Amazon UK VAT for sellers: what you actually owe

When do you have to register for VAT?

It depends entirely on whether your business is established in the UK, and this is where most guidance written for Amazon.com is simply wrong.

When does Amazon collect VAT for you?

Since the 2021 changes, Amazon is deemed the supplier for certain sales and collects the VAT itself rather than passing it to you. Broadly, this applies to goods sold by overseas sellers to UK consumers below the consignment threshold, and to goods already in the UK sold by an overseas seller.

Where Amazon collects, the money never reaches your account, so your disbursement is net of it. Sellers who do not realise this often think their margin has collapsed when in fact the VAT simply never arrived.

Where you remain the supplier — most UK-established sellers — Amazon pays you the gross amount and you account for the VAT yourself. Either way the referral fee is calculated on the gross figure, which is one of the fee lines set out in what it costs to sell on Amazon UK.

How does VAT change your real margin?

This is the part that has practical consequences every day, not just at quarter end.

On a standard-rated product at £24.99, the VAT element is roughly £4.16, leaving £20.83 of net revenue. Amazon's referral fee is charged on the gross selling price, not the net — so you pay the fee on money you do not keep.

Calculating margin on the gross price overstates it by a sixth on a standard-rated product, which is enough to turn a profitable ACoS target into a loss-making one. Our profit calculator strips VAT before doing anything else, for exactly this reason.

The same error carries straight into advertising. A break-even ACoS calculated on the gross price is too generous, so the target you set is one the product cannot support — what is a good ACoS works through the arithmetic, and what it costs to sell on Amazon UK sets out the fee lines that sit above it.

Which VAT rate applies to your products?

Most goods are standard-rated, but the exceptions matter and several are common Amazon categories.

• Standard rate — most goods.
• Reduced rate — children's car seats, some energy-saving materials, certain mobility aids.
• Zero rate — most food, children's clothing and footwear, books, and some printed matter.

Getting this wrong in either direction is expensive: charge too much and you are uncompetitive, too little and you owe the difference. Check your specific goods against the GOV.UK rate list rather than assuming by category.

Should you use the Flat Rate Scheme?

The Flat Rate Scheme lets smaller businesses pay a fixed percentage of gross turnover instead of accounting for VAT on every transaction, in exchange for not reclaiming input VAT on most purchases.

For Amazon sellers importing goods and paying import VAT, it is frequently the wrong choice, because the input VAT you give up often exceeds the administrative saving. For a service business with few purchases it can work well.

This is a question for an accountant who has seen your numbers, not for a marketing agency. We flag it because sellers regularly join the scheme on general advice and discover the problem a year later. If you want the marketing side of the same picture, our free Amazon audit covers fees, margin and advertising, and stops short of anything that belongs to your accountant.

What records and invoices do you have to keep?

A VAT-registered seller must keep records that support every figure on the return, keep them for six years, and — under Making Tax Digital — keep them digitally and file through compatible software. Amazon's reports are the raw material for that, but they are not themselves a VAT record.

What to keep, and where it comes from:

The mistake worth naming: treating your Amazon disbursement as turnover. A disbursement is net of fees, refunds, and in some cases VAT Amazon has already collected as deemed supplier. Building a return from disbursements rather than from transaction-level reports produces the wrong number in both directions. HMRC's VAT guide (Notice 700) is the reference for what a valid record looks like, and the rules for marketplace-facilitated sales are in HMRC's online marketplace guidance.

None of this is advice on your own position — we are an Amazon agency, not accountants. What we can tell you is which report each figure comes out of, which is usually where sellers get stuck.

What about selling into the EU after Brexit?

Cross-border sales into the EU are a separate regime. You will generally need a GB EORI number to export, and often an EU EORI to import. The Import One Stop Shop simplifies VAT on low-value consignments to EU consumers, and above those thresholds you may need registration in the destination country or an intermediary.

If you store stock in an EU fulfilment centre, you almost certainly need a VAT registration in that country regardless of turnover. That is the detail that catches out UK sellers enabling Pan-European FBA without reading what it does.

There is a marketing dimension to this that is easy to miss while sorting out the tax. An EU listing is not a translated UK listing: search volume, vocabulary and category conventions all differ, in the same way Amazon.co.uk differs from Amazon.com. If EU expansion is on the plan, budget for keyword research in each marketplace rather than for translation alone — the reasoning is the same one set out in Amazon SEO vs Google SEO.

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About the author

Monjur Hossain

Founder & Amazon Strategy Lead, MotionTrust Digital

Monjur incorporated MotionTrust Digital in September 2022 and leads Amazon strategy across the client base. Eight years in e-commerce and marketplace marketing, now on Amazon only — keyword strategy, listing architecture and advertising structure for growing brands.

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Last reviewed 4 July 2026. We update articles in place rather than republishing at a new URL, so the link you have keeps working.