One of the most common mistakes UK Amazon FBA sellers make is overpaying tax by failing to claim all allowable expenses. HMRC allows you to deduct any cost that is wholly and exclusively for the purposes of your business. For FBA sellers, that covers a wide range of costs across inventory, fees, software, shipping and more.

The starting point is understanding the difference between turnover and taxable profit.

Turnover vs Taxable Profit

You pay Income Tax and National Insurance on profit, not on gross sales. Profit is your total sales minus all allowable business expenses. For Amazon FBA sellers, this distinction is particularly significant because the direct costs of running the business are high.

Example calculation
Total Amazon sales (turnover)£100,000
Cost of goods sold£40,000
Amazon fees (fulfilment, referral, storage)£12,000
Advertising (PPC and external)£5,000
Software, shipping and other costs£3,000
Taxable profit£40,000

At basic rate Income Tax, correctly claiming £60,000 of expenses saves approximately £12,000 in Income Tax plus National Insurance. Getting this right is not optional admin. It is the most direct way to keep more of what you earn.

Every Expense Amazon FBA Sellers Can Claim

01

Inventory and Cost of Goods

  • Wholesale purchases from suppliers
  • Manufacturing costs for private label products
  • Product samples before bulk orders
  • Raw materials and components
  • Product packaging and labelling
  • Import duties and customs fees
COGS (Cost of Goods Sold) is calculated as: Opening Inventory + Purchases minus Closing Inventory. It is typically the largest single expense category for FBA sellers and must be tracked accurately throughout the year.
02

Amazon Fees

  • FBA fulfilment fees
  • Referral fees on each sale
  • Monthly Professional Seller subscription
  • Long-term storage fees
  • Removal and disposal fees
  • Refund administration fees
  • High-volume listing fees
Amazon fees typically represent 30 to 40% of revenue for most FBA sellers. Every fee Amazon charges is deductible. Pull these figures from your Amazon Seller Central account reports.
03

Shipping and Freight

  • International shipping from overseas suppliers
  • Freight forwarding costs (sea and air freight)
  • Customs clearance and brokerage fees
  • UK domestic shipping to Amazon warehouses or prep centres
  • DHL, FedEx, UPS and other courier costs
  • Pallet delivery charges
Keep all freight invoices and shipping documents. For sellers importing from China or other overseas markets, freight and customs costs can be a significant expense category.
04

Advertising and Marketing

  • Amazon PPC (Sponsored Products, Sponsored Brands, Sponsored Display)
  • Amazon DSP
  • External advertising (Google Ads, Meta Ads)
  • Influencer partnerships and collaborations
  • Affiliate commissions
  • Product photography and videography
  • Graphic design for listings, A+ Content and packaging
Amazon PPC is often one of the largest variable expense categories. Every penny of advertising spend is tax-deductible.
05

Software and Tools

  • Product research tools (Helium 10, Jungle Scout)
  • Inventory management software
  • Accounting software (Xero, QuickBooks, A2X)
  • Repricing tools
  • Review management and feedback tools
  • Keyword research and SEO tools
  • Email marketing platforms
FBA sellers commonly use five to ten software tools. Each subscription is a deductible expense. Make sure all are recorded and claimed.
06

Prep Centres and Storage

  • Prep centre fees (inspection, labelling, bagging, bundling)
  • Third-party warehouse storage fees
  • Storage unit rental for holding inventory
  • Fulfilment services for non-Amazon channels
All third-party logistics costs are fully deductible. Keep invoices from every prep centre and warehouse you use.
07

Professional Services

  • Accountancy fees and bookkeeping services
  • Legal fees for contracts and trademark registration
  • VAT consultant fees
  • Product compliance testing and certifications
  • Amazon consultants and agencies
  • Business coaching and training courses
Professional service costs are fully deductible and often pay for themselves through better tax efficiency and business outcomes.
08

Product Testing and Compliance

  • Product safety testing and lab certifications
  • CE and UKCA marking compliance
  • Quality control inspections
  • Factory audits
  • Trademark and patent registration fees
  • Design registration
Compliance costs are particularly relevant for sellers in categories such as electronics, toys, cosmetics and food. All fully deductible.
09

Home Office Costs

  • HMRC simplified flat rate: up to £26 per month depending on hours worked from home
  • Proportion of actual costs: rent or mortgage interest, utilities, internet
  • Office furniture and equipment used for the business
  • Office supplies
Using actual costs rather than the flat rate can affect Capital Gains Tax when you sell your home. The simplified method avoids this and is simpler to administer. Speak to an accountant before choosing.
10

Travel and Vehicle

  • Mileage to suppliers, trade shows, meetings and warehouses at 45p per mile (first 10,000 miles) then 25p per mile
  • Accommodation and meals during business trips
  • Trade show entry fees and exhibition costs
  • Public transport and flights for business travel
  • Parking and tolls
Keep a mileage log recording the date, destination and business purpose of every journey. Trade show trips including Canton Fair and UK exhibitions are fully deductible.
11

Bank Fees and Finance Costs

  • Business bank account fees
  • Transaction fees (PayPal, Stripe, Wise, Payoneer)
  • Currency conversion fees on overseas supplier payments
  • Interest on business loans or credit cards used for stock
  • Merchant account fees
Currency conversion fees are easily missed. If you pay overseas suppliers in USD or other currencies, these costs are a legitimate deductible expense.
12

Insurance and Returns

  • Product liability insurance
  • Public liability and business contents insurance
  • Goods in transit insurance
  • Cost of goods returned by customers and written off as unsellable
  • Damaged or obsolete inventory written off
Product liability insurance is essential for FBA sellers in regulated categories. Write-offs for damaged or unsellable returned stock reduce your taxable profit.

Common Mistakes That Cost FBA Sellers Money

✕Not tracking COGS accurately. Opening and closing inventory values must be recorded. Guessing or leaving this blank is one of the most costly errors on an FBA seller's tax return.
✕Mixing personal and business expenses. Use a dedicated business bank account. Mixed accounts make it impossible to produce accurate records and increase the risk of HMRC queries.
✕Missing software subscriptions. FBA sellers often have five or more tool subscriptions. Every one is deductible. Review your bank statements and claim them all.
✕Not keeping mileage records. Without a log, mileage claims are difficult to defend under HMRC scrutiny. Log journeys at the time, not retrospectively.
✕Claiming home office actual costs without advice. Claiming a proportion of mortgage interest rather than the flat rate can create a Capital Gains Tax liability when you sell. Take advice first.
✕Not using accounting software integrated with Amazon. Manual reconciliation is error-prone and time-consuming. Tools like A2X pull Amazon settlement data directly into Xero or QuickBooks, making bookkeeping accurate and fast.

VAT for Amazon FBA sellers is a separate topic with its own complexity. If your taxable turnover exceeds £90,000 in a rolling 12-month period, VAT registration is mandatory. FBA sellers selling across multiple EU marketplaces face additional VAT obligations. Read our full guide on VAT for Amazon FBA sellers.

At Simplr Accounting, we specialise in UK Amazon FBA seller tax and bookkeeping. We integrate directly with Amazon Seller Central and use A2X to keep your records accurate throughout the year. See our Amazon FBA accountant page for full details.

Further reading