If you sell on Amazon UK, VAT decides how much of every sale is actually yours. You must register once your taxable turnover passes £90,000 (or earlier if you are based overseas), charge VAT at the correct rate, file returns with HMRC and reclaim the VAT you pay on business costs. Using FBA does not take any of that off your plate. This guide walks through each step in the order you will meet it, with the official sources behind every rule.
TL;DR
- A UK business must register for VAT when taxable turnover over the last 12 months goes over £90,000, or when you expect to pass it in the next 30 days. Overseas sellers supplying to the UK must register regardless of turnover.
- Most goods carry the 20% standard rate, but some products are reduced- or zero-rated, so check each product.
- Amazon says each seller remains responsible for VAT compliance, including when using FBA or Amazon’s VAT services.
- You can reclaim VAT on business purchases only with a proper VAT invoice, and only to the extent it relates to taxable sales.
- Profit figures that ignore VAT are wrong. Track margin per SKU net of VAT, fees and ad spend.
Table of Contents
- What VAT means when you sell on Amazon UK
- Do you need to register for VAT?
- How to register, step by step
- How VAT applies to your Amazon sales
- VAT on Amazon fees
- Filling in your UK VAT return
- Keeping VAT records
- Where VAT hits your real profit
- Our perspective
- See your profit clearly with Osellpa
- A VAT checklist for Amazon UK sellers
- FAQ
- Sources
What VAT means when you sell on Amazon UK
VAT is a tax on the value added at each stage of a supply. When you are VAT-registered, you charge it on your sales (called output tax), you pay it on your business purchases (input tax), and you hand HMRC the difference. Amazon’s own guidance describes the same cycle: registered sellers charge VAT on sales, pass it to the tax authority through returns, and may recover VAT paid on purchases.
Two points catch new sellers out.
- The price on the listing is not all yours. Once you are registered, VAT on a standard-rated product is part of the price the customer pays. If you list at £24.00 and the product is standard-rated, £4.00 of that is VAT owed to HMRC, and you keep £20.00 before costs. Many sellers set prices before registering and then find their margin has shrunk by a sixth.
- VAT is not an Amazon matter. Amazon collects the money and reports your sales, but the legal obligation is yours. Amazon states that sellers are responsible for determining and meeting their own VAT obligations.
UK VAT rates for marketplace products
HMRC says most goods and services are charged at the standard rate of 20%. Reduced-rate and zero-rate treatment depends on the product and the conditions that apply to it. For Amazon sellers this means you should assign a VAT rate to every SKU and keep the reasoning on file, because a wrong rate across hundreds of orders becomes a wrong return.
Before you list, check each product against HMRC’s rates guidance and, where a product sits on the borderline (children’s items, food, printed matter, energy-saving products), ask an accountant. A mistake at product level repeats on every order.
Do you need to register for VAT?
The answer depends on where you are based and what you sell.
If you are a UK-based seller
HMRC’s rule is that you must register if your taxable turnover for the last 12 months goes over £90,000, or if you expect to go over £90,000 in the next 30 days alone. Two details matter:
- It is a rolling total. You do not wait for the tax year to end. Each month, add up the previous 12 months of taxable sales.
- Taxable turnover is not profit. It is the value of what you sell that is not exempt, and it includes all your sales channels, not only Amazon. A seller with £60,000 on Amazon and £35,000 through their own website is over the line.
If you exceed the threshold on the 12-month test, HMRC says you must apply within 30 days after the end of the month in which you went over, and registration takes effect from the first day of the second month after that. Check HMRC’s page for the current threshold, as it is set by government and can change.
You can also choose to register below the threshold. That makes sense if most of your customers are VAT-registered businesses, or if your costs carry a lot of VAT you would like to recover. It makes less sense if you sell mostly to consumers at thin margins, because you either raise prices or accept less profit.
If you are based outside the UK
The rules are stricter. HMRC says a business based outside the UK must register regardless of taxable turnover if it supplies goods or services to the UK, or expects to in the next 30 days. HMRC’s marketplace guidance also lists several situations for specified overseas sellers, including:
- an overseas seller given VAT details of a business customer by a marketplace;
- a seller of goods located in Northern Ireland to Northern Ireland customers;
- a seller with goods stored in the EU whose sales to Northern Ireland customers exceed £70,000 a year.
If you fall into one of these groups, read HMRC’s guidance in full before listing. Amazon has also been checking whether sellers are properly registered, so unregistered sales tend to surface sooner rather than later.
Does FBA change anything?
No. Amazon describes FBA as a storage, shipping and customer-service programme and says a VAT number is required where your goods are stored. If you place stock in a UK fulfilment centre, you are making UK supplies from UK stock and need to look at UK registration.
Amazon’s Remote Fulfilment works differently. Amazon says it lets you take cross-border orders without storing inventory in the destination marketplace, and that Amazon collects and remits VAT on those orders. That shifts one part of the work for those orders, but it does not remove your own registration, return or record-keeping duties in the country where you are established or where your stock sits.
Amazon’s VAT Services can help with registration and filing, yet Amazon is clear that each seller is responsible for compliance. Treat any service as a helper, not a transfer of responsibility.
How to register, step by step
- Work out your position. Add up 12 months of taxable turnover from every channel, and check whether you hold stock in the UK or sell from overseas.
- Gather business details. You will need your business structure, address, bank details, start date and an estimate of turnover.
- Apply through HMRC. The route and current guidance are on HMRC’s register for VAT page.
- Add your VAT number to Seller Central. HMRC says that after registration you must give the VAT number to each marketplace you sell on.
- Set tax rates per product. Make sure every SKU is tagged standard, reduced or zero rate.
- Reprice if needed. Recalculate your margin on a VAT-exclusive basis.
If you are close to the threshold, do the repricing exercise before you register. It is far easier to adjust prices ahead of time than to discover a shortfall in your first return.
How VAT applies to your Amazon sales
Once registered, HMRC says you must charge VAT on UK sales of standard- and reduced-rated goods, account for it and pay it to HMRC. On your own invoices, a VAT-registered business must show the VAT separately along with the VAT number, record it in its VAT account and include it on the return.
For most Amazon consumer sales, Amazon’s order data and settlement reports give you the figures you need. The practical question is which numbers go into which box on the return.
Refunds and returns
When a customer returns an item, the VAT follows. HMRC says that when a payment is refunded, the related VAT can be reclaimed in the next return. For goods returned, HMRC says to settle with a replacement invoice or credit or debit note, record it in your accounts and keep the original notes. A credit note must carry the information of a VAT invoice, the reason for issue, the amount credited excluding VAT, and the original invoice number and date.
If your return rate is high, this matters. Refunded orders reduce the VAT you owe, but only if they are recorded in the right period.
VAT on Amazon fees
Amazon charges referral fees, FBA fulfilment and storage fees, and advertising fees. HMRC’s general principle is that VAT is due on charges, deposits and fees that are full or part payment for a supply. Where Amazon charges you VAT, and you are VAT-registered, that VAT is normally input tax that you can reclaim, provided you hold a valid VAT invoice.
The detail of which entity invoices you, and whether VAT is added, has changed in recent years, so read the invoices in your Seller Central VAT invoice section rather than assuming. If you are not registered, any VAT Amazon charges you is simply a cost, which is one reason sellers who are close to the threshold sometimes choose to register early.
What you can reclaim
HMRC says a VAT-registered person can reclaim VAT on purchases and imports to the extent that they relate to standard-, reduced- or zero-rated supplies. VAT relating to non-business activity or exempt supplies is generally not recoverable. Typical reclaimable items for an Amazon seller include:
- stock purchased from UK suppliers (with a valid invoice);
- Amazon fees where VAT is charged and invoiced;
- software subscriptions, packaging and prep supplies;
- professional fees such as accounting.
HMRC also says a proper VAT invoice is required to support an input-VAT claim. Without it, you cannot claim the input VAT on the return. A bank statement does not replace an invoice.
Filling in your UK VAT return
The return is a calculation of what you charged against what you can recover. HMRC’s notice explains that Box 1 records VAT due on sales and other outputs, Box 4 records deductible VAT on purchases and other inputs, and Box 5 shows the net amount to pay or reclaim. In plain terms, you normally pay HMRC the excess of output tax over recoverable input tax.
A simple worked example for one quarter:
| Item | Amount |
|---|---|
| Sales including VAT (all standard-rated) | £30,000 |
| VAT in those sales (output tax, one sixth) | £5,000 |
| Stock, fees and software bought, including VAT | £15,000 |
| VAT on those purchases (input tax, one sixth) | £2,500 |
| Net VAT payable to HMRC | £2,500 |
The figures are illustrative and assume everything is standard-rated with valid invoices. Real returns also include refunds, imports and items that are zero-rated.
Amazon notes that VAT returns report VAT collected from customers and VAT paid to suppliers, and can include cross-border sales, acquisitions, imports and exports. If you sell internationally, expect more lines to reconcile.
For how often to file and how the return is submitted, use HMRC’s notice and your VAT account in your HMRC online services, which show your own deadlines. Do not rely on a date from an article for your return, because yours depends on your registration.
Keeping VAT records
Good records make the return quick and an HMRC enquiry manageable. HMRC’s guidance says to keep records of everything bought and sold, invoices issued and received, and debit or credit notes. It also expects digital records of VAT, supply dates and values, adjustments and reverse-charge transactions, and a record of which items are zero-rated, reduced-rated or exempt.
A practical routine for an Amazon seller:
- Download settlement and VAT reports monthly, not at quarter end.
- Save every supplier and Amazon VAT invoice against the month it relates to.
- Keep a product sheet that shows the VAT rate for each SKU and why.
- Log credit notes for returns and refunds as they happen.
- Reconcile Amazon payouts to your bank before you file.
Where VAT hits your real profit
VAT is not your cost when you are registered, but it distorts your numbers if you track revenue gross. A sales figure that includes VAT overstates your income by a sixth on standard-rated products. Fees, ads, storage and returns then come off a number that was never yours.
The cleanest way to see this is per product. Our guide to SKU profitability on Amazon shows how to work out what each product earns after costs, and the same logic applies to VAT: strip it out of revenue, and reclaim it on costs only where it is recoverable. If FBA charges are a big line for you, our piece on dimensional weight and UK fees explains how those charges are built.
Pricing also has a visibility side. A price that rises after VAT registration has to be offset by conversion, so it helps to understand what Amazon SEO means for your listings before you push prices up.
Our perspective
We talk to sellers every week who learn about VAT the hard way: they look at a healthy sales number, then see it shrink once VAT, fees and advertising are taken off. Our view is that VAT should never be a surprise at the end of the quarter. It should sit inside your profit view from the first order.
Three habits matter most.
- Measure profit per product, net of VAT. Averages hide the SKUs that lose money once VAT and fees are deducted.
- Watch ad spend against real margin. An advertising cost that looks fine on gross revenue can be too high on a VAT-exclusive margin. Our guide to portfolio budgets on Amazon Ads covers how to set limits that match your margins.
- Leave tax advice to an accountant. Software can show you your numbers clearly, but your registration, rates and filing are decisions for you and a qualified adviser.
We built Osellpa to give sellers clear profit tracking, PPC optimisation and profit and loss reporting using Amazon data through its API, so you spend less time in spreadsheets and more time on decisions. It is not a replacement for your VAT adviser, and we would rather you used both.
— Harry
See your profit clearly with Osellpa
If you are juggling spreadsheets to work out what each product earns, Osellpa brings profit tracking, automatic and manual PPC optimisation, inventory management and reporting into one place, connected directly to your Amazon account. Plans are priced for sellers of different sizes: Launch is £10 per month (or £96 per year), Scale is £20 per month (£192 per year) and Advanced is £40 per month (£384 per year). You can compare them on our pricing page.
A VAT checklist for Amazon UK sellers
- Add up rolling 12-month taxable turnover across all channels every month.
- If you are overseas or hold UK stock, check your registration duty now, not at the threshold.
- Add your VAT number to Seller Central after registering.
- Assign a VAT rate to every SKU and record the reason.
- Save valid VAT invoices for every cost you want to reclaim.
- Record credit notes for refunds and returns in the right period.
- Reconcile settlement reports before each return.
- Review per-SKU profit net of VAT every month.
FAQ
Do I need a VAT number to sell on Amazon UK?
Not always. A UK business only has to register once taxable turnover goes over £90,000 in 12 months, or when it expects to in the next 30 days. Sellers based overseas who supply goods to the UK must register regardless of turnover, and Amazon says a VAT number is required where your goods are stored. Check HMRC’s registration page for your case.
Does Amazon handle VAT for me if I use FBA?
No. Amazon’s own guidance says sellers are responsible for their VAT obligations, and its VAT Services can only help with registration and filing. You still register when required, charge the right rate and make sure returns are filed.
Can I reclaim VAT on Amazon fees?
If you are VAT-registered, you can generally reclaim VAT on business purchases that relate to taxable sales, provided you hold a valid VAT invoice. Check the invoices in Seller Central to see whether VAT has been charged. If you are not registered, you cannot reclaim it.
What records should I keep?
Keep invoices issued and received, credit and debit notes, and digital records of VAT, supply dates and values. Record which products are zero-rated, reduced-rated or exempt, and keep the original notes for returned goods.
Sources
- Register for VAT: When to register for VAT, GOV.UK
- How VAT works: How much VAT you must charge, GOV.UK
- Businesses selling goods in the UK using online marketplaces, GOV.UK
- Charge, reclaim and record VAT: Charging VAT, GOV.UK
- Charge, reclaim and record VAT: Keeping VAT records, GOV.UK
- VAT guide (VAT Notice 700), GOV.UK
- How to fill in and submit your VAT Return (VAT Notice 700/12), GOV.UK
- Value Added Tax (VAT) Service on Amazon UK, Amazon Knowledge Centre
- Amazon FBA: Optimise your Order Fulfilment in the UK
- Fulfilment between the UK and EU, Amazon UK
