How is Amazon FBA seller income taxed in the UK, and what about import VAT?

Full answer

Amazon FBA sellers who source and resell physical products are trading businesses for tax purposes from their very first sale (the £1,000 trading allowance is quickly exceeded by most FBA operations given typical stock and revenue volumes). If operating as a sole trader, profit after deducting cost of goods, Amazon referral and FBA fulfilment fees, advertising spend and other allowable expenses is taxed at standard Income Tax rates (0% to £12,570, 20% to £50,270, 40% above), plus Class 4 National Insurance (6% between £12,570 and £50,270, 2% above). Many FBA sellers eventually incorporate as a limited company once profits grow, paying Corporation Tax instead — 19% on profits up to £50,000, tapering marginal relief between £50,000 and £250,000, and 25% above £250,000 — plus Income Tax and dividend tax if profits are extracted personally. Separately from Income Tax or Corporation Tax, importing stock from overseas suppliers (very commonly manufacturers in China) triggers import VAT (usually 20%) and potentially customs duty at the point of entry into the UK, calculated on the customs value of the goods plus shipping and insurance — this import VAT can usually be reclaimed as input VAT once the business is UK VAT-registered, effectively making it cash-flow neutral rather than a real cost, provided postponed VAT accounting or a VAT-registered import agent is used correctly. UK VAT registration becomes compulsory once rolling 12-month turnover exceeds £90,000, and FBA sellers storing stock in Amazon's EU fulfilment centres may separately need to register for VAT in those EU countries too. Use the Self-Employed Tax or Corporation Tax calculator depending on your structure.

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