Tax Guide: Amazon seller UK
As an Amazon seller (UK), you will have to pay tax on your income as you would on any other self-employed income.
First though, you’ll need to work out how you’re viewed in the eyes of HMRC. This is known as your employment status.
How do I know my employment status?
This depends on what portion of your income selling on Amazon accounts for. Does it make up all of your income or do you use your earnings to top up your salary?
- It’s all of my income
In this case, you are a full-time Amazon seller and you will be taxed as a self-employed worker.
- It tops up my salary from another job
In this case, you are both employed and self-employed and you will be taxed as if it is a side gig.
Take a look at our Employed and Self-Employed Calculator to see what you owe.
Full-time Amazon seller (UK)
If Amazon selling is your main source of UK income, you’ll be taxed on your profits each tax year in three ways:
- Income Tax – depending on how much you earn, you’ll be taxed at 20%, 40% or 45%
- Class 2 National Insurance – this is a flat rate charge of £159 that you’ll owe when you earn over £6,475
- Class 4 National Insurance – this is a percentage charge (9%) on your earnings after they exceed £9,501 per year
It’s important to keep a record of everything you earn from Amazon by keeping the digital receipts and invoices all in one place. A spreadsheet for every tax year (split by month) is probably the most effective way of doing this, but it’s up to you how to go about it.
Luckily for you, we have a handy Self-employed calculator to help you work out what you owe.
How to pay my Amazon seller (UK) tax bill
There are three different avenues that you can choose between:
- Pay your bill yourself via HMRC
- Look for an online provider (… ahem, like TaxScouts)
- Use an accountant
If you choose to pay your bill yourself, you’ll first need to register for Self Assessment.
To do this, head to HMRC here.
You will then need to pay your tax bill by 31st January of the year following the tax year that you’re paying for.
Here’s an example:
If you’re paying for the 2019/20 tax year, you will pay this by 31st January 2021.
Take a look at all of the important deadlines to be aware of here.
Amazon selling is a side-gig
If you’re employed full-time and you sell items on Amazon on the side, good news. You’re covered by the Trading Allowance up to your first £1000 in profit.
If your profit exceeds £1000, you will need to declare it to HMRC. To do this:
- Register for Self Assessment online by 5th October of the given tax year
- Complete a tax return by 31st January the following year
- If you want to pay offline, the deadline for this is earlier: 31st October
Head to HMRC when you come to registering.
What is the Trading Allowance?
The Trading Allowance is a tax relief that enables you to earn up to £1000 in profit on top of your regular income without paying tax.
If you make less than £1000 in a tax year, you won’t have to register for Self Assessment or complete a tax return.
If you claim the Trading Allowance, be aware that you’re not allowed to deduct your expenses.
OK, so how do expenses work?
As a self-employed Amazon seller (UK), you can deduct your business expenses from your profits to lower the portion of income on which you pay tax.
You only pay tax on your profits. Not on your earnings as a whole. If, for example, you sold your old laptop through Amazon and for less money than you bought it for, you don’t pay tax on this sale.
Alternatively, if you earn £31,000 profit from selling, for instance, but buy a £500 camera to take more professional photos of your items for sale, you could deduct the camera from your takings. As a result, you would pay tax on £30,500 instead of £31,000.
Here’s a list of allowable expenses as an Amazon seller – but remember that you can actually expense anything (within reason!). As long as you have evidence of the purchase and of it being a business expense, you can include it.
- Amazon seller fees
- Shipping costs
- Cost of goods or supplies to make them
- Accountancy fees
- Training courses
- Marketing and advertising costs
- Photography equipment
- Relevant subscriptions (e.g. photo editing software)
- Home office costs
- Travel costs (business only e.g. if you travel to view stock)
- Warehouse rent
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