Aqua Accounting accepts no responsibility for any actions taken based on this content. You should seek professional advice tailored to your individual circumstances.
Omar Ahmed is an ICAEW Chartered Accountant and the Director of Aqua Accounting, a UK-based accountancy practice providing expert accounting and tax services to individuals, sole traders, and small to medium-sized businesses. As a trusted accountant in Newcastle, he offers expertise in annual accounts, self-assessment tax returns, company accounts, VAT, payroll, bookkeeping, and company formation.
With a strong focus on delivering clear and practical financial advice, Omar helps clients stay compliant while improving their understanding of their finances. Through Aqua Accounting, he works closely with business owners to simplify accounting processes, meet tax obligations, and support informed financial decision-making.