Selling on Amazon UK is one of the quickest ways to put a product in front of millions of shoppers without building your own website. The selling part is well documented. The part that trips people up is the tax: when you owe Income Tax on your profits, when you have to register for VAT, and what happens if you store stock in the UK from abroad.
This guide walks you through how to start selling, then focuses on the bit we know best at Zmartly: keeping you compliant with HMRC while you grow. We'll use figures for the 2025/26 tax year throughout.
It's written for new and growing Amazon sellers, from side hustlers to limited-company brands. If you'd rather hand the numbers to someone else, our accounting for ecommerce businesses team does exactly this all day.
<h2 id="setup">How do you set up as an Amazon UK seller?</h2>
You sell through Seller Central, Amazon's portal for listing products, managing orders and tracking payments. Setting up an account is straightforward. Getting your tax affairs right from day one is what saves you stress later.
Here's the practical order we recommend.
1. Decide your business structure. Most people start as a sole trader. If you're trading for profit, you must tell HMRC and file a Self Assessment tax return. As you grow, a limited company can be more tax-efficient, and we can help you weigh that up.
2. Register the right way with HMRC. A new sole trader must register for Self Assessment by 5 October following the end of the tax year in which you started trading.
3. Create your Seller Central account. You'll need a government-issued ID, a UK bank account, a chargeable card, a phone number and your tax details (your National Insurance number, or VAT number if you're registered).
4. Choose a selling plan and a fulfilment method. More on both below.
5. List your products and start selling. Amazon pays your sales proceeds into your bank account on a regular cycle once your account is established.
<h2 id="plans">Which selling plan should you choose?</h2>
Amazon offers two plans. The Individual plan has no monthly fee but charges a small per-item fee on each sale. The Professional plan charges a flat monthly subscription with no per-item fee, and unlocks advertising, bulk listing tools and detailed reports.
As a rough rule, the Professional plan works out cheaper once you're selling more than roughly 35 items a month, because you stop paying the per-item charge. Below that, the Individual plan is usually cheaper.
Amazon sets and occasionally changes these fees, so check the current figures in Seller Central before you decide. Both plans pay a referral fee (a percentage of each sale that varies by product category) on top of the plan cost.
One tax point worth flagging: Amazon's fees, including the Professional plan subscription, normally carry VAT. If you're VAT-registered, you can usually reclaim that VAT as input tax. If you're not registered, the VAT on those fees is simply a cost to your business.
<h2 id="fba">What is Amazon FBA and how does it affect your tax?</h2>
Fulfilment by Amazon (FBA) is where you send stock to an Amazon warehouse and Amazon picks, packs, ships and handles returns for you. Your products become Prime-eligible, which can lift sales. The alternative is Fulfilled by Merchant (FBM), where you store and ship everything yourself.
FBA is a logistics choice, but it has two tax consequences worth understanding.
It changes where your stock is. Storing goods in a UK warehouse is significant for VAT, especially if you're an overseas seller (see below).
It affects your allowable costs. FBA storage and fulfilment fees, referral fees, packaging and postage are all normal business expenses you deduct from turnover to work out taxable profit. Good bookkeeping here directly lowers your tax bill, which is why bookkeeping for ecommerce sellers matters more than most people expect.
<h2 id="income-tax">Do you pay tax on Amazon sales?</h2>
Yes. If you sell on Amazon to make a profit, that profit is taxable, whether it's a full-time business or a weekend side hustle. There's no "Amazon is just a hobby" exemption once you're trading.
What you pay depends on your structure:
- Sole traders pay Income Tax and Class 4 National Insurance on their trading profits through Self Assessment.
- Limited companies pay Corporation Tax on profits, and you pay personal tax on any salary or dividends you take out.
For a sole trader, the first slice of income is covered by the personal allowance. For 2025/26 the personal allowance is £12,570, which is the amount you can earn before paying any Income Tax (gov.uk). Profits above that are taxed at 20% up to the higher-rate threshold of £50,271, then 40%, then 45% on income over £125,140 (gov.uk). These bands apply to England, Wales and Northern Ireland; Scotland sets its own Income Tax rates.
Class 4 National Insurance for the self-employed is charged at 6% on profits between £12,570 and £50,270, and 2% on profits above that, for 2025/26 (gov.uk).
Illustrative example: a side hustle's first profitable year
Priya sells eco-friendly dog toys on Amazon alongside her job. In her first full year she makes £8,000 of profit after all her Amazon fees, stock and postage.
Because her Amazon profit of £8,000 sits within her £12,570 personal allowance (and assuming her employment already uses part of it, the figures would differ), the tax depends on her total income for the year. This is exactly the kind of calculation where your day job and your side income interact, so it's worth modelling properly rather than guessing.
You can get a quick steer on the self-employed side using our self-employed tax calculator, then come to us for the full picture.
<h2 id="vat">Do you need to register for VAT to sell on Amazon UK?</h2>
This is the question we get asked most by Amazon sellers, and the answer has changed for many people as they've grown.
You must register for VAT if your VAT-taxable turnover goes over the registration threshold, which is £90,000 from 1 April 2024 (gov.uk). You check this on a rolling 12-month basis, not per tax year, and you must also register if you expect to go over the threshold in the next 30 days alone.
A few things to keep in mind:
- The threshold is based on turnover (your sales), not profit.
- Once registered, you charge VAT at the standard rate of 20% on standard-rated goods (gov.uk), and you can reclaim VAT on business costs, including most Amazon fees.
- You can also register voluntarily below the threshold, which sometimes makes sense if most of your customers are VAT-registered businesses or you have a lot of reclaimable input VAT.
VAT-registered businesses must keep digital records and file returns through Making Tax Digital compatible software. MTD for VAT is mandatory for all VAT-registered businesses (gov.uk).
If a return crossing the £90,000 line feels close, talk to us before you trip over it. Our tax advisory team handles VAT registration and ongoing returns for Amazon sellers regularly.
<h2 id="non-resident-vat">What about VAT if you're based outside the UK?</h2>
This is the trap that catches a lot of overseas FBA sellers.
If you're an overseas seller and you store goods in the UK (for example, in an Amazon FBA warehouse) to sell to UK customers, you generally have to register for UK VAT regardless of turnover. The usual £90,000 threshold is designed for UK-established businesses; it doesn't give a non-established seller a free pass.
Because the rules around place of supply, marketplace VAT collection and overseas sellers are detailed and easy to get wrong, check the current HMRC guidance and get advice for your specific setup. The penalties for getting VAT registration wrong are not worth the gamble.
<h2 id="records">What records do you need to keep?</h2>
Whatever your size, HMRC expects you to keep accurate records of your income and expenses. For Amazon sellers, that means:
- Your Amazon settlement and transaction reports (sales, refunds and every fee).
- Supplier invoices for your stock.
- Postage, packaging and shipping costs.
- Any software, subscriptions and advertising spend.
- VAT invoices, if you're registered.
There's also a change on the horizon for sole traders and landlords. Making Tax Digital for Income Tax starts from 6 April 2026 for those with qualifying income over £50,000, then from 6 April 2027 for income over £30,000 (gov.uk). If your Amazon business is growing, building tidy digital records now means you won't be scrambling later.
<h2 id="mistakes">Common compliance mistakes we see</h2>
In practice, these are the slip-ups that cost Amazon sellers the most.
Treating turnover as profit. People panic about the £90,000 VAT threshold but forget it's based on sales, not what they keep. Equally, others ignore it because their profit is small, not realising turnover is what counts.
Not tracking fees properly. Amazon's fees are buried across multiple reports. Miss them and you'll overstate your profit and overpay tax.
Overseas sellers assuming the threshold protects them. As above, storing stock in the UK usually triggers a VAT obligation from the first sale.
Leaving registration too late. VAT registration isn't instant, and late registration can mean owing VAT you never charged your customers.
Want help getting your Amazon tax right?
Talk to an e-commerce accountant →
You focus on sourcing products and winning the Buy Box. We'll handle the bookkeeping, VAT and tax so HMRC is never a surprise. Book a free call with a Zmartly accountant who works with Amazon sellers, and we'll map out exactly what you need to do next. Visit our ecommerce accounting page or get in touch.
<h2 id="faqs">FAQs</h2>
Do you pay tax on Amazon sales in the UK?
Yes. Profit you make selling on Amazon is taxable. Sole traders pay Income Tax and Class 4 National Insurance through Self Assessment, while limited companies pay Corporation Tax. There's no exemption just because it's a side hustle, though for 2025/26 your first £12,570 of income may be covered by the personal allowance.
When do you have to register for VAT as an Amazon seller?
You must register once your VAT-taxable turnover passes £90,000 over any rolling 12-month period, or if you expect to pass it within the next 30 days. The threshold is based on sales, not profit. Overseas sellers storing stock in the UK usually have to register regardless of turnover.
Can you reclaim VAT on Amazon fees?
If you're VAT-registered, you can usually reclaim the VAT charged on Amazon's fees, including the Professional plan subscription and referral fees, as input tax on your VAT return. If you're not registered, that VAT is just a cost.
Does Amazon FBA change your tax position?
FBA itself is a fulfilment choice, but storing stock in a UK warehouse matters for VAT, especially for overseas sellers. FBA fees, referral fees and postage are all deductible business expenses that reduce your taxable profit, so keep careful records.
Do you need to register as a business to sell on Amazon UK?
There's no special Amazon licence, but if you're selling to make a profit you must register with HMRC, as a sole trader or limited company, and report your income. You'll also need to register for VAT once you cross the £90,000 threshold.
