Amazon seller tax and VAT explained

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What you need to get right

1. Income tax on profit. Report your sales and costs, including fees, postage, packaging and stock, on your Self Assessment return.
2. The VAT threshold. Register once taxable turnover passes £90,000 on a rolling 12 month basis.
3. Marketplace VAT rules. For some sales, the marketplace collects and accounts for VAT, but you still report your own position correctly.
4. Importing stock. Import VAT and duty apply when you bring goods into the UK, and there are schemes to manage the cash flow.
5. Records. Keep marketplace reports, fees and stock records, which are essential for an accurate return.

Where online sellers slip up

Common problems are forgetting that marketplace fees and postage are allowable costs, missing the VAT threshold because sales grow fast, and not separating personal and business selling. Getting the structure and records right early saves a great deal later.

Two separate questions, and people answer the wrong one

Selling online raises two distinct tax questions. Do I owe Income Tax on the profit, and do I need to be VAT registered. They have different thresholds, different tests and different answers, and confusing them is where most of the trouble starts.

Income Tax first

If you are trading, profit is taxable. The trading allowance covers gross income up to £1,000 a year, and above that you either deduct the £1,000 or claim your actual costs.

Since 1 January 2024, marketplaces report seller data to HMRC automatically, including gross receipts and transaction counts. A goods seller is only left out of the report if they made fewer than 30 sales in the calendar year and received under about £1,700. Both tests, not either.

Those are reporting triggers, not tax thresholds. HMRC has said publicly there is no new tax for online selling. What has changed is that they now receive the data whether you tell them or not.

VAT, if you are a UK seller

The rules here are the ordinary ones. You must register once taxable turnover for the rolling last 12 months passes £90,000, or when you expect to pass it in the next 30 days alone.

Two points specific to marketplace sellers. First, the threshold is measured on gross sales, not on what lands in your bank after fees. A seller with £95,000 of sales and £15,000 of Amazon fees has crossed the line, even though only £80,000 reached them. Second, the rolling test means checking monthly, not at the year end.

Once registered you charge VAT on your standard rated sales, which for a consumer facing seller means either absorbing 20% or raising prices. You also reclaim VAT on stock, fees and shipping, and you can go back 4 years on goods you still hold and 6 months on services when you first register.

When the marketplace owes the VAT instead of you

This is the part unique to platform selling, and it applies to overseas sellers rather than UK ones.

Since 1 January 2021, where goods in a consignment worth £135 or less are sold to a UK customer from outside the UK through an online marketplace, the marketplace is treated as the supplier and accounts for the VAT at the point of sale. Import VAT does not apply to those consignments.

Where goods are already in the UK at the point of sale but the seller is overseas, the marketplace is liable for the VAT on the sale whatever the value. The overseas seller still pays import VAT and duty when the goods first arrive, and their supply to the marketplace is a zero rated deemed supply.

The £135 is measured on the whole consignment, not on individual items. Three £60 items shipped together are a £180 consignment and fall outside the rule.

An overseas business selling into the UK direct, not through a marketplace, has no registration threshold at all and must register from the first sale.

One change on the horizon

The government announced in June 2026 that it will remove customs duty relief on low value imports of £135 or less, brought forward to October 2028. That is a customs duty change. The VAT treatment described above is unchanged in the meantime, but anyone importing low value stock should be planning for it.

Where sellers actually lose money

Using net payouts instead of gross sales to test the VAT threshold. Forgetting that marketplace fees usually carry VAT you can reclaim once registered. Failing to reclaim the pre registration VAT on stock still held. Treating the platform's reporting threshold as a tax threshold. And keeping no record of what stock cost, which makes the profit figure guesswork.

The habit worth building

Download the platform reports monthly, record gross sales and fees separately, and check the rolling 12 month total every month. Everything on this page becomes straightforward if you do that, and awkward if you do not.

Frequently asked questions