14. April 2026

Amazon FBA Accounting UK: Complete Guide for Sellers (2026) | Taxity

If you sell on Amazon FBA in the UK, your accountant needs to understand more than just tax. They need to know what a settlement report actually contains, why the figure landing in your bank account is almost never your real revenue, and how Amazon's fee structure, VAT obligations, and reserve movements interact with your books.

Most generalist accountants don't. This guide covers everything you need to know as a UK-based Amazon FBA seller — from how to account for your settlement reports correctly, to when you need to register for VAT, to what your Self Assessment or Corporation Tax return should look like.

What Is an Amazon FBA Settlement Report — and Why Does It Matter?

Every two weeks, Amazon pays out to your bank account. That payment — known as your settlement — is a net figure. By the time it lands, Amazon has already deducted referral fees, fulfilment fees, advertising costs, refunds, and any reserve movements. What you see in your account is the residual.

If your accountant codes that bank deposit as your revenue, your entire financial picture is wrong from the start.

Here is what a typical Amazon FBA settlement actually contains:

Gross Sales Revenue — The total value of all orders placed during the settlement period. This is your actual revenue figure. It should be recorded in full in your accounts before any deductions.

Amazon Referral Fees — Amazon's commission on each sale, typically 8–15% depending on your product category.

FBA Fulfilment Fees — The per-unit charges Amazon applies for picking, packing, and shipping your orders from their fulfilment centres.

Advertising Costs — Any spend on Sponsored Products, Sponsored Brands, or Sponsored Display during the period. This should be recorded as a marketing expense, separate from fulfilment costs.

Returns and Refunds — When customers return items, Amazon processes the refund and deducts it from your settlement. These reduce both your revenue and need a corresponding stock adjustment.

Reserve Movements — Amazon holds a portion of your funds as a payment reserve, particularly for newer accounts or those with high return rates. Reserve movements are not income or expenditure — they are balance sheet items that represent funds Amazon is temporarily holding on your behalf.

Net Settlement Payout — What actually reaches your bank account after all of the above. This is the figure most sellers and many accountants treat as revenue. It is not.

Getting this right matters not just for accurate profit reporting, but because your VAT threshold calculation, your tax liability, and any business decisions you make based on your numbers all depend on recording gross revenue correctly.

Amazon FBA and VAT: What UK Sellers Need to Know

VAT is where UK Amazon FBA sellers most often fall foul of HMRC. The rules are more nuanced than for a typical bricks-and-mortar business.

When Do You Need to Register for VAT?

You must register for VAT in the UK when your taxable turnover exceeds £90,000 in any rolling 12-month period. For Amazon sellers, taxable turnover means your gross sales revenue — not your net payout.

This distinction catches many sellers out. If your settlement payouts total £75,000 over 12 months, but your gross sales were £94,000 before Amazon's fees, you are above the threshold and should already be registered.

You can also choose to register voluntarily before reaching the threshold. This is worth considering if your suppliers are VAT-registered, as you can reclaim input VAT on your stock purchases and other business costs.

VAT on Amazon Sales — UK Buyers

For sales to UK customers, standard VAT rules apply. Most goods sold on Amazon attract the standard 20% VAT rate, though some categories (children's clothing, books, certain food items) are zero-rated or exempt.

Once you are VAT-registered, Amazon's UK marketplace will display your prices inclusive of VAT, and you must account for the output tax on every UK sale through your quarterly VAT return under Making Tax Digital (MTD).

Amazon Marketplace VAT — The Complexity

Since January 2021, Amazon has operated as a deemed supplier for certain transactions on its marketplace. Specifically, when a non-UK business sells goods to UK customers through Amazon, Amazon itself accounts for the VAT rather than the individual seller.

For UK-based FBA sellers, this means your settlement reports may contain transactions where Amazon has separately accounted for VAT on your behalf — and your own VAT return needs to reflect only the transactions where you are the deemed supplier.

If you also sell into Europe via Amazon's Pan-European FBA or European Fulfilment Network, you may have additional VAT registration obligations in individual EU member states, or you may be eligible to account for EU sales through the EU One Stop Shop (OSS) scheme. This is an area where specialist advice is essential — the rules differ by country and by how your inventory is distributed across Amazon's European fulfilment network.

Self Assessment vs Corporation Tax: Which Applies to You?

If You Trade as a Sole Trader

Your Amazon FBA profits form part of your personal income and must be reported on a Self Assessment tax return each year. Your tax year runs from 6 April to 5 April, and your return is due by 31 January following the end of the tax year.

You will pay Income Tax on your profits above the personal allowance (£12,570 for 2024/25), plus Class 4 National Insurance contributions. The effective tax rates are:

• Basic rate: 20% Income Tax + 9% Class 4 NI on profits between £12,570 and £50,270
• Higher rate: 40% Income Tax + 2% Class 4 NI on profits above £50,270

Your allowable deductions include the cost of goods sold, Amazon fees, advertising, software subscriptions, storage costs, professional fees (including your accountant), a proportion of home office costs if you work from home, and any other expenses wholly and exclusively for business purposes.

If You Operate Through a Limited Company

Your company pays Corporation Tax on its profits. The rate is 25% for profits above £250,000, and 19% for profits below £50,000, with marginal relief between the two thresholds.

As a director, you will also typically receive a salary (usually set at the NI secondary threshold to minimise employer NI) and dividends from retained profits. Dividends are taxed at lower rates than salary — 8.75% for basic rate taxpayers, 33.75% for higher rate — making the limited company structure tax-efficient once profits exceed a certain level.

For most Amazon FBA sellers generating over £40,000–£50,000 in profit annually, incorporation is worth serious consideration. The tax savings can be significant, though they need to be weighed against the additional administrative requirements of running a limited company.

Common Amazon FBA Accounting Mistakes UK Sellers Make

Treating the net payout as revenue. As covered above, this understates revenue, misrepresents your gross margin, and risks inaccurate VAT threshold monitoring.

Ignoring reserve movements. Sellers who book reserve releases as income, or fail to account for reserves at all, end up with a balance sheet that does not reconcile to their bank account — and HMRC enquiries that are difficult to defend.

Missing the VAT registration deadline. Amazon's gross sales can build up quickly, particularly in Q4. If you cross £90,000 on a rolling 12-month basis and do not register within 30 days of the end of the month in which you crossed the threshold, you become liable for VAT on all sales from the date you should have registered — even if you did not charge it to your customers.

Mixing personal and business funds. Particularly common among sole traders, this makes bookkeeping significantly harder and creates potential issues during any HMRC enquiry.

Leaving stock out of accounts entirely. Your closing stock value directly affects your profit calculation. If you have significant Amazon FBA inventory sitting in Amazon's fulfilment centres, it needs to be accounted for in your year-end figures.

Do You Need a Specialist Amazon FBA Accountant?

A generalist accountant can handle the basics — Self Assessment filing, basic bookkeeping, simple VAT returns. But Amazon FBA sits at the intersection of several areas of complexity that most generalist practices encounter rarely, if at all:

• Settlement report reconciliation
• Marketplace VAT rules post-Brexit
• EU OSS and IOSS for cross-border sellers
• Stock accounting and cost of goods sold methodology
• The interaction between Amazon's reserve system and your cash flow

Getting any of these wrong creates problems that are expensive and time-consuming to unwind. Underpaid VAT comes with interest and penalties. Incorrect profit figures affect your mortgage applications, investment decisions, and tax planning. And an HMRC enquiry into an Amazon seller's accounts — where the numbers do not tie back to the settlement reports — is a difficult and stressful experience.

Working with an accountant who handles Amazon sellers regularly means these things are built into your monthly process from the start, rather than identified as problems at year-end.

How Taxity Accountants Works With Amazon FBA Sellers

At Taxity, we work with Amazon FBA sellers across the UK — from side-hustle sellers just approaching the VAT threshold to established multi-channel businesses selling on Amazon, Shopify, and TikTok Shop simultaneously.

We connect directly to your Amazon Seller Central account and reconcile your settlement data into Xero each month. You receive monthly management accounts that show your real revenue, real margin, and real cash position — by platform, by product category, in total.

We handle your VAT returns under MTD, your annual accounts, your Self Assessment or Corporation Tax, and any HMRC correspondence. Fixed monthly fees. No charges for calls or emails. A qualified accountant who knows your business and picks up the phone.

Travis Cole MAAT — Founder, Taxity
Based in Fleet, Hampshire. Serving Amazon FBA sellers and ecommerce businesses across the UK.

[Book a free 30-minute call to talk through your Amazon accounting]

Summary: Amazon FBA Accounting Key Points

• Your settlement payout is not your revenue — record gross sales and fees separately
• Monitor your rolling 12-month gross turnover against the £90,000 VAT threshold
• Post-Brexit marketplace VAT rules add complexity — especially for EU sales
• Xero with a proper Amazon integration (A2X, Link My Books) is the standard setup
• Sole traders report profits on Self Assessment; limited companies pay Corporation Tax
• Stock accounting at year-end directly affects your tax liability
• Specialist knowledge matters — the cost of getting it wrong exceeds the cost of an accountant

Taxity is a MAAT-qualified accountancy practice based in Fleet, Hampshire, specialising in ecommerce sellers, Amazon FBA businesses, and growing SMEs across the UK. [Find out more about our ecommerce accounting service