If you run your Amazon bookkeeping off the figure that lands in your bank account, your turnover is almost certainly wrong, and so is your VAT.
The payout is what is left after Amazon has stripped out its fees, netted off refunds, and parked some of your money in a reserve. Turnover is the full value of what you sold before any of that. They are rarely close, and the gap can be thousands of pounds a month.
This guide shows you exactly how to read the Amazon settlement report, where your real turnover sits inside it, and how the VAT rules (including the deemed-supplier rules for marketplaces) change what you put on your VAT return. It is written for Amazon FBA and marketplace sellers in England, Wales and Northern Ireland. Scotland has its own Income Tax rates, but the VAT and turnover points here apply UK-wide.
Why isn't my Amazon payout the same as my turnover?
Your payout is your sales minus Amazon's fees, minus refunds, minus any amount held back in reserve. Turnover is the gross value of your sales before any of those deductions, so the payout always understates it.
Think of it as the difference between what you earned and what you took home. HMRC, your VAT return, and your accounts all care about what you earned. The bank only sees what you took home.
Here is the chain of deductions Amazon applies before it pays you:
- Referral fees on every sale, set as a percentage of the item price by category.
- Fulfilment fees if you use FBA (pick, pack and ship).
- Storage and other FBA fees.
- Refunds issued to customers, netted off your sales.
- Advertising costs and subscription fees.
- A reserve, where Amazon holds part of your money back to cover potential returns.
Every one of those is a real, separate accounting event. If you only book the net payout, you have understated your turnover and hidden your costs. That breaks your accounts, your VAT return and, once you are VAT-registered, your margin.
What is actually inside an Amazon settlement report?
The settlement report is the line-by-line record behind a single payout. It lists every transaction in the period: product sales, the tax and shipping Amazon collected on your behalf, each fee type, refunds, reimbursements, the reserve movement, and finally the net amount transferred to your bank.
The important structural point is that the "product sales" total at the top is close to your turnover, while the figure at the bottom is your payout. Everything in between is the bridge.
| Settlement report line | What it represents | Goes into turnover? |
|---|---|---|
| Product sales | Gross value of goods sold | Yes |
| Shipping and gift-wrap charged to buyers | Income you charged the customer | Yes |
| Promotional rebates | Discounts you funded | Reduces turnover |
| Refunds | Sales reversed | Reduces turnover |
| Selling fees (referral fees) | Amazon commission | No, it is a cost |
| FBA fulfilment and storage fees | Amazon logistics charges | No, it is a cost |
| Advertising and subscription | Marketing and account costs | No, it is a cost |
| Reserve / unavailable balance | Timing only, money held back | No, ignore for turnover |
| Total to be paid | Your bank payout | No, this is the wrong number |
Read the report top-down and you can see why the payout misleads. The reserve in particular is pure timing. It is your money, sitting in a holding pattern, so it must never reduce the turnover you report.
How do I work out my real turnover from a settlement report?
Start from gross product sales, add other income you charged buyers, subtract refunds and promotional rebates, and stop. Do not subtract any Amazon fee, and do not touch the reserve. The fees are costs that belong in your profit and loss account, not in your turnover.
Illustrative example: Maya, an Amazon FBA seller
Maya sells homeware through Amazon FBA. One fortnightly settlement period looks like this.
| Item | Amount |
|---|---|
| Product sales | £18,000 |
| Shipping charged to buyers | £600 |
| Refunds to customers | -£900 |
| Referral fees | -£2,700 |
| FBA fulfilment and storage fees | -£2,200 |
| Advertising | -£1,100 |
| Reserve held back | -£1,500 |
| Bank payout (total to be paid) | £10,200 |
Her bank shows £10,200. But her turnover for the period is the sales lines net of refunds and rebates:
£18,000 + £600 - £900 = £17,700.
That is a £7,500 gap between turnover and payout in a single fortnight. The £6,000 of Amazon fees (£2,700 + £2,200 + £1,100) are deductible business costs that belong in her profit and loss account, and the £1,500 reserve is simply her own money she has not yet received. If Maya tracked turnover off the £10,200, she would understate sales by about 42% and lose the deduction for £6,000 of genuine costs.
Why this matters for the VAT threshold: VAT registration is compulsory once your taxable turnover passes £90,000 in any rolling 12 months, the threshold in force from 1 April 2024. Maya is testing that limit against the £17,700, not the £10,200. Underreport turnover and you can sail past the threshold without registering, which is exactly the kind of error HMRC now catches automatically (see the reporting section below).
How does VAT change what counts as my turnover?
Once you are VAT-registered, your turnover for the VAT return is the net (VAT-exclusive) value of your sales, and the VAT you charged is shown separately. The Amazon "product sales" figure is usually VAT-inclusive, so you have to strip the VAT out before it becomes your net turnover.
At the standard rate of 20%, you divide the VAT-inclusive sales by 6 to get the VAT, or by 1.2 to get the net figure. Take Maya's £17,700 of net-of-refund sales. If all of it is standard-rated and VAT-inclusive:
- Net turnover: £17,700 / 1.2 = £14,750
- Output VAT: £17,700 / 6 = £2,950
So one settlement period produces £14,750 of net turnover and £2,950 of output VAT to declare, from a bank payout of just £10,200. The payout told you almost nothing useful.
Two practical points. First, separate your standard-rated, zero-rated and any reduced-rated sales, because the VAT differs (children's clothing is often zero-rated, for example). Second, since August 2024 Amazon has charged its UK seller fees from a UK entity with UK VAT added, so that VAT is normally reclaimable as input tax on a standard VAT return, rather than handled under the reverse charge as it was before. Keep the fee invoices; they support the input VAT you reclaim. If you are unsure how your fees are now invoiced, our Amazon FBA accounting service reconciles this every period.
What about the marketplace deemed-supplier rules?
For most UK-established sellers, Amazon is not the VAT taxpayer on your sales, you are. But for goods sold by overseas sellers, or low-value imported goods, the marketplace can become the "deemed supplier" and account for the VAT instead. Those sales are then excluded from your own VAT figures.
The rules from gov.uk are specific:
- Where goods are already in the UK at the point of sale and sold by an overseas business through an online marketplace, the marketplace is liable for the VAT and charges it at the point of sale. The overseas seller is treated as making a zero-rated "deemed supply" to the marketplace.
- For consignments of goods valued at £135 or less that are outside the UK and sold through a marketplace to UK customers, the marketplace must charge and account for UK supply VAT at the point of sale. The £135 limit applies to the total consignment, not each item.
- For consignments over £135, normal import VAT and customs rules apply on importation.
- The overseas seller stays liable for any import VAT and customs duty when goods are first imported.
If you are a UK-established business selling your own UK stock, none of this shifts VAT off you, and your settlement turnover is yours to declare in full. The deemed-supplier rules bite mainly on overseas sellers. But if you import low-value stock from outside the UK yourself, check whether the marketplace has already accounted for VAT at the point of sale, because you must not double-count it. The settlement report will show whether marketplace tax was collected.
How does the VAT Flat Rate Scheme treat Amazon sales?
On the Flat Rate Scheme (FRS) you pay a fixed percentage of your VAT-inclusive turnover instead of the difference between output and input VAT. The catch for marketplace sellers is that any sale where the marketplace (or a business customer) is liable to account for the VAT is left out of the FRS calculation entirely.
The mechanics from gov.uk:
- You apply your flat rate to your VAT-inclusive turnover, which is all the supplies your business makes including VAT.
- A "limited cost business" pays a higher rate of 16.5% if its goods cost less than 2% of turnover, or less than £1,000 a year where costs are more than 2%. Many service-style sellers fall into this, so check before assuming a lower sector rate.
- You can reclaim VAT on a single purchase of capital expenditure goods costing £2,000 or more (including VAT), dealt with outside the scheme in box 4.
- There is a 1% discount on your flat rate in your first year of VAT registration.
- You must leave the scheme if income including VAT (excluding capital asset sales) in the year then ending exceeds £230,000. You can join only if taxable turnover excluding VAT in the next year will be £150,000 or less.
For an FBA seller who reclaims a lot of input VAT on stock and fees, the FRS is often worse than standard VAT, because you give up that input recovery. Run the comparison on real settlement figures before you opt in. This is exactly the kind of decision where reading the settlement report correctly changes the answer.
Why does HMRC already know my Amazon figures?
Under the Reporting Rules for Digital Platforms, marketplaces like Amazon must report your sales and identifying details to HMRC each year, and give you a copy. So the gap between your real turnover and what you declare is now visible to HMRC automatically.
The rules took effect from 1 January 2024. Platforms collect seller information (including name, address, tax identification details and bank account data), verify it, and report it to HMRC, with the first reports due by 31 January 2025 for the 2024 calendar year, and again by 31 January following each later year. Crucially, the platform must also give you a copy of the information it reports, so you can declare the right income.
The practical message is simple. If you have been reporting payouts instead of turnover, HMRC can now see the difference. Getting the settlement report right is no longer optional housekeeping, it is how you stay matched to the data HMRC already holds.
Frequently asked questions
Is my Amazon payout my turnover?
No. Your payout is net of Amazon fees, refunds and any reserve held back. Turnover is the gross value of your sales (net of refunds and your own promotional rebates) before fees. The payout always understates turnover, often by 30% to 50%.
Which figure do I use for the VAT registration threshold?
You test your gross taxable turnover, not your payout, against the £90,000 rolling 12-month threshold in force from 1 April 2024. Underreporting by using the payout can mean you breach the threshold without realising and register late.
Are Amazon fees deductible?
Yes. Referral fees, FBA fulfilment and storage fees, advertising and subscription fees are all business costs that go in your profit and loss account. Since August 2024 Amazon has charged UK VAT on its UK seller fees, which a VAT-registered seller can normally reclaim as input tax with the fee invoice as evidence.
Do I include the Amazon reserve in my turnover?
No. The reserve is your own money held back temporarily to cover potential returns. It is a timing difference, not a sale, so it never reduces or increases the turnover you report. It just changes when cash reaches your bank.
Does Amazon report my sales to HMRC?
Yes. Under the Reporting Rules for Digital Platforms (in force from 1 January 2024), Amazon reports your sales and details to HMRC annually and gives you a copy, with reports due by 31 January after each calendar year. HMRC can compare this to what you declare.
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Talk to a Zmartly accountant about your Amazon numbers
If your bookkeeping runs off the bank payout, your turnover, VAT and profit are all likely wrong. We reconcile every settlement report to your sales, fees and VAT so your figures match what HMRC already sees. Learn more about our Amazon FBA accounting support or book a free call to talk it through.
