The largest marketplace in the world offers all those who sell goods there almost unlimited possibilities. If you are a seller in the UK and want to sell products on Amazon yourself, you’ve come to the right place. We explain step by step how you can successfully build up your Amazon FBA business in the UK and which points you have to pay special attention to.
Patrick Moeller
Last Updated on 17 February 2022
Amazon FBA in UK: Get started
The tasks that need to be completed in order to successfully start an Amazon FBA business could not be more diverse. Besides the obligations you have to fulfill towards the state, the tax office, your suppliers and your customers, as an entrepreneur you also have to deal with the less bureaucratic, but no less important areas of entrepreneurship – questions such as the right product and the right strategy. However, a prerequisite for starting your business on Amazon is your registration for VAT in the UK. This is necessary under the following conditions:
- You store goods in the UK
- You sell them to consumers based in the UK
- You exceed the domestic VAT threshold of £85,000 in the next 30 days or exceeded it in the past 12 months
In addition, you may also have to register in other EU countries if you sell your products to them. This depends, among other things, on whether you reach the respective delivery thresholds with your sales or where you store your goods.
Register your own business in the UK
The first step towards a successful Amazon FBA business is to register your own business. If you intend to carry out an activity and generate revenue with it, the home state requires that you register this gainful activity and pay taxes.
You should inform yourself in advance about the different types of business and find out which type of business is best suited for you and your company. You should pay particular attention to the fact that you will have to pay as little tax as possible later on and that your private assets and private property remain as separate as possible from the company. When registering a company in the UK, you will need to provide some data.
The data which is required for registering a company in the UK:
- The name of your company
- The address of your business (especially important for HMRC)
- The owner and manager of the business
You can easily enter your home address as the address – this is especially common for small Amazon FBA participants. The address is especially important for correspondence with HMRC (HM Revenue and Customs). The same person can be given as owner and director, if this is the case. It is only important that each business has at least one manager and one owner.
Open a business account
Opening your own bank account for your business is not obligatory, but highly recommended even in the initial stages of business activity. Having your own business account allows you to keep your personal and business finances strictly separate, as well as to have a better overview of your various income and expenses.
Creating a new bank account purely for your entrepreneurial activity not only brings more transparency and overview, but also radiates a higher level of professionalism. In general, however, you should sign up for a free bank account if possible, especially in the beginning. However, be sure to pay attention to the various conditions and restrictions that these accounts entail.
Get your VAT identification number and tax number
In order to be able to issue invoices as a company subject to VAT, a VAT identification number in the UK is required. This must be stated together with the respective tax number on every invoice issued by you. You must apply for the VAT ID and the tax number (UTR) at HMRC; the required form can usually be filled out and sent when registering your business.
If you are not liable to VAT for various reasons, for example because you are considered a small business (annual turnover of less than 85,000 GBP) or because you only sell goods that are exempt from VAT, it is still advisable to apply for a VAT ID. On the one hand, it will lay the foundation for your business and you will not have to worry once your annual turnover exceeds the small business limit, and on the other hand, it will make the process of importing products for your business much easier.
Apply for an EORI number
After completing the first three steps, you need to find the product you want to sell. However, in order to be able to import it, every British company needs an EORI number. It does not matter whether the order is from the European Union or from a country outside the EU.
Using the EORI number, customs can find out which goods are delivered by which company to which company and check the legality of the corresponding order. The application for the EORI number is completely free of charge. If you only want to purchase goods from your own country, the number is not mandatory, but recommended in any case, because otherwise you have to make a delivery confirmation for each order.
Create an Amazon FBA UK account
If you have already registered your business in the UK, you can now create your Amazon FBA account on Amazon. You have to choose between a Basic and a Pro Seller account. If you sell less than 35 products per month, the Basic account is your first choice. The account is free, but charges a fee of £0.75 (plus VAT) every time you sell a product on Amazon. If you sell more than 34 products, the Pro-Seller account is worth it, which costs a fixed £25 (plus VAT) per month.
Warehousing and storage for Amazon FBA in the UK
In addition to the Amazon fees just mentioned, there are also costs for storing your goods. As an Amazon FBA seller, your products are stored in Amazon warehouses and shipped from there to your customers. For this storage Amazon charges fees depending on the area your goods occupy in cubic feet. In the UK, fees of £0.48 per cubic foot are charged between the months of January and September, and £0.68 between the busier periods of October and December.
Long Term Inventory Storage Fees
In addition, there are the so-called Long Term Inventory Storage fees. These are fees that Amazon charges if your products are in Amazon’s warehouses for more than twelve months without being sold or shipped. For this Amazon charges £882.50 per cubic foot, which is of course to be avoided.
In order to avoid that your products lie for such a long time at Amazon, you should always make sure not to order too many copies of a product and always order a test quantity first to see how well they sell.
Amazon FBA fees calculator UK
As an FBA seller, Amazon takes care of the storage and shipping of your products to the end consumer. In return, the e-commerce giant naturally demands a certain share of your revenue. A part of your income is retained by Amazon in the form of the Amazon FBA fee.
To find out what profit you can expect per item sold after deducting all applicable amounts, there is the Amazon FBA Calculator for the UK. After entering all relevant data (purchase price of the product, packaging costs, shipping costs for delivery to the Amazon warehouse, etc.), it calculates the net profit you will generate per item and the exact amount of the fee that Amazon will deduct from your sales for each product sold.
VAT filing in the UK
As a UK registered business you are usually required to file your VAT returns quarterly – but you can register for monthly VAT returns yourself and in some cases HMRC will ask you to do so – in der Regel, wenn dein jährlicher steuerpflichtiger Umsatz £2.3 million überschreitet. Annual VAT returns are possible if your annual taxable turnover is less than £1.35 million. In this case you will have to make advance payments throughout the year. After the annual return, you will either have to pay or get money back, depending on how much you paid in advance.
Your VAT returns are generally due and payable by the 7th day of the second month following your accounting period. If you wish to file your VAT return for the period January to March, this must be done by 7 May.
Amazon FBA in UK during Covid
As already mentioned in the introduction, Amazon FBA sellers also have to keep up with the times, as the Internet and thus the major trading platforms are also significantly influenced by the major changes of our time.
The coronavirus pandemic in particular is a good example of this. As a result of the lockdown imposed to contain the virus, the e-commerce industry has become the main shopping market for millions of new users. In particular, products for everyday use have been increasingly purchased online since the beginning of the pandemic.
However, the huge rush on the e-commerce platforms does not only bring advantages for the FBA retailers. The delivery times at suppliers as well as at Amazon itself have sometimes dragged on due to the extreme demand as well as due to the more difficult working conditions (distance regulations, illnesses in the workforce, etc.). Not only customer satisfaction, but also the planning reliability for the respective sellers suffers from this circumstance to this day.
Conclusion
To become a successful seller on Amazon, there are many steps to take and many hurdles to overcome. From registering your business to choosing the right product, there are many details to consider that can ultimately determine the success or failure of your Amazon FBA business. Especially since leaving the EU, sellers in the UK should keep an eye on trade regulations.
