Selling on Amazon as a Side Hustle — Tax Guide

The Accounted Business Team·3 March 2026·9 min read

Amazon is the UK's largest online marketplace, and it is no surprise that thousands of people use it as a side hustle. Whether you are doing retail arbitrage, private labelling, selling handmade products, or using Fulfilment by Amazon (FBA) to shift stock while you sleep, it can be a genuinely profitable way to earn extra income.

But Amazon selling comes with real tax obligations — and they kick in sooner than many people expect. This guide covers everything you need to know about the tax side of selling on Amazon as a UK-based side hustler.

Are You Trading?

The very first question is whether HMRC considers your Amazon activity to be trading. Unlike selling personal items on Vinted or at a car boot sale, most Amazon selling is clearly trading from the outset.

If you are:

Buying products to resell at a markup
Using Amazon FBA to store and ship inventory
Sourcing from wholesalers or manufacturers
Running a private label brand
Doing retail or online arbitrage

Then yes, you are trading. HMRC will treat your Amazon income as self-employed trading income, subject to income tax and National Insurance.

The only exception is if you are selling a handful of your own personal belongings through Amazon's marketplace. In that case, it is no different from selling personal items on eBay or Vinted — and not taxable. But let us be honest: most people selling on Amazon are doing so as a business, even if it started casually.

The £1,000 Trading Allowance

If your total Amazon sales are £1,000 or less in a tax year, you can use the trading allowance. This means:

No need to register as self-employed
No Self Assessment required
No tax to pay

However, this threshold is based on your gross income — total sales, not profit. Given that Amazon's own fees (referral fees, FBA fees, etc.) can eat up 30–40% of your selling price, your actual profit might be modest, but your gross sales could easily exceed £1,000 even with a small number of products.

For most Amazon sellers, crossing the £1,000 mark happens quickly — often within the first month or two. Once you do, you need to register as self-employed with HMRC.

Registering as Self-Employed

If your Amazon income exceeds the £1,000 trading allowance, you must register as self-employed with HMRC. This involves:

Creating a Government Gateway account (if you do not already have one)
Registering for Self Assessment
Receiving your Unique Taxpayer Reference (UTR) number

You need to register by 5 October following the end of the tax year in which you started trading. So if you started selling on Amazon in September 2025, you would register by 5 October 2026.

Once registered, you will file a Self Assessment tax return each year by 31 January. If this is your first time, our Self Assessment guide for beginners covers the whole process.

How Your Tax Is Calculated

Your Amazon side hustle profit is added to any other income you have (employment, pensions, savings, etc.) to determine your total taxable income.

For the 2025/26 tax year:

Personal Allowance: £12,570 (0% tax)
Basic rate: £12,571 – £50,270 (20%)
Higher rate: £50,271 – £125,140 (40%)
Additional rate: Over £125,140 (45%)

Example

You earn £32,000 from your full-time job. Your Amazon side hustle generates £15,000 in sales and £6,000 in expenses, giving you a profit of £9,000.

Your total taxable income is £32,000 + £9,000 = £41,000. Your personal allowance is already used through PAYE, so the £9,000 Amazon profit is taxed at the basic rate of 20%, giving you an income tax bill of £1,800 on your side hustle earnings.

National Insurance

On top of income tax, you will pay National Insurance on your self-employed profits:

Class 2 NI: £3.45 per week (if profits exceed £12,570)
Class 4 NI: 6% on profits between £12,570 and £50,270, and 2% above that

If your Amazon profits are relatively modest and you are already employed, Class 4 NI is the main one to worry about.

Amazon Fees — What You Are Actually Paying

Amazon's fee structure is notoriously complex, and understanding it is essential for calculating your true profit. Here are the main costs:

Selling plan fees

Individual plan: 75p per item sold (no monthly fee)
Professional plan: £25 per month (no per-item fee)

If you are selling more than about 34 items per month, the Professional plan works out cheaper.

Referral fees

Amazon charges a referral fee (commission) on every sale, typically between 7% and 15% depending on the product category. Most categories sit around 15%.

FBA fees

If you use Fulfilment by Amazon, you pay:

Fulfilment fees — based on the size and weight of each item (from about £2.50 for small, light items)
Storage fees — monthly charges based on the volume of space your inventory occupies in Amazon's warehouses (higher during Q4, October–December)
Long-term storage fees — additional charges for inventory stored for more than 365 days

Other fees

Advertising costs — if you run Sponsored Products or other Amazon PPC campaigns
Returns processing — Amazon may charge for processing customer returns
Removal or disposal fees — if you need to get unsold stock back or have it destroyed

All of these fees are legitimate business expenses and can be deducted from your income on your tax return.

Allowable Expenses for Amazon Sellers

Beyond Amazon's own fees, there are plenty of other costs you can claim against your income:

Cost of goods sold (COGS) — what you paid for the products you sell
Shipping to Amazon — the cost of sending inventory to FBA warehouses
Packaging materials — boxes, poly bags, labels, tape
Product photography — professional photos for your listings
Software and tools — repricing tools, keyword research, inventory management, bookkeeping software
Home office costs — a proportion of your household bills if you work from home
Travel and mileage — trips to source stock, pick up supplies, or visit Amazon lockers (45p per mile for the first 10,000 miles)
Training and courses — if you have invested in learning how to sell on Amazon
Phone and internet — the business-use proportion
Accountancy fees — if you use an accountant or bookkeeping service

Keeping track of all these is crucial. Amazon provides detailed transaction reports, but they are not the friendliest documents to work with. Tools like Accounted can pull your data together and categorise your expenses automatically, saving you hours of spreadsheet work.

For a comprehensive look at Amazon-specific tax rules, see our tax guide for Amazon FBA sellers.

VAT — When You Need to Register

You need to register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period. This is based on your total sales, not your profit.

For a side hustle, most sellers are well below this threshold. But if your Amazon business is growing quickly — particularly if you are scaling with private label or wholesale products — it is important to monitor your turnover.

Things to be aware of

Amazon does not charge VAT on your behalf (unlike some platforms). If you are VAT-registered, you need to add VAT to your prices and submit VAT returns.
Amazon's fees include VAT. If you are VAT-registered, you can reclaim the VAT on Amazon's fees as input tax.
Selling from the UK to other countries can trigger additional VAT obligations. If you use Amazon's Pan-European FBA or sell to EU customers, you may need to register for VAT in other countries.

For a side hustle kept at a manageable scale, VAT is unlikely to be relevant. But it is worth knowing the threshold so you can plan ahead if your business grows.

Common Mistakes Amazon Sellers Make

1. Confusing turnover with profit

Your Amazon sales figure (turnover) is not your profit. After deducting the cost of goods, Amazon fees, and other expenses, your actual profit may be a fraction of your headline sales number. Make sure you are calculating your tax based on profit, not turnover.

2. Not tracking expenses properly

It is easy to lose track of the dozens of small expenses that add up over the year — packaging supplies, postage, tools, mileage. Every unclaimed expense means you are paying more tax than you need to.

3. Ignoring stock on hand

If you have unsold inventory at the end of the tax year, you cannot claim the full cost as an expense. Only the cost of goods you have actually sold is deductible. The value of remaining stock is carried over to the next year.

4. Forgetting about payments on account

If your Self Assessment tax bill exceeds £1,000, HMRC may ask you to make payments on account — advance payments towards next year's tax bill. This catches many new sellers off guard. Our guide on payments on account explains how they work.

5. Missing the registration deadline

You need to register as self-employed by 5 October following the end of the tax year in which you started trading. Miss this deadline and you could face a penalty.

Record Keeping

HMRC requires you to keep business records for at least five years after the 31 January deadline for the relevant tax year. For Amazon sellers, this includes:

Amazon settlement reports and transaction records
Invoices and receipts for stock purchases
Receipts for all business expenses
Records of stock levels at the start and end of each tax year
Bank statements showing business transactions

Amazon provides detailed reports through Seller Central, which you can download and keep. But raw Amazon data can be overwhelming. A dedicated bookkeeping tool makes it far easier to turn transaction reports into a clear picture of your profit and expenses.

Making Tax Digital

From April 2026, sole traders and landlords with income over £50,000 will need to comply with Making Tax Digital for Income Tax (MTD for ITSA). This means keeping digital records and submitting quarterly updates to HMRC using compatible software.

If your Amazon side hustle grows to that level, you will need MTD-compatible bookkeeping software. For most side hustlers, this is not an immediate concern, but it is worth being aware of as the threshold drops to £30,000 from April 2027.

Key Takeaways

Most Amazon selling counts as trading from the start — you cannot rely on the "personal items" exemption.
The £1,000 trading allowance gives you a small buffer, but most Amazon sellers exceed it quickly.
Register as self-employed and file a Self Assessment tax return once you pass the threshold.
Track all expenses carefully — Amazon fees, stock costs, postage, software, and more are all deductible.
Keep detailed records for at least five years.
Monitor your turnover for VAT registration at £90,000.

Selling on Amazon can be a fantastic side hustle, but it is a real business — even if you are doing it from your kitchen table. Treat the tax side with the same attention you give to product research and pricing, and you will be in great shape.

Accounted helps UK sole traders stay on top of their bookkeeping and tax. Start your free 30-day trial at getaccounted.co.uk

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