You sell on Amazon's US or European marketplaces, the cash lands in your bank in pounds, and the number never quite matches what your Seller Central dashboard said you earned. Somewhere between the sale and the settlement, the currency moved and a conversion fee was taken. The question is how to record all of that so your VAT return and your tax figures are right.
This guide is for UK Amazon FBA sellers who get paid in dollars or euros and want the bookkeeping done properly. We'll cover which exchange rate HMRC expects you to use, how to treat Amazon's currency-conversion fee, and what to do with the gain or loss that appears when the rate shifts between sale and payout.
It is written for the 2025/26 tax year and every rule is linked to its gov.uk source. If you'd rather hand the whole thing over, our accounting support for Amazon FBA sellers is built for exactly this.
How does Amazon pay you in a foreign currency?
When you sell on amazon.com or a European marketplace, your sales, fees, FBA charges and refunds are all denominated in that marketplace's currency, US dollars or euros. Amazon nets them off and disburses the balance to you.
If your deposit account is in pounds, that balance gets converted to sterling before it reaches you. You can either let Amazon convert it through its Currency Converter for Sellers, or hold the foreign currency in a multi-currency account and convert it yourself later through your bank or a payment provider.
Either way, two things happen at conversion. A rate is applied, and a conversion fee or spread is charged. Both need a home in your books, and the rate you use for the underlying sale is a separate question from the rate at which the cash eventually lands.
The cleanest mental model is to keep three things apart: the sale (recorded when it happens), the conversion fee (a cost of doing business), and the FX movement (the difference between the two rates). The rest of this guide takes them one at a time.
What exchange rate should you use to record an Amazon sale for VAT?
For VAT, you must convert every foreign-currency sale into sterling when you record it in your VAT account, and HMRC gives you two standard methods to do it.
The two standard options, set out in HMRC's guidance on foreign currency transactions and VAT, are the UK market selling rate at the time of the supply (the rates published in national newspapers are accepted), or the period rate of exchange published by HMRC. The period rate is the popular choice because you can apply a single rate for an entire calendar month, which makes a high-volume FBA ledger far easier to reconcile.
HMRC publishes these monthly rates on the UK Trade Tariff service. Per HMRC's customs valuation exchange rates guidance, the rates are published towards the end of each month and apply for the whole of the following calendar month, from the first to the last day. There is a tolerance check: if a commercial rate moves more than 5% from the published customs rate, HMRC amends the rate from midnight on the Tuesday into Wednesday of the following week.
A few practical points worth pinning down:
- You can use the period rate across the board or only for certain supply types. If you use it selectively you must note the detail in your records, but you do not need to tell HMRC. If you later change your approach, you do need HMRC's agreement.
- You cannot use forward rates, or any method derived from forward rates, for VAT.
- If you want a non-standard method, you must get HMRC's approval before using it for VAT accounting.
One thing that trips up a lot of sellers: if UK VAT is actually due on the supply, your invoice must show the total net value at each VAT rate, and the VAT itself, in sterling. You can show the rest in dollars or euros, but the VAT figure has to be in pounds. That is confirmed in HMRC's VAT records manual at VATREC5060.
Whether UK VAT is due at all on a US or EU marketplace sale is a separate question that turns on where the goods are and who the customer is. This post is about the currency mechanics. For the supply-side VAT rules, speak to us through our Amazon FBA service.
How are foreign-currency sales translated for income tax and corporation tax?
For your profit figures, you translate foreign-currency trading income at a reasonable, market-based rate that is reflected consistently in your accounts.
HMRC's Business Income Manual at BIM39515 says trading profits are computed using generally accepted accounting practice, and that the exchange rates used in the business accounts are acceptable for tax. It lists London closing rates, bank-quoted rates and HMRC's monthly average rates among the acceptable choices, and notes HMRC will only challenge a rate if it diverges markedly from rates available from reputable sources.
For companies, HMRC's Corporate Finance Manual at CFM12070 takes the same pragmatic line: HMRC staff will generally accept the exchange rate a company uses in preparing its accounts, provided it is used consistently. Closing rates, average rates and the actual transaction rate from your payment documentation are all fine.
The headline is consistency. Pick a sensible method, the HMRC monthly rate is a common one because it also serves your VAT, and apply it the same way every period. Don't cherry-pick the rate that flatters a given month.
If you are a sole trader, remember that the cash basis is now the standard way to record income and expenses, and you can choose traditional accruals accounting instead, as set out in HMRC's cash basis guidance. The basis you use affects when you recognise income and therefore which day's rate applies, so it is worth getting that decision right before you start translating payouts.
How do you account for Amazon's currency-conversion fee?
Amazon's currency-conversion fee is an ordinary business expense, so it is deductible against your trading profits in the same way as referral fees, FBA fees and storage charges.
The fee is the explicit charge (or the margin built into the rate) that Amazon or your bank takes for turning dollars or euros into pounds. It is incurred wholly and exclusively for the trade, so it reduces taxable profit. In your bookkeeping it sits naturally in a "bank charges" or "payment processing fees" cost account, kept separate from the Amazon selling fees so you can see what conversion is actually costing you.
In practice we recommend two columns in your FBA reconciliation: gross sales translated to sterling, and conversion costs. Lumping them together hides a cost that, on thin FBA margins, can quietly eat a meaningful slice of profit over a year.
Two cautions. First, if Amazon converts at a poor rate rather than charging a separate line-item fee, the "fee" is hidden inside the spread, so the gap between the HMRC monthly rate and the rate you actually received is effectively your conversion cost. Second, do not try to reclaim VAT on a currency-conversion fee as if it were a standard UK supply with input VAT; financial and currency-exchange services are generally exempt from VAT, so there is usually no input VAT to recover.
What about the FX gain or loss between sale and payout?
The difference between the rate you used to record the sale and the rate you actually got on payout is a foreign-exchange gain or loss, and for a trading business it is normally part of your trading result.
This is the bit sellers most often miss. You book a $1,000 sale at, say, one rate, but by the time Amazon disburses and converts, the rate has moved. The small surplus or shortfall is an exchange difference.
HMRC's guidance is helpful here. BIM39550 confirms that, in practice, exchange differences arising on a non-sterling current account held by a trader and used wholly or mainly for the trade can normally be accepted as trading receipts or expenses. Its exact wording is that such differences "can normally be accepted as trading receipts or expenses." So if you hold dollars in a trading account before converting, the movements on that balance generally fold into your trading profit rather than being treated as some separate capital item.
For companies, the corporate FX rules in the loan relationships and derivative contracts regime bring most exchange gains and losses on money balances into the tax computation automatically, again following the accounts. The practical effect for a typical FBA limited company is the same: record the difference, and it lands in your profit and loss.
The bookkeeping move is simple. When the sterling actually arrives, post the difference between what you recorded and what you received to a "foreign exchange gain/loss" account. Over a year these net off, and you have a clean, defensible figure rather than a pile of unexplained reconciling items.
Worked example: a US payout converted to sterling
Illustrative example. Priya runs an FBA business selling on amazon.com and is registered for VAT in the UK. She uses HMRC's monthly period rate for both VAT and her accounts, and she lets Amazon convert her disbursement to sterling.
The figures below are illustrative and use a sample exchange rate to show the method, not a published HMRC rate for any given month.
| Item | Amount (USD) | Rate used | Sterling |
|---|---|---|---|
| Gross sales for the period | $10,000.00 | 1.25 (HMRC monthly rate) | £8,000.00 |
| Amazon selling and FBA fees | -$2,500.00 | 1.25 (HMRC monthly rate) | -£2,000.00 |
| Net amount due before conversion | $7,500.00 | £6,000.00 | |
| Sterling actually received | 1.28 (Amazon's payout rate) | £5,859.38 | |
| Currency-conversion cost (the difference) | £140.62 |
Here is how Priya records it:
- Sales: £8,000 of turnover, translated at the HMRC monthly rate of 1.25, goes into her books and her VAT account.
- Amazon fees: £2,000 of selling and FBA costs, also at 1.25, as an expense.
- Conversion cost: the $7,500 net due was worth £6,000 at her recording rate of 1.25, but Amazon's payout used a worse rate of 1.28, so she received £5,859.38. The £140.62 shortfall is her conversion cost, posted to bank charges or FX, and it reduces her taxable profit.
Check the arithmetic: $7,500 / 1.28 = £5,859.38 (to the nearest penny), and £6,000.00 - £5,859.38 = £140.62. The numbers tie.
If Amazon had instead charged an explicit conversion fee and given her the 1.25 rate, the £140.62 would simply appear as a stated fee line rather than as a rate difference. The accounting destination is the same: a deductible cost.
Does the digital-platform reporting rule change anything?
No. The digital-platform reporting rules change what Amazon tells HMRC about you, not how you account for your payouts or your FX.
Since 1 January 2024, under the reporting rules for digital platforms, platforms like Amazon collect and report seller income to HMRC, with the first reports due by 31 January 2025. You should get a copy of what was reported.
The thing to watch is consistency. The figures the platform reports are typically the gross marketplace amounts, often in the marketplace currency. Your own records translate those to sterling and strip out fees and conversion costs. As long as you can reconcile your sterling turnover back to the platform's reported gross figures, with the FX method and fees explained, you are in good shape if HMRC ever asks.
This is exactly the kind of reconciliation we keep clean for clients on our Amazon FBA accounting service, so the platform report and your return always tell the same story.
FAQs
Which exchange rate is best for Amazon FBA bookkeeping?
For most UK sellers, HMRC's monthly period rate is the practical choice because you can apply one rate for the whole calendar month and use the same rate for both VAT and your accounts. HMRC accepts it for VAT and lists its monthly average rates as acceptable for trading profits, so it keeps everything consistent.
Is Amazon's currency-conversion fee tax deductible?
Yes. It is an ordinary cost of running your FBA business, incurred wholly and exclusively for the trade, so it reduces your taxable profit. Record it in bank charges or payment-processing fees, separate from Amazon's selling and FBA fees.
Can I reclaim VAT on Amazon's currency-conversion fee?
Generally no. Currency-exchange and financial services are normally exempt from VAT, so there is usually no input VAT on a conversion charge to reclaim. This is different from Amazon's selling fees, where reverse-charge rules can apply.
Do I have to use the rate on the day of each sale?
Not necessarily. HMRC lets you use a period rate, usually a single rate for the whole calendar month, rather than translating each sale at the daily rate. You can also use a market selling rate at the time of supply. You just cannot use forward rates for VAT.
What do I do with the gain or loss when the rate moves before payout?
Record it as a foreign-exchange gain or loss in your accounts. For a trading business, exchange differences on a foreign-currency account used for the trade are normally treated as trading receipts or expenses, so they fold into your profit rather than being a separate item.
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Key takeaways
- Translate every foreign-currency Amazon sale into sterling when you record it, using HMRC's monthly period rate or a market selling rate. No forward rates for VAT.
- Use the same sensible rate consistently for your income tax or corporation tax profit figures.
- Amazon's currency-conversion fee, whether a stated charge or a spread, is a deductible business cost. Currency-exchange services are usually VAT-exempt, so there's normally no input VAT to reclaim.
- The difference between your recording rate and the payout rate is an FX gain or loss that normally sits in your trading result.
- Keep sales, conversion costs and FX movements in separate columns so your records reconcile to Amazon's platform report.
Getting multi-currency FBA books right is fiddly, and the FX detail is where a lot of returns quietly go wrong. If you want it handled by people who do it every day, talk to a Zmartly accountant about our Amazon FBA accounting support.
