Do you pay taxes on Amazon FBA?
As an Amazon Seller, you will be required to pay tax on any income that you generate. This is something that you can’t avoid, as you need a Tax Status to register to sell on Amazon. Although paying tax isn’t going to be the most enjoyable of tasks for you, it’s ultimately the price to pay for gaining access to the biggest worldwide marketplace.
Before you decide your employment status, it’s worth taking a bit of time out to understand the different types. Depending on your circumstances, you’ll be better suited to a specific employment status.
How do I find my employment status?
Making this as simple as possible, there’s two options for Amazon sellers to choose from. It relies on answering one question:
Do you make all of your income from selling products on Amazon, or is this something that tops up your salary and you’re selling ‘part time’ on Amazon?
If you sell items on Amazon with no other income, you’ll be classified and taxed as a self-employed worker.
If you have a full time job, you will have the option to complete a self-assessment, but it may also pay dividends (no pun intended), to register an LTD company.
Tax Rules as a Full Time Amazon Seller
As a full time Amazon seller, you’ll be paying a minimum of 20% income tax on any earnings above £12,570. If your earnings exceed £50,270 your tax rate will be 40%, rising to 45% for any earnings over £150,000.
In addition to this, you’ll also be required to pay Class 2 and Class 4 National Insurance contributions. For this reasons, you’ll want to ensure you keep hold of every single invoice and receipt that you can. Even keep your fuel receipts, if you travel to different areas to source stock. Ideally, you’ll have a top Amazon FBA accountant who can deal with this for you.
Another thing that you will have to keep in mind, is your VAT status. If your turnover exceeds £85,000 during any rolling 12 month period, you will also need to become VAT registered and pay an additional tax.
As a VAT registered company, you should include VAT in the price of your products and track how much VAT you pay on goods, in addition to what you charge.
The end result of this will be a VAT return to HMRC, which will need to be submitted every three months. Sometimes HMRC may owe you money, but as you continue to scale your selling, you’ll end up paying them.
What Expenses can an Amazon Seller Claim?
Your Amazon business will work like any other business, and there will be certain expenses that you can claim which will lower your payable taxes.
Do You Have to Pay Sales Tax When Selling on Amazon?
You won’t be able to avoid paying taxes when selling on Amazon. This is because you’re operating a professional business, not selling items cash in hand, from a car boot sale or equivalent.
Do you need an Accountant?
It’s highly likely that you will need an accountant. This is to ensure that your accounts are completed correctly, and to avoid you paying any further fines due to errors.
Accountants aren’t too expensive luckily, you can get a great one for around £50/£60 per month. We have our favourites that we personally use, but you might already have your own. It’s important that your accountant knows about Amazon selling, as there will definitely be more invoices than usual, for them to deal with!